Deciphering ACO Exclusivity for Specialist Physicians

By Stephen Siegel and Fred Segal

On November 3, 2011, the Centers for Medicare & Medicaid Services (CMS) published the “Final Rule” setting forth the parameters for Accountable Care Organizations (ACOs) to participate in Medicare Shared Savings Program (MSSP). One of the concerns of specialist physicians who are interested in joining an ACO is their ability to participate in more than one ACO. In the Final Rule, CMS included provisions that provide flexibility for specialists to participate in multiple ACOs. However, practically speaking, they may not have as much flexibility as the Final Rule appears to provide. This article discusses a practical problem specialist physicians face if they seek to participate in multiple ACOs.

The Final Rule defines an ACO as a legal entity that has a certain Taxpayer Identification Number (TIN), and which is comprised of one or more “ACO participants”. An ACO participant is an individual or group of provider(s)/supplier(s) (e.g. hospitals, physicians, and others involved in patient care) that are identified by a Medicare-enrolled TIN. An ACO provider/supplier is defined as a provider or supplier who is enrolled in the Medicare program and bills on a fee-for-service basis under a billing number assigned to an ACO participant’s TIN.

As part of its application to CMS, a prospective ACO is required to submit a list of its ACO participants and their associated ACO providers/suppliers, and identify those providers/suppliers who are primary care physicians. Further, the ACO participants and the providers/suppliers are, prior to the filing of the ACO application, required to sign agreements or contracts relating to participation in the ACO. Essential to the successful operation of the MSSP is CMS’ ability to gather and analyze claims and other information submitted to CMS by an ACO participant through its billing TIN. This data will be used by CMS to calculate an ACO’s shared savings, assign beneficiaries, benchmark, etc. Consequently, CMS has determined that all ACO providers/suppliers associated with each ACO participant TIN must agree to participate in the ACO as a member of that ACO participant. Thus, for example, if a group practice agrees to participate in an ACO, the group practice entity will be designated as an ACO participant and all of the physicians and allied health professionals in the group must agree to participate in that ACO. CMS’s “all or none” approach is one reason why physicians and physician group practices may hesitate before agreeing to become either ACO providers/suppliers or ACO participants.

An ACO participant TIN, and its associated physicians “upon which beneficiary assignment is dependent,” must be exclusive to one ACO. If beneficiary assignment is not dependent on the ACO participant’s TIN, an ACO participant and its associated physicians may participate in multiple ACOs. Thus, the question of how Medicare beneficiaries will be assigned to an ACO becomes a critical step in determining whether a given ACO participant is able to provide services on behalf of multiple ACOs.

The assignment of a Medicare beneficiary to a particular ACO is a two-step process:

1. CMS identifies those beneficiaries who have received at least one primary care service , based on the most recent twelve months (for prospective assignment) or the “performance year” (for final assignment) , from a primary care physician who is an ACO provider/supplier in that ACO. ACO assignment of those beneficiaries is made based on a “plurality of care” determination. This means if the allowed charges for the primary care services furnished to a given beneficiary by all the primary care physicians who are ACO providers/suppliers in that ACO exceeds the allowed charges for the primary care services furnished by the primary care physicians who are either ACO providers/suppliers in any other ACO, or not affiliated with any ACO and identified by a Medicare-enrolled TIN , he or she is assigned to that ACO.

2. For a beneficiary who has not received primary care services from a primary care physician in the previous twelve months, CMS will make a prospective ACO assignment determination based upon the total allowed charges paid by the program to a specialist physician for primary care services rendered to that individual. Again, the plurality of care approach is used. A beneficiary will be assigned to an ACO if the sum of the allowed charges for primary care services furnished to him or her in the most recent performance year by all of the physicians, nurse practitioners, physician assistants and clinical nurse specialists who are ACO providers/suppliers in that ACO exceeds the sum of the allowed charges for primary care services furnished by either the ACO providers/suppliers in another ACO, or those physicians, nurse practitioners, physician assistants, clinical nurse specialists who are unaffiliated with an ACO and are identified by a Medicare–enrolled TIN.

When the assignment of Medicare beneficiaries to an ACO is determined through Step 1, any primary care physicians assigned a beneficiary will likely cause that physician’s group to be exclusive to one ACO. Moreover, even when an ACO participant does not have primary care physicians among its ACO providers/suppliers, if one of its specialist physicians provides the plurality of primary care services in the previous performance year to even one Medicare beneficiary, and that beneficiary does not receive primary care services from any primary care physician, that beneficiary will be assigned to the ACO, and the specialist physician will be treated like a primary care physician in that he or she (and other physicians billing under the ACO participant’s TIN) may only participate in one ACO.

