[Federal Register Volume 76, Number 212 (Wednesday, November 2, 2011)]
[Rules and Regulations]
[Pages 67992-68010]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-27460]



[[Page 67991]]

Vol. 76

Wednesday,

No. 212

November 2, 2011

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Chapter IV





Office of the Inspector General





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42 CFR Chapter V





Medicare Program; Final Waivers in Connection With the Shared Savings 
Program; Interim Final Rule

  Federal Register / Vol. 76 , No. 212 / Wednesday, November 2, 2011 / 
Rules and Regulations  

[[Page 67992]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Chapter IV

Office of Inspector General

42 CFR Chapter V

[CMS-1439-IFC]
RIN 0938-AR30


Medicare Program; Final Waivers in Connection With the Shared 
Savings Program

AGENCY: Centers for Medicare & Medicaid Services (CMS) and Office of 
Inspector General (OIG), HHS.

ACTION: Interim final rule with comment period.

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SUMMARY: This interim final rule with comment period establishes 
waivers of the application of the Physician Self-Referral Law, the 
Federal anti-kickback statute, and certain civil monetary penalties 
(CMP) law provisions to specified arrangements involving accountable 
care organizations (ACOs) under section 1899 of the Social Security Act 
(the Act) (the Shared Savings Program), including ACOs participating in 
the Advance Payment Initiative. Section 1899(f) of the Act, as added by 
the Affordable Care Act, authorizes the Secretary to waive certain 
fraud and abuse laws as necessary to carry out the provisions of 
section 1899 of the Act.

DATES: Effective date: These regulations are effective on November 2, 
2011.
    Comment date: To be assured consideration, comments must be 
received at one of the addresses provided below, no later than 5 p.m. 
on January 3, 2012. Because of the large number of public comments we 
normally receive on Federal Register documents, we are not able to 
acknowledge or respond to them individually. We will consider all 
comments we receive by the date and time specified here, and, when we 
proceed with a subsequent document, we will respond to the comments in 
the preamble to that document.

ADDRESSES: In commenting, please refer to file code CMS-1439-IFC. 
Because of staff and resource limitations, we cannot accept comments by 
facsimile (FAX) transmission.
    You may submit comments in one of four ways (please choose only one 
of the ways listed)
    1. Electronically. You may submit electronic comments on this 
regulation to http://www.regulations.gov. Follow the ``Submit a 
comment'' instructions.
    2. By regular mail. You may mail written comments to the following 
address only: Centers for Medicare & Medicaid Services, Department of 
Health and Human Services, Attention: CMS-1439-IFC, P.O. Box 8013, 
Baltimore, MD 21244-8013.
    Please allow sufficient time for mailed comments to be received 
before the close of the comment period.
    3. By express or overnight mail. You may send written comments to 
the following address only: Centers for Medicare & Medicaid Services, 
Department of Health and Human Services, Attention: CMS-1439-IFC, Mail 
Stop C4-26-05, 7500 Security Boulevard, Baltimore, MD 21244-1813.
    4. By hand or courier. Alternatively, you may deliver (by hand or 
courier) your written comments only to the following addresses prior to 
the close of the comment period:
    a. For delivery in Washington, DC--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, Room 445-G, Hubert 
H. Humphrey Building, 200 Independence Avenue, SW., Washington, DC 
20201.
    (Because access to the interior of the Hubert H. Humphrey Building 
is not readily available to persons without Federal government 
identification, commenters are encouraged to leave their comments in 
the CMS drop slots located in the main lobby of the building. A stamp-
in clock is available for persons wishing to retain a proof of filing 
by stamping in and retaining an extra copy of the comments being 
filed.)
    b. For delivery in Baltimore, MD--Centers for Medicare & Medicaid 
Services, Department of Health and Human Services, 7500 Security 
Boulevard, Baltimore, MD 21244-1850.
    If you intend to deliver your comments to the Baltimore address, 
call telephone number (410) 786-1066 in advance to schedule your 
arrival with one of our staff members.
    Comments erroneously mailed to the addresses indicated as 
appropriate for hand or courier delivery may be delayed and received 
after the comment period.
    For information on viewing public comments, see the beginning of 
the SUPPLEMENTARY INFORMATION section.

FOR FURTHER INFORMATION CONTACT:

Neal Shah (410) 786-1167 or Kristin Bohl (410) 786-8680, for general 
issues and issues related to the Physician Self-Referral Law.
James A. Cannatti III (202) 619-0335, for general issues and issues 
related to the Federal anti-kickback statute or civil monetary 
penalties.

SUPPLEMENTARY INFORMATION: 
    Inspection of Public Comments: All comments received before the 
close of the comment period are available for viewing by the public, 
including any personally identifiable or confidential business 
information that is included in a comment. We post all comments 
received before the close of the comment period on the following Web 
site as soon as possible after they have been received: http://www.regulations.gov. Follow the search instructions on that Web site to 
view public comments.
    Comments received timely will be also available for public 
inspection as they are received, generally beginning approximately 3 
weeks after publication of a document, at the headquarters of the 
Centers for Medicare & Medicaid Services, 7500 Security Boulevard, 
Baltimore, Maryland 21244, Monday through Friday of each week from 8:30 
a.m. to 4 p.m. To schedule an appointment to view public comments, 
phone 1-800-743-3951.

