ACOs Bring Legal Concerns

Kurt Ullman

Affordable Care Organizations have been gaining ground among private payers, but the practices in these ACOs need to be aware of potential legal issues of referring patients to other members in the organization.

An important part of the Patient Protection and Affordable Care Act, Accountable Care Organizations (ACO) have been gaining ground among private payers. As members of ACOs need to refer patients to other members in order to provide care to a cohort of Medicare patients, the organizations raise legal issues for practices.

“Many legal concepts play into ACO formation, restricting physician participation in them,” said Barton C. Walker, JD, a health care attorney with McGuire Woods, LLP in Charlotte, N.C. “Laws such as the Stark Law (SL) and Anti-Kickback Statute say if you are a doctor and have financial interests in an entity that provides certain kinds of health services, you can’t make a referral to that entity unless you fit into one of the handful of exceptions or safe harbors.”

The structure of ACOs can make this a legal puzzle.

“In ACOs doctors across specialties agree to be responsible for a certain number of patients,” said Martin Merritt, JD, a health care lawyer with Martin Merritt, PLLC, in Dallas. “This requires people to refer back and forth across the participants. A literal reading of SL says this is a violation since an ACO is a relationship.”

He notes there are added concerns because not every Medicare patient a physician sees will be a part of the ACO.

“Everybody knows an internist can refer a patient to an oncologist in the ACO when there is a problem with cancer,” Merritt said. “What happens when a person not involved in the ACO needs to be referred between the same two physicians?”

Stark is a strict liability statute, so good intentions do not protect you and the adverse outcomes can be severe. A violation subjects physicians to substantial monetary penalties and exclusion from participation in Medicare and other federal programs. In addition, each individual billing is considered a separate violation. A practice that files thousands of Medicare claims every month can be bankrupted by the combination of the government reversing payment and added per-case civil penalties.

To address these issues, the Centers for Medicare, Medicaid Services (CMS) and its Office of the Inspector General (OIG) issued guidelines in October of 2011 on the subject. According to the regulations, financial relationships between ACO participants are waived under the Stark Law if "reasonably related to the purposes of the [Medicare] Shared Savings Program."

The agencies define “reasonably related" using six characteristics:

• Promoting accountability for the quality, cost and overall care for a Medicare population

• Managing and coordinating care for Medicare fee-for-service beneficiaries through an ACO

• Encouraging investment in infrastructure and redesigned care processes for high-quality and efficient service delivery for patients, such as appropriate reduction Medicare costs and expenditures

• Evaluating health needs of the ACO's assigned population

• Communicating clinical knowledge and evidence-based medicine to beneficiaries and developing standards for beneficiary access and communication

“It is interesting to note that commercial ACOs were not expressly included,” said Walker. “You have to be more careful when dealing with organizations tied to private payers. There are other long-standing exceptions to the Stark Law that these commercial ACOs will have try to fit into.”

The other concern when looking into ACOs is the Anti-Kickback Statute (AKS). This law prohibits the offer or receipt of compensation in exchange for referrals or services under Medicare or Medicaid.

Unlike Stark, AKS is an intent-based statute and calls for criminal penalties. Conviction for a single violation may result in a fine of $25,000 and five years in jail and results in mandatory exclusion from federal healthcare programs.

The government may also assess civil monetary penalties, which could result in treble damages plus $50,000 for each violation of the AKS. As in Stark, every bill submitted is a separate offense.

The OIG and CMS have made an exemption for ACOs when they distribute shared savings among participating practices and hospitals in the year it is earned. However, they also state that payments made to a physician either directly or indirectly can not induce the doctor to limit medically needed services.

Although there are concerns that physicians should be aware of, the need for the physician practice to reinvent the wheel when they look at joining ACOs is minimal. Few practices will lead the ACOs.

“Most ACOs we have seen are being driven by hospitals or payers,” Walker said. “They almost always will have in-house counsel or an outside advisor helping them structure the ACO.”

The majority of physicians will come into ACOs that have already been set up and vetted from a legal standpoint. Most times, an individual practice will only need its own attorney to double check and make sure the originator has structured the agreements properly.

“Most practice’s ACO concerns are more mundane than the big picture legal or structural concepts,” Walker said. “They need to ensure that the paperwork is consistent with what was agreed to in areas such as how long the practice is committed to the group, how can they exit if needed, how extra money is divided, what are their responsibilities if the ACO is not successful financially, if there is any up-front or continuing capital commitment, and similar concerns.”

Both experts agree that any physician considering joining an ACO should consult with an attorney that is well versed in the intricacies of Stark and AKS.

“Make sure you pick a lawyer with specialty in health care and these specific laws,” Merritt said. “This is not a problem that you can trust to a business law generalist. You need to proceed very carefully with the help of a very knowledgeable health care lawyer in your state.”

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