Thus, at first glance, the Final Rule appears to provide physician specialists with the flexibility to belong to multiple ACOs. However, whether intended or not, many specialists may find their options are foreclosed by virtue of the nature of the services other physicians in their ACO participant render, or the services they render as part of their practices. Consider the following scenarios:

Scenario 1

A multispecialty “group practice” (Group A), which provides “designated health services” and which includes primary care physicians and specialists, wants to become a participant in an ACO (ACO 1). Group A’s specialists are concerned that participating only in ACO 1 will harm their stream of referrals from other practices. In this scenario the primary care physicians and the specialists face a dilemma. Because of the primary care physicians, CMS is likely to assign beneficiaries to ACO 1 and Group A’s TIN will be exclusively linked to ACO 1. In addition, every physician in Group A (primary care physicians and specialists) must agree to participate in ACO 1.

One potential resolution would appear to be for Group A to permit its specialists to provide a portion of their services under another TIN. As specialists upon whom beneficiary assignment is not dependent, but for their affiliation with Group A these physicians could be ACO participants and/or ACO providers/suppliers in ACO 1 as well as other ACOs. Unfortunately, for many group practices this resolution will carry significant potential risk.

CMS and the Office of the Inspector General (“OIG”) recognized that the Stark Law, as federal illegal remuneration/kickback prohibition, and the Civil Money Penalties provision could be impediments to the development of ACOs. In order to minimize this likelihood, at the same time the ACO Final Rule was published these agencies promulgated five related waivers in order to provide parties seeking to form and operate ACOs with assurance that their arrangements would not be viewed as violating any of these statutes (Final Waivers). One of them addresses “Compliance With the Physician Self-Referral Law Waiver”. In order to take advantage of this waiver –
… any financial relationship between or among the ACO, its ACO participants, and its ACO providers/suppliers that implicates the [Stark Law must meet 3 conditions, including]
* * * * *
3. The financial relationship fully complies with the exceptions at 42 C.F.R. 411.355 through 411.357.

Even assuming that the members of Group A are willing to allow its specialists to perform services under a different TIN, that may not result in a satisfactory resolution. The Stark Law prohibits a physician (or an immediate family member of such physician) who has a “financial relationship” with an entity from referring patients to the entity for designated health services, unless an exception is available. Many group practices provide designated health services by taking advantage of the “in-office ancillary services” exception. In order to satisfy the in-office ancillary services exception, a physician group must, among other requirements, meet the definition of a “group practice.” Satisfying all of the requirements of this definition is not only essential for the group to be able to perform in-office ancillary services, but it gives a group significantly greater flexibility in paying physician incentive and bonus-based compensation.

As noted above, Group A is providing DHS pursuant to the in-office ancillary services exception. In order to take advantage of this exception, Group A must satisfy the Stark Law’s definition of a group practice. One of the elements of this definition is the so-called 75% test; i.e., “at least 75% of the total patient-care services of the group practice members …must be furnished through the group and billed under a TIN assigned to the group….” Thus, Group A needs to ensure that any of its members who are permitted to provide services under a different TIN do not cause Group A to fall below the 75% threshold. Depending on the number of physicians who are members of Group A and the proportion of patient-care services furnished under the group’s billing number, it may not be feasible to permit one or more of its specialists to practice part-time under a different TIN.

Scenario 2

Another Stark Law compliant group practice (Group B) wants to participate in ACOs 1, 2, and 3. Group B does not include any primary care physicians. However, one of Group B’s physicians provides primary care services to some Medicare fee for service patients. Consequently, there is a risk that at least one Group B physician has provided a Medicare beneficiary the plurality of his or her primary care services over the previous performance year and during that time, the beneficiary did not receive medical services from either a primary care physician affiliated with an ACO participant, or a physician, nurse practitioner, physician assistant, or clinical nurse specialist who was both unaffiliated with an ACO and identified by a Medicare–enrolled TIN. If that is the case, Group B may be limited to participating in only one ACO.

Because CMS’ beneficiary assignment determination involves a retrospective review of claims data, Group B’s options for ensuring it is able to participate in multiple ACOs appear to be limited. One option may be to develop a mechanism whereby Group B ensures that it is not providing the plurality of a beneficiary’s primary care services; however, without the ability to control which physician a beneficiary elects to see, it is hard for an ACO participant to control where a beneficiary seeks these services. Another option is to make sure all Medicare beneficiaries who receive primary care services from a Group B specialist also receive at least one primary care service annually from a primary care physician who is not affiliated with this group practice. A third option would be to avoid providing those items and services which CMS has defined as primary care for purposes of ACO participation. However, not only would this thirdoption limit the continuity of care provided to Group B’s patients, it also likely would have a significant negative impact on many of these physicians’ incomes.