I. Introduction and Overview

    Section I. of this interim final rule with comment period (IFC) 
provides an introduction and overview of this rule. Section II. of this 
IFC provides background on the Shared Savings Program. Section III. of 
this IFC summarizes public comments received in response to the Waiver 
Designs Notice and Shared Savings Program proposed rule (as those terms 
are defined below). Section IV. of this IFC sets out the waivers and 
applicable requirements. Section V. of this IFC explains the waivers 
and solicits comments on specific ways we might modify the waivers to 
address fraud and abuse or other problems that may arise.

A. Connection Between Shared Savings Program and Fraud and Abuse 
Waivers

    Elsewhere in this issue of the Federal Register, the Centers for 
Medicare & Medicaid Services (CMS) published a final rulemaking setting 
forth the requirements for ACOs under the Shared Savings Program 
(hereinafter referred to as the ``Shared Savings Program final rule''). 
Section 1899 of the Act (as added by section 3022 of the Patient 
Protection and Affordable Care Act (Pub. L. 111-148), as amended by the 
Health Care and Education Reconciliation Act of 2010 (Pub. L. 111-152) 
(collectively, the ``Affordable Care Act'') describes the Shared 
Savings Program as a Medicare program to promote accountability for a 
Medicare patient population, coordinate items

[[Page 67993]]

and services under Parts A and B, and encourage investment in 
infrastructure and redesigned care processes for high quality and 
efficient service delivery. As described in the Shared Savings Program 
final rule, the Shared Savings Program is designed to achieve three 
goals: Better health for populations, better care for individuals, and 
lower growth in expenditures. CMS's expectation is that Shared Savings 
Program accountable care organizations (ACO) \1\ will help foster a new 
approach to delivering care that reduces fragmented or unnecessary care 
and excessive costs for Medicare fee-for-service beneficiaries and 
other patients.
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    \1\ For purposes of this IFC, the terms ``ACO,'' ``ACO 
participants,'' and ``ACO providers/suppliers'' have the meanings 
ascribed to them in 42 CFR 425.20.
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    The Physician Self-Referral Law, the Federal anti-kickback statute, 
and the civil monetary penalties (CMP) law provisions addressing 
inducements to beneficiaries and hospital payments to physicians to 
reduce or limit services, described in greater detail elsewhere in this 
IFC, are some of the important tools used to protect patients and the 
Federal health care programs from fraud, improper referral payments, 
unnecessary utilization, underutilization, and other harms. However, 
stakeholders have expressed concern that the restrictions these laws 
place on certain arrangements between physicians, hospitals, and other 
individuals and entities may impede development of some of the 
innovative integrated-care models envisioned by the Shared Savings 
Program. Section 1899(f) of the Act authorizes the Secretary to waive 
these and certain other laws as necessary to carry out the Shared 
Savings Program. Based on stakeholder input and other factors, the 
Secretary has found that it is necessary to waive these fraud and abuse 
laws in order to carry out the Shared Savings Program.
    Accordingly, this IFC sets forth waivers of certain provisions of 
the Physician Self-Referral Law, the Federal anti-kickback statute, the 
CMP law prohibiting hospital payments to physicians to reduce or limit 
services (the Gainsharing CMP), and the CMP law prohibiting inducements 
to beneficiaries (the Beneficiary Inducements CMP) as necessary to 
carry out the provisions of section 1899 of the Act. We seek to waive 
application of these fraud and abuse laws to ACOs formed in connection 
with the Shared Savings Program so that the laws do not unduly impede 
development of beneficial ACOs, while also ensuring that ACO 
arrangements are not misused for fraudulent or abusive purposes that 
harm patients or Federal health care programs.
    The waivers set forth in this IFC are promulgated pursuant to the 
specific authority at section 1899(f) of the Act. This authority 
applies only to the Shared Savings Program and to all ACOs 
participating in the Shared Savings Program. This includes those Shared 
Savings Program ACOs that are also participating in the Advance Payment 
Initiative to be administered by the Center for Medicare & Medicaid 
Innovation (Innovation Center). The Affordable Care Act includes 
separate authority for the Secretary to waive fraud and abuse laws for 
certain other demonstrations and pilot programs. Guidance regarding 
such waivers will be issued separately.

