A Watershed Day for Accountable Care Organizations

By David A. Manko, Esq. and George Choriatis, Esq.


Yesterday was a watershed day for accountable care organizations (ACOs) - a new type of healthcare organization being promoted under ongoing health reform initiatives, particularly the recently enacted federal health reform legislation (the "Patient Protection and Affordable Care Act" or "PPACA"). Such reform initiatives seek to encourage physicians, hospitals, and other healthcare providers to form ACOs assume accountability and coordinate their services for a defined patient population and to be rewarded for improving the effectiveness and efficiency of their care with respect to the defined patient population. Yesterday, the following took place:The Centers for Medicare and Medicaid Services (CMS) issued proposed regulations implementing the ACO program to be established under Medicare, which is known as the Medicare "Shared Savings Program." To access the regulations, click here:

• CMS and the HHS Office of Inspector General (OIG) issued a proposal to waive the application of the Stark law, the Anti-Kickback law, and the Civil Monetary Penalties Law with respect to specified financial arrangements involving ACOs. To access the proposal, click here:
• The Federal Trade Commission (FTC) issued new guidance regarding the application of the federal anti-trust laws to ACOs. To access the guidance, click here:
• The Internal Revenue Service (IRS) issued a notice soliciting comments regarding the application of the federal tax laws governing tax exempt organizations to hospitals and other healthcare organizations that are recognized as tax exempt under Section 501(c)(3) of the Internal Revenue Code and participate in ACOs. To access the notice, click here:
• The New York State legislature enacted a law establishing an ACO demonstration project in New York State. The legislation requires the New York State Department of Health (DOH) to establish an ACO demonstration project, pursuant to which the DOH would certify up to 7 qualifying organizations as ACOs through December 2015. The December 2015 sunset date does not mean that an organization qualified as an ACO prior to that date would be required to cease operating on that date, but that DOH may not approve any new ACOs after that date unless such date is extended. Organizations certified as ACOs by DOH would be protected from certain types of liability under anti-trust, corporate practice of medicine, self-referral, and state insurance laws. The enactment of this legislation is intended to facilitate the development of ACOs beyond the Medicare context.

We intend to publish further analyses of the above items. Stay tuned.