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A recent decision by HHS' Office of the Inspector General raises some interesting issues with ACOs participating in the Medicare Shared Savings Program.
A year ago, I wrote in this column an article discussing Stark Law/Anti-Kickback Statute (AKS) and AMA Ethics Implications that may not be obvious in forming ACOs. I warned, "The question under Stark Law and the Anti-Kickback Statute isn’t the referral or treatment of patients covered within the ACO. The question is the referral of everyone else."
Last month, I wrote the problems inherent in the limited waivers of Stark Law, the AKS, and civil monetary penalties law applicable to ACOs and the Medicare Shared Savings Program. The waivers are "limited" because the waivers only protect physicians and other participants in an ACO from fraud and abuse enforcement for activities "reasonably related" to the ACO Medicare patients. Most practitioners who join an ACO will treat both ACO patients and non-ACO patients. The shared savings program only works because some members of the ACO are being paid less than the expected expenditures. (In other words, someone in losing money. That’s where the savings comes from.) The shared savings program itself creates a financial incentive to make up the loss in income through cross referrals of other patients covered by federal plans. That’s a problem.
On June 7, 2013, the HHS Office of the Inspector General (OIG) issued Advisory Opinion No. 13-3 which may render it all but impossible for ACO participants to refer "other patients" without fear of AKS liability. I would ask you to read Opinion 13-3 to get the facts, but essentially a "parent laboratory" offered "turn-key" laboratories to physicians groups (termed "physician group laboratories" ) managed by the Parent Laboratory, which also operated other labs in the area. The plan was to "carve out" federally insured patients from being referred by the physician group to the physician group laboratories. But the physician group could refer those federal patients to the parent company’s other labs. The referrals wouldn’t be encouraged, but wouldn’t be discouraged.
Would these "other referrals" potentially violate the AKS?
The OIG answered "yes," there is likely a violation. As a threshold matter, "we must address whether the ‘carve-out’ of federal business is dispositive of the question of whether the proposed arrangement implicates the Anti-Kickback statute." We conclude it is not." In other words, "carving out" the federal business does not eliminate the AKS problem.
The OIG explained, although the physician group laboratories would bill only for services for non-federal healthcare program patients, participation in the proposed arrangement may increase the likelihood that physicians will order services from the parent laboratory for federal healthcare program beneficiaries. This may occur for reasons of convenience, to demonstrate commitment to the parent laboratory and potentially secure more favorable pricing on private pay services. "Thus, we cannot conclude that there would be no nexus between the potential profits the physician groups may generate from the private pay clinical laboratory business, on the one hand, and orders of the parent laboratory’s services for federally insured patients, on the other." Finally the OIG expressed concern that the financial incentives offered through the private-pay clinical laboratory business under the proposed arrangement are likely to affect a physician’s decision making with respect to all of his or her patients, including federal healthcare program beneficiaries, potentially resulting in the overutilization of laboratory services generally and increased costs to the federal health care programs.
Reading Opinion 13-3, simply replace "proposed arrangement" with "ACO Shared Savings Program." The same reasoning applies. The problem isn’t the physician group’s referral of ACO Shared Savings Program beneficiaries (they are "carved out" by waivers). The problem is the referral of "everyone else."
I certainly cannot reconcile the shared savings program with the reasoning of Opinion 13-3. Using the language of the opinion: "the Proposed Arrangement [is] likely to affect a physician’s decision making with respect to all of his or her patients, including federal healthcare program beneficiaries, potentially resulting in the overutilization of services generally." Add to this, the fact that many states, including my home state of Texas, have enacted state AKS laws which apply to every person, not just federally beneficiaries. Simply put, there is no "carve out," because federal waivers do not apply to state laws.
This is not to suggest the "sky is falling" on ACOs. The problem I am describing is really no different that the "cost shifting" which has taken place since the federal Emergency Medical Treatment and Active Labor Act (EMTALA) required hospitals to lose money by treating all emergency room patients regardless ability to pay. The government has always looked the other way as hospitals made up the difference in losses by overcharging everyone else. The OIG and CMS will review the waivers after 2014 to see what can be improved. I am suggesting that there must be some attempt to reconcile Opinion 13-3 with the reality of how the Medicare Shared Savings Program actually works.