B. Overview of Final Waivers

    On April 7, 2011, CMS and OIG jointly published a notice with 
comment period seeking public comment on certain proposed waivers and 
other waiver design considerations (Waiver Designs in Connection with 
the Shared Savings Program and the Innovation Center (76 FR 19655)) 
(hereinafter referred to as the ``Waiver Designs Notice''). In that 
same issue of the Federal Register, CMS published a proposed rulemaking 
setting forth proposed requirements for ACOs under the Shared Savings 
Program (Shared Savings Program: Accountable Care Organizations (76 FR 
19528)) (hereinafter referred to as the ``Shared Savings Program 
proposed rule'') and soliciting public comments.
    CMS and OIG are jointly establishing waivers under this IFC to 
provide stakeholders with a coordinated approach to the waivers of 
fraud and abuse laws in connection with the Shared Savings Program. 
Administration of the Physician Self-Referral Law is the responsibility 
of CMS; the OIG is responsible for enforcement of the CMP provisions 
under the Physician Self-Referral Law. OIG shares responsibility for 
the Federal anti-kickback statute with the Department of Justice. The 
Gainsharing CMP and Beneficiary Inducements CMP are administered by the 
OIG.
    For reasons elaborated in more detail elsewhere in this IFC, the 
Secretary has determined, based on consideration of public input and 
the Department's own analysis, that it is necessary to waive certain 
provisions of the Physician Self-Referral Law, the Federal anti-
kickback statute, the Gainsharing CMP, and the Beneficiary Inducements 
CMP in some circumstances to carry out the Shared Savings Program.
    Section IV. of this IFC sets out the specific waivers and the 
conditions pertaining to them. Section V. of this IFC provides 
commentary explaining the waivers and solicits comments on possible 
modifications. There are five waivers addressing different 
circumstances--
     An ``ACO pre-participation'' waiver of the Physician Self-
Referral Law, the Federal anti-kickback statute, and the Gainsharing 
CMP that applies to ACO-related start-up arrangements in anticipation 
of participating in the Shared Savings Program, subject to certain 
limitations, including limits on the duration of the waiver and the 
types of parties covered;
     An ``ACO participation'' waiver of the Physician Self-
Referral Law, the Federal anti-kickback statute, and the Gainsharing 
CMP that applies broadly to ACO-related arrangements during the term of 
the ACO's participation agreement under the Shared Savings Program and 
for a specified time thereafter;
     A ``shared savings distributions'' waiver of the Physician 
Self-Referral Law, Federal anti-kickback statute, and Gainsharing CMP 
that applies to distributions and uses of shared savings payments 
earned under the Shared Savings Program;
     A ``compliance with the Physician Self-Referral Law'' 
waiver of the Gainsharing CMP and the Federal anti-kickback statute for 
ACO arrangements that implicate the Physician Self-Referral Law and 
meet an existing exception; and
     A ``patient incentive'' waiver of the Beneficiary 
Inducements CMP and the Federal anti-kickback statute for medically 
related incentives offered by ACOs under the Shared Savings Program to 
beneficiaries to encourage preventive care and compliance with 
treatment regimes.
    These waivers include the two waivers proposed in the Waiver 
Designs Notice (the shared savings distributions waiver and the 
compliance with the Physician Self-Referral Law waiver), as well as 
three new waivers developed in response to public comments seeking 
additional pathways to address a broader array of ACO activities needed 
to achieve the purposes of the Shared Savings Program. These five 
waivers provide flexibility for ACOs and their constituent parts to 
pursue a wide array of activities, including start-up and operating 
activities that further the purposes of the Shared Savings Program. 
These waivers incorporate conditions that, in combination with

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additional safeguards in the Shared Savings Program final rule, are 
intended to protect Medicare beneficiaries and the Medicare program 
from fraud and abuse while furthering the quality, economy, and 
efficiency goals of the Shared Savings Program.
    An arrangement need only fit in one waiver to be protected; parties 
seeking to ensure that an arrangement is covered by a waiver for a 
particular law may look to any waiver that applies to that law. In some 
cases, an arrangement may meet the criteria of more than one waiver.

II. Shared Savings Program: Background

A. Section 1899 of the Social Security Act

    Section 1899 of the Act establishes the Shared Savings Program to 
encourage the development of ACOs in Medicare. The Shared Savings 
Program is one of the first initiatives implemented under the 
Affordable Care Act aimed specifically at improving ``value'' in the 
Medicare program--that is, both higher quality and lower total 
expenditures for individual Medicare beneficiaries and the Medicare 
program. Section 1899 of the Act encourages ACOs to promote 
accountability for individual Medicare beneficiaries and population 
health management, improve the coordination of patient care under Parts 
A and B, and encourage investment in infrastructure and redesigned care 
processes for high quality and efficient service delivery. Redesigned 
care processes may improve care, increase efficiency, and lower costs 
for Medicare and other patients served by the ACO.
    In accordance with the Shared Savings Program final rule, ACOs will 
enter into a participation agreement with the Secretary to participate 
in the Shared Savings Program for no less than a 3-year period under 
one of two tracks. Under the first track, an ACO will have the 
opportunity to share in savings generated during the agreement. Under 
the second track, ACOs will operate under a ``two-sided risk'' model in 
which they will be eligible to receive a higher share of savings, but 
will also be required to repay a portion of the losses sustained by the 
Medicare program if costs for the ACO's assigned beneficiaries exceed 
certain thresholds. Under either model, in order to share a percentage 
of achieved savings with the Medicare program, ACOs must successfully 
meet quality and savings requirements and certain other conditions 
under the Shared Savings Program. ACO participants and ACO providers/
suppliers will continue to receive fee-for-service payments, and, under 
the Shared Savings Program, the ACO legal entity may choose how it 
distributes shared savings or allocates risk among its ACO participants 
and its ACO providers/suppliers. ACOs in the Shared Savings Program 
must also comply with requirements addressing governance, management, 
and leadership of the ACO, as well as program integrity, transparency, 
compliance plan, and certification requirements, among others.

