von Briesen Health Law Blog

“The Administration has led an unprecedented, collaborative effort among all of the agencies responsible for developing guidance for ACOs,” said FTC Chairman Jon Leibowitz. “This guidance will help ensure that ACOs meet their goals of improving quality and lowering costs while minimizing the regulatory burden on healthcare providers.”

As the Chairman notes, the agencies responsible for development and oversight of Accountable Care Organizations (“ACOs”) issued on March 31, 2011 guidance regarding qualification and implementation of Medicare Shared Savings Programs. This Update provides summaries of the proposed rules offered by the Centers for Medicare & Medicaid Services (“CMS”)/Department of Health and Human Services Office of Inspector General (“OIG”) and Federal Trade Commission (“FTC”)/Antitrust Division of the Department of Justice (“DOJ”) and the notice issued by the Internal Revenue Service (“IRS”) all of which address ACOs.  The agencies will accept public comments until May 31, 2011.

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On March 31st the Centers for Medicare and Medicaid Services (“CMS”) released its proposed rule to establish the Medicare Shared Savings Program (the “Shared Savings Program”). The rule will be published in the Federal Register in the next few days. CMS will accept comments on the proposed rule for a period of 60 days after publication in the Federal Register, and will respond to comments in a final rule to be issued later this year. At the heart of the Shared Savings Program is the development of Accountable Care Organizations (“ACOs”) to bring together providers and suppliers in an effort to coordinate care for Medicare fee-for-service (“FFS”) beneficiaries. To participate in the Shared Savings Program, ACOs must submit an application, and if approved, enter into a three year agreement with CMS to be accountable for the quality, cost and overall care of at least 5,000 traditional FFS Medicare beneficiaries who may be assigned to it. The Shared Savings Program will begin operating on January 1, 2012.

Proposed Rule Key Concepts and Issues

•      Proposed regulations will be published in the Federal Register on April 7.

•     Participation requires 3 year agreement with early termination forfeiture.

•     Proportionate representation and 75% control of governance required for ACO participants which may include hospitals, physicians and other providers.

•     Involvement of Medicare beneficiaries and community stakeholders required.

•     Detailed and potentially onerous application, operation and reporting requirements.

•     Retrospective and prospective assignment of beneficiaries based on primary care physician.

•     Beneficiaries may opt out of data sharing, but quality of services and coordination of care may not decline.

•     Two track shared savings model to encourage early participation in program.

•     Comments to proposed rule due by Monday, June 6.

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The Federal Trade Commission (“FTC”) and the Antitrust Division of the Department of Justice (“DOJ”) issued a Proposed Statement of Antitrust Enforcement Policy for Accountable Care Organizations (ACOs).  The proposed Statement applies the antitrust laws to collaborations among independent health care providers that seek to participate as ACOs under the Medicare Shared Savings Program.  Public comments on the proposed Statement must be received by May 31, 2011.

The Health Law team at von Briesen will be posting additional client bulletins with details on the FTC & DOJ proposed Statement for antitrust enforcement guidance.

In a memorandum to their legislative colleagues, Representative Dr. Erik Severson, Representative John Nygren and Senator Dr. Pam Galloway announced that they are co-sponsoring legislation that would make statements of apology or condolence by a health care provider inadmissible in a court action or administrative hearing. The bill is LRB-0769.

Their memorandum states:

“The goal of this bill is to provide medical professionals with the ability to express condolences or apologies to patients or their families without fear of frivolous malpractice lawsuits. Currently, saying “I’m sorry” could be construed as an admission of guilt in the court system. However studies have shown that the simple act of saying “I’m Sorry” results in families being less likely to file lawsuits. Unfortunately medical professionals have become reluctant to express apology, condolence, or sympathy for fear of suit, despite their personal feelings.

This bill has been introduced with bipartisan support in the last several sessions. A version of this legislation was even passed through the full legislature in 2005, but was vetoed by Governor Jim Doyle. Laws similar to our proposed Doctor Apology Bill have been passed in 35 other states across the nation, showing the importance of allowing medical professionals to express their concerns without fear of damaging and frivolous litigation.”

The deadline for additional co-sponsors is March 9. We will monitor the progress of this bill through the legislative process.

Florida Federal District Court Judge Roger Vinson serving in Pensacola, Florida, ruled that key components of the health reform law are unconstitutional and declared the entire law void.

