CMS has issued a proposed rule change that clarifies the formation of ACOs and could impact antitrust regulations.
- This week, the Centers for Medicare and Medicaid Services (CMS) released proposed regulations for Accountable Care Organizations (ACO) that participate in the Medicare Shared Savings Program. The goal of the rules it to clarify and reinforce current requirements for participating in an ACO and creating new antitrust implications.
According to an article from the National Law Review, the proposed changes should clarify the current regulations to ensure decisions made by ACO executives are in the best interest of the ACO alone.
The way the existing regulations are written, for an ACO to be formed, it requires two or more “otherwise independent” participants, forming a separate, independent legal entity. However, since these were put into effect two years ago, many prospective organizations questioned what exactly qualified as an “otherwise independent” and what are the specific parameters that require a separate legal entity.
The article points to several corporate lawyers who have debated whether potential ACO participants that have a prior relationship through an integrated health system by contract would be considered independent and require the formation of a separate legal entity for participation.
The proposed regulations will clarify this concern. The first thing that would happen is the elimination of the phrase “otherwise independent.” Then, it clarifies requirements for the formation of an ACO as separate legal entities whenever two or more participants by adding that each organizations involved needs to be identified by a unique taxpayer identification number. This would require the creation of a new, separate entity, which ends previous speculation.
“This proposed change has clear and potentially significant antitrust ramifications given that the formal creation of new legal entities (through joint ventures or other corporate forms) by independent entities is subject to antitrust review by the Federal Trade Commission (FTC) and Department of Justice (DOJ) through Section 7 of the Clayton Act and premerger reporting requirements under the Hart-Scott-Rodino (HSR) Act,” the article reads.
This is something that has been talked about since the early 2011, when the Federal Trade Commission and the Department of Justice released proposed rules known as the Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program that would make ACOs eligible for expedited antitrust reviews.
“The Administration has led an unprecedented, collaborative effort among all of the agencies responsible for developing guidance for ACOs,” FTC Chairman Jon Leibowitz said at the time. “This guidance will help ensure that ACOs meet their goals of improving quality and lowering costs while minimizing the regulatory burden on healthcare providers.”
The proposed CMS ruling adds some impact to these previous FTC and DOJ statements. Namely, it makes it clear that the only kind of collaboration applicable by the Policy Statement are those formally established ACOs as a separate legal entity.
The proposed rule is currently in the 60-comment period, which will end on February 6, 2015.