B. Waiver Authority Under Section 1899(f) of the Act

    Section 1899(f) of the Act provides that ``[t]he Secretary may 
waive such requirements of sections 1128A and 1128B and title XVIII of 
[the] Act as may be necessary to carry out the provisions of [section 
1899 of the Act].'' This waiver authority is specific to the Shared 
Savings Program, and does not apply to other similar integrated-care 
delivery models. We may consider waivers (where authorized under the 
Affordable Care Act), exceptions, or safe harbors, as applicable, for 
other types of accountable care organizations, integrated-care delivery 
models, or arrangements at a later date. As explained in section V. of 
this IFC, any waivers for Innovation Center demonstration programs, 
apart from the Advance Payment Initiative, will be issued separately 
under the relevant authority.
    We note that a waiver of a specific fraud and abuse law is not 
needed for an arrangement to the extent that the arrangement: (1) Does 
not implicate the specific fraud and abuse law; or (2) implicates the 
law, but either fits within an existing exception or safe harbor, as 
applicable, or does not otherwise violate the law. Arrangements that do 
not fit in a waiver have no special protection and must be evaluated on 
a case-by-case basis for compliance with the Physician Self-Referral 
Law, the Federal anti-kickback statute, and the CMP laws. Failure to 
fit in a waiver is not, in and of itself, a violation of the laws. 
Existing exceptions and safe harbors might apply to ACO arrangements, 
depending on the circumstances.\2\ These include, among others, 
Physician Self-Referral Law exceptions for employment, personal 
services arrangements, in-office ancillary services, electronic health 
records (EHR) arrangements, risk-sharing, and indirect compensation 
arrangements (to the extent an ACO arrangement is an indirect financial 
relationship). Potential Federal anti-kickback statute safe harbors 
include, among others, those for employment, personal services and 
management contracts, EHR arrangements, and managed care arrangements.
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    \2\ 42 CFR 411.355 through 411.357; 42 CFR 1001.952; 42 CFR 
1003.110.
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    The waiver authority under section 1899(f) is limited to sections 
1128A and 1128B and title XVIII of the Act, and does not extend to any 
other laws or regulations, including, without limitation, the Internal 
Revenue Code (IRC) or State laws and regulations. Accordingly, nothing 
in this IFC affects the obligations of individuals or entities, 
including tax-exempt organizations, to comply with the IRC or other 
Federal or State laws and regulations. Moreover, nothing in this IFC 
changes any Medicare program reimbursement or coverage rule or alters 
any obligations parties may have under the Shared Savings Program. 
Although the waivers described in this IFC are necessary to ensure that 
the fraud and abuse laws do not unduly impede development of ACOs in 
connection with the Shared Savings Program, the waivers are not 
intended to suggest that any particular arrangement between particular 
parties is necessary to implementing the Shared Savings Program.

C. Fraud and Abuse Laws--Background

1. Physician Self-Referral Law (Section 1877 of the Act)
    Section 1877 of the Act (42 U.S.C. 1395nn, the ``Physician Self-
Referral Law'') is a civil statute that prohibits physicians from 
making referrals for Medicare ``designated health services,'' including 
hospital services, to entities with which they or their immediate 
family members have a financial relationship, unless an exception 
applies. These entities may not bill Medicare for services rendered as 
a result of a prohibited referral, and section 1877(g)(1) of the Act 
states that no payment may be made for a designated health service that 
is furnished pursuant to a prohibited referral. CMPs also apply to any 
person who presents (or causes to be presented) a bill for services for 
which he or she knows or should know payment may not be made under 
section 1877(g)(1) of the Act. For additional details, see section 
1877(g)(3) of the Act. Violations of the Physician Self-Referral Law 
may also result in liability under the False Claims Act (31 U.S.C. 
3729-33).
2. The Federal Anti-Kickback Statute (Section 1128B(b) of the Act)
    Section 1128B(b) of the Act (42 U.S.C. 1320a-7b(b), the ``Federal 
anti-kickback statute'') provides criminal penalties for

[[Page 67995]]

individuals or entities that knowingly and willfully offer, pay, 
solicit, or receive remuneration to induce or reward the referral of 
business reimbursable under any of the Federal health care programs, as 
defined in section 1128B(f) of the Act. The offense is classified as a 
felony and is punishable by fines of up to $25,000 and imprisonment for 
up to 5 years. Violations of the Federal anti-kickback statute may also 
result in the imposition of CMPs under section 1128A(a)(7) of the Act 
(42 U.S.C. 1320a-7a(a)(7)), program exclusion under section 1128(b)(7) 
of the Act (42 U.S.C. 1320a-7(b)(7)), and liability under the False 
Claims Act (31 U.S.C. 3729-33). Certain practices that meet all of the 
conditions of a safe harbor at 42 CFR 1001.952 are not subject to 
prosecution or sanctions under the Federal anti-kickback statute.
3. Prohibition on Inducements to Beneficiaries (Section 1128A(a)(5) of 
the Act)
    Section 1128A(a)(5) of the Act (42 U.S.C. 1320a-7a(a)(5)), the 
``Beneficiary Inducements CMP'') prohibits individuals and entities 
from offering or transferring remuneration to Medicare or Medicaid 
beneficiaries that the individual or entity knows or should know is 
likely to influence the beneficiary to order or receive from a 
particular provider, practitioner, or supplier any Medicare or Medicaid 
item or service. There are existing exceptions to the Beneficiary 
Inducements CMP at section 1128A(i)(6) of the Act.
4. Prohibition on Hospital Payments to Physicians To Induce Reduction 
or Limitation of Services (Sections 1128A(b)(1) and (2) of the Act)
    Sections 1128A(b)(1) and (2) of the Act (42 U.S.C. 1320a-7a(b)(1) 
and (2), the ``Gainsharing CMP'') apply to certain payment arrangements 
between hospitals and physicians, including arrangements commonly 
referred to as ``gainsharing'' arrangements. Under section 1128A(b)(1) 
of the Act, a hospital is prohibited from making a payment, directly or 
indirectly, to induce a physician to reduce or limit services to 
Medicare or Medicaid beneficiaries under the physician's direct care. 
Hospitals that make (and physicians who receive) such payments are 
liable for CMPs of up to $2,000 per patient covered by the payments 
(sections 1128A(b)(1) and (2) of the Act).

