Legal Considerations With Accountable Care Organizations

Kurt Ullman
Published: Friday, Nov 30, 2012
Oncologists Should Consider Two Key Laws Before Participating in ACOsAccountable Care Organizations (ACOs) are groups of doctors, hospitals, and other providers tied together to provide care to a cohort of Medicare patients, according to the the Centers for Medicare and Medicaid Services (CMS). ACOs are an important part of the Patient Protection and Affordable Care Act and have also been gaining ground among private payers. Oncologists should be aware that the need to refer patients between ACO members can raise legal issues for practices.

“Many legal concepts play into ACO formation, restricting physician participation in them,” said Barton C. Walker, JD, a healthcare attorney with McGuire Woods, LLP, in Charlotte, North Carolina. “Laws such as the Stark Law 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 healthcare lawyer with Martin Merritt, PLLC, in Dallas, Texas. “This requires people to refer back and forth across the participants. A literal reading of the Stark Law says this is a violation since an ACO is a relationship.”

Merritt noted that there are added concerns because not every Medicare patient a physician sees will be a part of their ACO. “Everybody knows an internist can refer a patient to an oncologist in the ACO when there is a problem with cancer,” said Merritt. “What happens when a person not involved in the ACO needs to be referred between the same two physicians?”

The Stark Law 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 percase civil penalties.

To address these issues, the CMS and its Office of the Inspector General (OIG) issued guidelines on the subject in October 2011. 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 in Medicare costs and expenditures
  • Evaluating health needs of the ACO’s assigned population
  • Communicating clinical knowledge and evidence-based medicine to beneficiaries
  • 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 to try to fit into.”

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

Unlike the Stark Law, the Anti-Kickback Statute is an intent-based statute and calls for criminal penalties. Conviction for a single violation may result in a fine of $25,000 and 5 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 Anti-Kickback Statute. 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. They also state, however, that payments made to a physician either directly or indirectly cannot 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,” said Walker. “They almost always will have in-house counsel or an outside advisor helping them structure the ACO.”


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