In his decision, Judge Vinson writes:

“… I must reluctantly conclude that Congress exceeded the bounds of its authority in passing the Act with the individual mandate. That is not to say, of course, that Congress is without power to address the problems and inequities in our health care system. The health care market is more than one sixth of the national economy, and without doubt Congress has the power to reform and regulate this market. That has not been disputed in this case. The principal dispute has been about how Congress chose to exercise that power here.

Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void.”

The ruling by Judge Vinson may be appealed to the Federal Court of Appeals in Atlanta. Separately, an appeals court in Richmond, Virginia, is scheduled in May to hear challenges to two conflicting lower-court rulings, one upholding the legislation, the other invalidating part of it.

As we have noted in other posts, it is likely that the constitutionality (or not) of the health reform law will not be certain until a final ruling by the United States Supreme Court.

Virginia U.S. District Judge Henry E. Hudson declared that the mandate in the Patient Protection and Affordable Care Act (”PPACA”) requiring people to purchase health insurance exceeds Congress’ power to regulate economic activity under the commerce clause.  In his December 13, 2010 ruling in Commonwealth of Virginia v. Sebelius, Judge Hudson said that the government cannot require Americans to purchase insurance.  He also deemed that the mandate is not a tax.  Despite the ruling, the law will remain in tact while appeals continue.  There is no immediate impact of the coverage mandate which is not scheduled to begin until 2014.

Judge Hudson is the first federal judge to strike down material provisions of PPACA.   Federal judges in Virginia and Michigan have upheld the law, several challenges have been dismissed and still others are pending, including Florida.  Florida Federal District Judge Roger Vinson will hear arguments on Thursday, December 16 in a challenge to the mandate brought by 20 state attorneys general and a handful of governors.

Challenges to PPACA, including Virginia’s, are expected to continue and not be settled until decided by the Supreme Court.

Department Alleges Agreements with Hospitals Stifle Competition, Resulting in Higher Health Insurance Prices for Michigan Consumers

WASHINGTON – The Department of Justice filed a civil antitrust lawsuit today against Blue Cross Blue Shield of Michigan (BCBSM) alleging that provisions of its agreements with hospitals raise hospital prices, prevent other insurers from entering the marketplace and discourage discounts. The department said that these agreements likely resulted in Michigan consumers paying higher prices for their healthcare services and health insurance.

The state of Michigan joined the department in its lawsuit, which was filed in U.S. District Court in the Eastern District of Michigan.

The challenged provisions are known as most favored nation (MFN) clauses. In the healthcare context, MFN provisions generally refer to contractual clauses between health insurance plans (buyers) and healthcare providers (sellers) that essentially guarantee that no other plan can obtain a better rate than the plan wielding the MFN. Some of the MFNs in this case guarantee the plan an even better rate than given to any other plan or purchaser.

The department alleges in its complaint that BCBSM’s MFN clauses in its contracts with hospitals have caused hospitals to increase their prices to BCBSM’s competitors and insulated BCBSM from competition. According to the complaint, BCBSM has used MFNs or similar clauses in its contracts with at least 70 of Michigan’s 131 general acute care hospitals, including many major hospitals in the state.

“The department’s lawsuit alleges that the intent and effect of Blue Cross Blue Shield of Michigan’s MFNs is to raise hospital costs for competing health plans and reduce competition for the sale of health insurance. As a result, consumers in Michigan are paying more for their healthcare services and health insurance,” said Christine Varney, Assistant Attorney General in charge of the Department of Justice’s Antitrust Division. “American consumers deserve affordable healthcare at competitive prices, and the Antitrust Division will vigorously pursue anticompetitive actions that stand in the way of achieving that goal.”

The department said that the MFNs require a hospital either to charge BCBSM no more than it charges BCBSM’s competitors, or to charge the competitors a specified percentage more than it charges BCBSM, in some cases between 30 and 40 percent. The complaint alleges that BCBSM’s use of MFN provisions has reduced competition in the sale of health insurance in Michigan by raising hospital costs to BCBSM’s competitors, which discourages other health insurers from entering into or expanding within markets throughout Michigan. The complaint further alleges that BCBSM agreed to raise the prices that it pays certain hospitals to obtain the MFNs, thus buying protection from competition by increasing its own costs.

BCBSM is a Michigan nonprofit healthcare corporation headquartered in Southfield, Mich. It is the largest provider of commercial health insurance in Michigan, with revenues of more than $10 billion in 2009. BCBSM insures more than nine times as many Michigan residents as its next largest commercial health insurance competitor, covering more than 60 percent of Michigan’s three million commercially insured residents.

The court will determine a pretrial schedule for the case once BCBSM files its response to the government’s lawsuit.