D. Summary of Public Input Opportunities

    Since passage of the Affordable Care Act, the U.S. Department of 
Health and Human Services (DHHS) has offered numerous opportunities for 
the public to provide input into the design and operation of ACOs and 
waivers necessary to carry out the provisions of the Shared Savings 
Program, most recently through the Waiver Designs Notice described 
previously in this IFC. In addition, CMS issued a Request for 
Information Regarding Accountable Care Organizations and the Shared 
Saving Program on November 10, 2010,\3\ and held multiple listening 
sessions with stakeholders. CMS, OIG, and the Federal Trade Commission 
held a joint workshop on October 5, 2010, entitled ``Workshop Regarding 
Accountable Care Organizations, and Implications Regarding Antitrust, 
Physician Self-Referral, Anti-Kickback, and Civil Monetary Penalty 
(CMP) Laws.'' \4\ We also received and reviewed written public comments 
in connection with the workshop.\5\ Finally, we received public 
comments related to the waivers in response to the Waiver Designs 
Notice and the Shared Savings Program proposed rule. Through these 
means, DHHS has received public input representing a wide spectrum of 
views.
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    \3\ 75 FR 70165 (2010).
    \4\ Information about the workshop is available on CMS's Web 
site at http://www.cms.gov/center/physician.asp.
    \5\ The public comments are available on the FTC's Web site at 
http://www.ftc.gov/os/comments/aco/index.shtm.
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E. Contents of Waiver Designs Notice

    The Waiver Designs Notice proposed several waivers related to ACOs 
in the Shared Savings Program and also solicited public comments on a 
range of issues. The proposed waivers included waivers of certain 
provisions of the Physician Self-Referral Law and the Federal anti-
kickback statute to distributions of shared savings received by an ACO 
from CMS under the Medicare Shared Savings Program: (1) To or among ACO 
participants, ACO providers/suppliers, and individuals and entities 
that were ACO participants or ACO providers/suppliers during the year 
in which the shared savings were earned by the ACO; or (2) for 
activities necessary for and directly related to the ACO's 
participation in and operations under the Shared Savings Program. We 
also proposed to waive certain provisions of the Federal anti-kickback 
statute with respect to any financial relationship between or among the 
ACO, ACO participants, and ACO providers/suppliers necessary for and 
directly related to the ACO's participation in and operations under the 
Medicare Shared Savings Program that implicates the Physician Self-
Referral Law and fully complies with an exception at 42 CFR 411.355 
through 411.357.
    We also proposed to waive certain provisions of the Gainsharing CMP 
with respect to two scenarios: (1) Distributions of shared savings 
received by an ACO from CMS under the Medicare Shared Savings Program 
in circumstances where the distributions are made from a hospital to a 
physician, provided that the payments are not made knowingly to induce 
the physician to reduce or limit medically necessary items or services, 
and the hospital and physician are ACO participants or ACO providers/
suppliers, or were ACO participants or ACO providers/suppliers during 
the year in which the shared savings were earned by the ACO; and (2) 
any financial relationship between or among the ACO, its ACO 
participants, and its ACO providers/suppliers necessary for and 
directly related to the ACO's participation in and operations under the 
Medicare Shared Savings Program that implicates the Physician Self-
Referral Law and fully complies with an exception at 42 CFR 411.355 
through 411.357.
    The Waiver Designs Notice recognized that the proposed waivers 
might not cover all of the possible arrangements involved with setting 
up and operating an ACO. As such, we solicited comments on waivers, 
modifications, or additions that would be necessary to carry out the 
provisions of the Shared Savings Program. We specifically solicited 
comments on how waivers should address: arrangements related to 
establishing the ACO; arrangements between or among ACO participants 
and/or ACO providers/suppliers related to ongoing operations of the ACO 
and achieving ACO goals; other arrangements for which a waiver would be 
necessary; the duration of the waivers; and the scope of the waivers.

III. Summary of Public Comments to the Waiver Designs Notice and 
Relevant Sections of the Shared Savings Program Proposed Rule

    We received comments related to the proposed waivers and 
solicitation of comments on other waiver design considerations in 
response to both the Waiver Designs Notice and the Shared Savings 
Program proposed rule. We summarize the comments in this section of the 
IFC. Section V. of this IFC explains the waivers in more detail and 
responds to comments.

A. Threshold Qualifications for Waiver

    Commenters requested that we clarify whether we will be issuing 
waivers that are uniform across all ACOs

[[Page 67996]]

participating in the Shared Savings Program. At least one commenter 
recommended that we retain some provision for individualized review 
while others requested that waivers apply uniformly to all 
participants.