Scenario 3

Group B enters into participation agreements with ACO applicants 1, 2, and 3. Each applicant is successful and signs an ACO contract with CMS. However, CMS determines that at least one Group B physician has provided one Medicare beneficiary the plurality of his or her primary care services and that beneficiary has not seen a primary care physician during the previous performance year. As a result, Group B’s TIN and all of its physician specialists “upon which beneficiary assignment is dependent” must be exclusive to one ACO.

It is not clear whether CMS or Group B will decide in which ACO Group B will participate. If the decision is made by CMS, this group may find itself a participant in the least attractive of the three options. In either case, Group B will need to terminate its contract with each of the other ACOs, which may have further consequences.

In the Final Rule, CMS tried to clarify when an ACO participant that includes physicians must be exclusive to one ACO. As frequently is the case, the Final Rule raises as many questions as it answers. CMS has recognized this and appears to be attempting to provide the industry with further guidance concerning this and other issues involving the role of TINs in the ACO program. The ACO Memo was the agency’s first effort to do so. CMS published another memorandum a week later, giving further guidance on a related issue that is beyond the scope of this article. Hopefully, CMS will be providing additional guidance as the agency continues to encourage the development of ACOs.

1. 76 F.R. 67,802.
2. 42 C.F.R. § 425.20.
3. Id.
4. Id.
5. 42 C.F.R. § 425.204(c)(5)(i). all, CMS Memorandum to Medicare Shared Savings Program Applicants, Additional guidance for Medicare Shared Savings Program Accountable Care Organization (ACO) applicants (March 16, 2012) (hereinafter referred to as the “ACO Memo”), at 2.
6. Id.
7. Id.
8. Id.
9. Id.
10. Id.
11. For purposes of this article, the phrase “group practice” refers to an entity that satisfies the definition of that term found at 42 C.F.R. § 411.352.
42 C.F.R. § 425.306(b).
13. “’Primary care services’ mean the set of services identified by the following HCPCS codes: 1) 99201 through 99215. 2) 99304 through 99340, and 99341 through 99350, G0402 (the code for the Welcome to Medicare visit), G0438 and G0439 (codes for the annual wellness visits); 3) Revenue center codes 0521, 0522, 0524, 0525 submitted by FQHCs (for services furnished prior to January 1, 2011), or by RHCs. 42 C.F.R. § 425.20.
14. 42 C.F.R. § 425.400(a)(2)(ii). CMS explains that the Final Rule provides for “prospective assignment of beneficiaries to ACOs in a preliminary manner at the beginning of a performance year based on the most recent data available.” Assignment will be updated quarterly based on the most recent 12 months of data. Final assignment is determined after the end of each performance year based on the data from that year.” 76 FR 67867.
15. “’Primary care physician’ means a physician who has a primary specialty designation of internal medicine, general practice, family practice, or geriatric medicine, or, for services furnished in an FQHC or RHC, a physician included in an attestation by the ACO as provided under § 425.404.” 42 C.F.R. § 425.20.
16. 42 C.F.R. § 425.402(a).
17. 42 C.F.R. § 425.402(a)(1)(B)(ii).
18. 42 C.F.R. § 425.402(B)(2).
19. 42 C.F.R. § 425.402(B)(2)(i)-(ii).
20. As defined by the so-called Stark Law, 42 U.S.C. §1395nn, and its implementing regulations. See, 42 C.F.R. 411.352.
21. 42 C.F.R. 411. 351.
22. For purposes of this Scenario, assume that the specialists do not provide any primary care services. But, see, Scenarios 2 and 3.
23. 42 U.S.C. §§ 1320a-7b(b) and 1320(a)-7a(a)7, respectively.
24. 76 F.R. 67,992 (November 2, 2012), Final Waivers in Connection With the Shared Savings Program – Interim Final Rule (the “Final Waivers”).
25. 76 F.R. 67,992 at 68,001 (col. 2-3).
26. Id.
27. 42 C.F.R. § 411.355(b).
28. Id.
29. 42 C.F.R. § 411.352.
30. 42 C.F.R. § 411.352(d).
31. CMS Memorandum to Medicare Shared Savings Program Applicants, Merger and Acquisitions FAQ (March 21, 2012).

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