Legal pitfalls of ACOs (Pt. 3)

Legality of ACOs

FH: Are ACOs actually legal as the draft rules are written now? What are the potential antitrust issues with ACOs?

Jay Levine: Can ACOs be legal? Absolutely. An ACO is nothing more than a collaboration of competing providers. Anytime you have competing providers that get together, you have the specter of price fixing. Naked price fixing is, per se, illegal. However, if they come together in a joint venture that is sufficiently integrated, then they take themselves out of the per se.

To be eligible for the Medicare Shared Savings plan, you have to have a certain infrastructure and clinical integration to effectuate these shared savings, and the antitrust agencies have almost declared that to meet these requirements for participation in the program, you are going to be deemed sufficiently integrated and receive rule-of-reason treatment. It doesn't mean that you will ultimately pass the muster test under the antitrust laws, but it also means you're not, per se, illegal.

There's a gray area where you're between the safety zone (when the antitrust agencies have cleared the organization or provider to participate) but you're not yet at the mandatory review level.

Yes, [ACOs] can be legal, but there certainly are areas that are tricky, when they would have to show they are achieving real and sufficient cost savings that would outweigh any anticompetitive effects. And if they meet certain thresholds, they would have to have a mandatory review with the government, which is itself an entirely different procedure.

FH: Another ACO rule that organizations have criticized is the requirement that patients have a seat on oversight boards. Why do you think providers and organizations have had such a negative reaction to that rule?

MG: That might be a visceral reaction: "We want to have a board of all providers." There are issues with having someone who isn't versed in corporate issues; it may make things more difficult.

The other question is confidentiality. There are some state laws where there would be issues. Do you want people from the community on the board? Boards generally don't get down to [discussing] the patient level, but they could. The board might discuss certain beneficiaries, people who are outliers and very expensive in the program.

It's like the PTA. The school system wants to say they have parent involvement, parent representation. Is that person representative of the group? Were they elected? Sometimes, it gives the appearance that you have more [representation] than you really have.

FH: What are the potential fraud and anti-kickback issues?

MG: CMS is giving waivers, but the waivers are very narrow.

[Providers and organizations] also can't give any inducements to patients to participate in the ACO. You can't give them money, but even nonmonetary things could create kickback. For example, you can't give someone transportation. If a patient can't get to the doctor, if you [as the provider or organization] provide transportation, is that kickback? It could be unless the government is willing to give you a waiver on it.

With rewards to patients for conforming, such as rewards for taking medication, it could be viewed as kickback.

FH: What other type of offerings could a hospital give to patients that might be a kickback?

JL: Even premium appointment times.

FH: And that's illegal?

MG: I don't know. You can't discriminate against beneficiaries.

FH: What are the legal challenges with gain sharing?

MG: There are legal limitations on who you can share savings with. If you go outside the ACO to others (other providers, such as home health), it must be necessary for the ACO and directly related to the business of the ACO. What's "necessary"? My view of necessary may not be the government's view of necessary. It's always a judgment issue.

FH: Another major complaint about the ACO proposed rules is that the document is more than 400 pages that no one can get through. Was that overkill? Was all the language really necessary?

MG: That's how the government does it. It's not that many rules; the regulation part is not that many pages. It's really the explanation that's there to help you. It's not the same as the health reform law, which I printed out and was 2 feet high, literally. This [ACO rules document] is not all law; it's explanation.

This interview has been edited and condensed for clarity.