B. Scope of Proposed Waivers

    We received numerous comments about the appropriate scope of the 
waivers. The great majority of commenters supported broader waivers. 
Many of those commenters indicated that the proposed waivers would be 
insufficient to foster the innovation and relationships necessary for 
participation in the Shared Savings Program. However, some commenters 
expressed concern that the proposed waivers were too broad, or that 
expanded waivers could lead to program abuses.
1. General Issues
    Many commenters stated that the applicable fraud and abuse laws 
should be waived in their entirety for ACOs participating in the Shared 
Savings Program because, according to the commenters, the laws are 
premised on a ``fee-for-service'' world that has different incentives 
than those that apply to the Shared Savings Program and because the 
Shared Savings Program incorporates monitoring, reporting, and other 
program features that will act as safeguards. These commenters stated 
that DHHS should waive these laws for entities that successfully enter 
and participate in the Shared Savings Program, such that the entities 
would be shielded from penalties for transactions related to ACO 
business. Many commenters stated that certain elements of the Physician 
Self-Referral Law exceptions and Federal anti-kickback statute safe 
harbors cannot sufficiently support the development of innovative ACO 
structures. For example, these commenters identified the ``transaction-
by-transaction'' structure of the existing exceptions and safe harbors 
and the ``fair market value'' or ``set in advance'' elements of many of 
them as specific burdens.
    Several commenters stated that the fraud and abuse laws should be 
waived for payments between ACOs enrolled in the Shared Savings 
Program, their ACO participants, and/or their ACO providers/suppliers, 
regardless of the source of funding for the payments. Some commenters 
asserted that the Shared Savings Program's standards for clinical 
integration should justify protection for payments other than shared 
savings distributions, if the payments are made in service of achieving 
Shared Savings Program goals. Others were concerned that the continued 
use of fee-for-service payments in the program created an incentive for 
overutilization.
    The majority of comments generally suggested one of two broad 
approaches to waiving the laws: First, an ``ACO waiver'' establishing 
broad protections for ACO functions, or second, a total waiver of the 
laws for any ACO participating in the Shared Savings Program. Many 
commenters called for the agencies to create an ``ACO waiver'' that 
would cover ACO activities through the lifespan of an ACO, from 
arrangements leading up to formation of the ACO, through the end of the 
ACO's participation in the program. Other commenters advocated the 
creation of a ``single, comprehensive approach'' for compliance, rather 
than requiring a piecemeal transaction-by-transaction analysis. Some 
commenters requested ``blanket'' waivers for certain categories of 
remuneration, including non-monetary arrangements (such as IT services, 
EHR systems, and the provision of free care management personnel and/or 
services) and ``systems-level'' activities (such as medical 
directorships or infection prevention/antimicrobial stewardship 
programs).
    In contrast, a minority of commenters favored waivers no broader or 
narrower than the proposed waivers. Some of these commenters advocated 
alternate approaches including: Different safeguards (discussed later 
in this IFC), waivers conditioned on certain qualitative limits, and 
more extensive monitoring (including monitoring of beneficiary access 
to care and cost-shifting to private insurers). Although some 
commenters were concerned about an overly broad waiver and cautioned 
against expanding beyond the proposed waiver designs, the majority of 
commenters believed the proposed waiver for shared savings 
distributions would be too narrow, particularly because an ACO, its ACO 
participants, and its ACO providers/suppliers will not have access to 
the shared savings distributions until long after the ACO has entered 
into its participation agreement, thus precluding use of those savings 
to fund start-up and operating activities.
    Some commenters raised issues related to specific scenarios. For 
example, a commenter requested that ACOs with ``commercial motives'' be 
treated differently than ACOs composed of ``public health providers'' 
because, according to the commenter, the latter do not give rise to 
similar fraud and abuse concerns. Other commenters stated that the 
fraud and abuse laws presented a particular challenge for prospective 
ACOs in States with ``corporate practice of medicine'' laws because 
providers and suppliers could not satisfy certain important exceptions 
and safe harbors (including the employment exception and safe harbor) 
in those States.
    We also received requests for clarification about the proposed 
waivers. Several commenters requested clarification about how the fraud 
and abuse laws would interact with specific Shared Savings Program 
rules. For example, one commenter expressed concern about the phrase 
``distributions of shared savings,'' and asked the agencies to clarify 
whether a payment from an ACO to its ACO participants or its ACO 
providers/suppliers must be conditioned on the same quality and cost 
terms that govern the ACO's participation agreement (or whether it 
would be sufficient that the payment initially comes from shared 
savings). We also received a number of comments on the proposed 
``necessary for and directly related to'' standard. Commenters 
overwhelmingly requested that we clarify this phrase, arguing it was 
too restrictive and thus did not provide sufficient assurance that ACOs 
could participate in the Shared Savings Program. Some commenters 
believed the standard was overly broad, with one expressing concern 
that the standard could allow arrangements that would eliminate 
competition. Some commenters requested concrete examples of 
relationships that would meet this standard, while others requested 
that the agencies allow greater flexibility. Commenters also suggested 
a range of different standards, including, for example, mandating that 
relationships simply be ``related'' or ``directly related'' to the ACO, 
making the standard subjective, or requiring payments to entities 
outside the ACO to be linked to quality improvement goals. Finally, 
some commenters stated that it would be difficult to isolate 
arrangements that are ``necessary for and directly related to'' the ACO 
because many arrangements will only be feasible if applied to all 
payers and/or patients.
    Some commenters also raised questions about how the waivers would 
function practically. For example, one commenter asked whether all ACO 
participants or ACO providers/suppliers would endanger their Medicare 
fee-for-service payments if the ACO (or one of its ACO participants or 
ACO providers/suppliers) fails to satisfy one of the qualifications of 
the waiver. We also received many requests for clarification of the 
scope of the waiver for shared savings distributions. For example,

[[Page 67997]]

some commenters asked us to confirm that downstream distributions would 
be covered by the waiver, while others asked us to clarify whether 
repayment of start-up costs out of shared savings would be considered 
``necessary for and directly related to'' the ACO's participation in 
the program.
2. Compliance With the Physician Self-Referral Law Waiver
    We received several comments asking for clarification of the 
proposed waiver of the Federal anti-kickback statute and Gainsharing 
CMP for financial relationships between or among the ACO, ACO 
participants, and ACO providers/suppliers necessary for and directly 
related to the ACO's participation in and operations under the Shared 
Savings Program that implicate the Physician Self-Referral Law and 
fully comply with an existing exception at 42 CFR 411.355 through 
411.357. Several commenters requested expansion of this waiver to cover 
relationships that would not implicate the Physician Self-Referral Law 
either because the relationship would not involve designated health 
services or would not involve referring physicians covered by the 
Physician Self-Referral Law. While commenters on this topic generally 
welcomed the alignment of the Federal anti-kickback statute, the 
Gainsharing CMP, and the Physician Self-Referral Law for ACO 
arrangements, some expressed concern that the proposed waiver design 
was too limited to promote many innovative ACO arrangements.
3. Gainsharing CMP
    Some commenters requested clarification of the application of the 
waiver of the Gainsharing CMP. For example, some commenters asked us to 
confirm that distributions of shared savings made from the ACO to a 
physician would be protected, even if the ACO is owned in part by a 
hospital. Some commenters urged us to adopt a narrow waiver of the 
Gainsharing CMP and to carefully monitor ACOs to ensure that the waiver 
does not lead to a reduction or limitation of medically necessary 
services. Many commenters requested additional clarification of the 
``medically necessary'' standard that limited application of the 
proposed waiver of the Gainsharing CMP to arrangements that do not 
reduce medically necessary care. Several commenters asked us to clarify 
or confirm whether reliance on evidence-based protocols would be 
sufficient to meet the ``medically necessary'' standard. Several 
commenters noted that successful ACOs may reduce some types of 
medically necessary services by encouraging the use or ordering of 
alternative medically necessary services, for example, arrangements 
that incentivize reductions in emergency room visits by encouraging 
management of conditions on a non-emergency basis or arrangements that 
reduce inpatient admissions in favor of coordinated outpatient care. A 
commenter urged us to permit financial rewards that incent 
implementation of evidence-based treatment protocols, even though such 
payments may be intended to encourage clinicians to select one type of 
medically necessary service over another.

C. Duration of Waivers

    Commenters generally objected to the proposed requirement that the 
waivers would apply only so long as an ACO, its ACO participants, and 
its ACO providers/suppliers remained in compliance with Shared Savings 
Program requirements. Some commenters requested that this requirement 
be eliminated and replaced by a simpler threshold for waiver 
qualification, asserting that the auditing and oversight functions at 
the outset of and during the Shared Savings Program are sufficient to 
protect against fraud and abuse.
    Many commenters requested that the waivers cover periods prior to 
an ACO's acceptance into the Shared Savings Program. Some of these 
commenters also expressed a desire that the waivers cover time periods 
after the ACO, its ACO participants, and its ACO providers/suppliers 
have left the Shared Savings Program, for purposes of winding down the 
arrangement or otherwise ensuring continued compliance with the laws. 
One commenter suggested that the waivers cover a period of at least 24 
months prior to the start of any agreement with CMS, with no 
possibility of retroactive enforcement, in order to avoid a chilling 
effect on innovation. Other commenters suggested that the agencies 
apply the waivers to payments whenever made, if the payments relate to 
activities leading up to or occurring within the agreement period.

D. Additional Waiver Design Considerations

1. Start-Up Costs
    Many commenters stated that the fraud and abuse laws should be 
waived in a manner that allows participants to finance others' start-up 
costs. As examples, commenters identified: Infrastructure creation and 
provision prior to acceptance in the Shared Savings Program (for 
example, care coordination mechanisms; EHR systems; data reporting 
systems; new staff; and systems to make operational performance 
measurements and allocate performance results and payments 
accordingly); market analysis for antitrust purposes; potential novel 
arrangements created to facilitate integration across multiple 
organizations; organizational and training costs; incentives to attract 
primary care physicians; and any loans, capital contributions, grants 
and withholds.
    Some commenters suggested that waivers covering start-up costs 
should be limited to providers that have a financial stake in the 
success of the ACO, or, absent this requirement, that any waiver should 
be limited to distributions of shared savings only.
2. Other Arrangements Among the ACO, Its ACO Participants, and Its ACO 
Providers/Suppliers
    Most commenters on this topic stated that waivers should cover 
arrangements (in addition to those arising out of shared savings) among 
the ACO, its ACO participants, and its ACO providers/suppliers. One 
commenter recommended that the waivers not apply to additional 
arrangements unless the arrangements are necessary for or directly 
related to the ACO's operations under the Shared Savings Program. But 
the majority of commenters, supporting a broader approach to waivers, 
explained that waivers for other arrangements are necessary to allow 
for start-up, operating, and maintenance costs in the context of 
innovative arrangements. These commenters had various suggestions about 
how the laws should be waived. As noted previously, many commenters 
suggested that the fraud and abuse laws should be waived broadly for 
ACOs in the Shared Savings Program. Others suggested that the laws 
should be waived for compensation that is expressly conditioned on 
quality improvements, cost savings, or adherence to objective clinical 
measures, care coordination guidelines, and/or treatment models. Others 
suggested that waivers should cover payments that are made in 
connection with the operations and goals of the ACO and are 
commercially reasonable. Some commenters asked us to consider 
situations in which ACOs do not generate shared savings immediately, if 
at all, and pointed to the Medicare Physician Group Practice 
demonstration project as an example. One commenter proposed that the 
waiver should cover hospitals that share the proceeds of system-wide 
savings they achieve

[[Page 67998]]

outside the context of the Shared Savings Program or some other formal 
payer-organized shared savings program.
3. Other Arrangements With Parties Outside the ACO
    Some commenters asked us to clarify the term ``outside individuals 
and entities'' as that term was used in the solicitation of comments on 
this issue. For example, commenters asked whether the waivers would 
cover arrangements with physicians and other providers who are not ACO 
participants or ACO providers/suppliers but who treat ACO patients and 
voluntarily comply with the ACO's policies and procedures.
    Many commenters appreciated the proposed waiver for arrangements 
with parties outside the ACO that are funded with distributions of 
shared savings. However, many commenters requested that we expand the 
waiver to cover arrangements with individuals or entities outside the 
ACO even if the payments are not derived from shared savings. Some 
commenters suggested that covered arrangements be restricted to those 
that meet articulated standards (for example, only arrangements arising 
out of the distribution of shared savings should be waived) and that 
CMS monitor referrals to ensure that non-ACO participants and non-ACO 
providers/suppliers are not being unfairly marginalized.
4. Relationships With Private Payers/Other Payers
    Many commenters stated that the agencies should waive the fraud and 
abuse laws for arrangements involving payments from private payers to 
ACOs, including ``downstream'' arrangements between or among the ACO, 
ACO participants, and ACO providers/suppliers. These commenters 
generally believed that limiting the waiver to arrangements involving 
Medicare shared savings would limit economies of scale and introduce 
significant complexity from the perspective of governance and 
management. One commenter argued that the involvement of private health 
plans in ACO relationships would reduce fraud and abuse concerns. Some 
commenters expressed concern that failure to address private payer 
arrangements would perpetuate uncertainty for ACOs enrolling in the 
Shared Savings Program that were also contemplating similar 
arrangements with private payers. These commenters observed that 
arrangements downstream of private payer incentive payment programs can 
be sensitive to the volume or value of ``other business generated'' for 
providers and suppliers and thus might not fit in existing exceptions 
to the Physician Self-Referral Law. One commenter representing health 
plans expressed concern about ACO arrangements under the Shared Savings 
Program that might result in cost-shifting to private plans or steerage 
of patients to or from Medicare managed care plans based on the 
services required by the patient. Some commenters stated that we should 
not create waivers for private payer arrangements.
    Some commenters suggested that, if the final waivers do not cover 
relationships with private payers, the agencies should clarify how 
elements of existing exceptions and safe harbors may be applied to such 
arrangements involving ACOs. For example, commenters requested further 
clarification on the following: whether hospital distribution of a 
private payer's shared savings payments would constitute ``indirect 
compensation'' under the Physician Self-Referral Law; how to calculate 
``fair market value'' of downstream distributions of private payer 
shared savings for purposes of applicable exceptions; and whether the 
Physician Self-Referral Law risk-sharing exception could be used. 
Finally, one commenter requested that the agencies integrate guidance 
for private payers with guidance for other non-Medicare payers, 
including Medicaid.
5. Appropriate Safeguards
    Some commenters stated that safeguards beyond the transparency, 
accountability, and oversight protections built into the Shared Savings 
Program proposed rule are unnecessary because such safeguards 
adequately address patient and program abuse. A commenter stated that 
providing opportunities for creativity without waiver-specific, 
restrictive safeguards will not increase the likelihood that 
individuals or organizations will place their own financial interests 
above those of their patients; instead, it will allow them to focus on 
furnishing appropriate and necessary care coordination. A commenter 
suggested that safeguards be based on prior OIG advisory opinions or 
the CMS proposed incentive payment and shared savings exception.
    Other commenters believed that additional safeguards are necessary 
and suggested, for example, requiring arrangements to meet a fair 
market value or commercial reasonableness standard; requiring 
additional disclosures to CMS and to patients; or imposing more 
specific requirements related to methods for distributing shared 
savings to address the commenters' concerns about distributions 
inappropriately influencing physician ordering patterns or possible 
stinting on care.
    A commenter stated that the waiver for shared savings distributions 
should not protect distributions of shared savings from an ACO to an 
ACO participant on the basis of that ACO participant's generation of 
other business for another ACO participant. Some commenters suggested 
monitoring of referrals outside the ACO to detect improper referral 
patterns. One commenter requested that CMS create a system to 
continually assess the compliance of an ACO, its ACO participants, and 
its ACO providers/suppliers with the fraud and abuse laws.
6. Two-Sided Risk
    We received several comments in response to our solicitation on 
waiver considerations related to two-sided risk. One commenter noted 
that a waiver should apply equally to both one- and two-sided risk 
models. Other commenters recommended that CMS either extend the 
proposed waiver to cover hospitals' disproportionate assumption of risk 
or change the Shared Savings Program proposed rule to make the two-
sided option voluntary or make it clear that such assumption of risk is 
not remuneration under the Physician Self-Referral Law. Commenters 
asked that we protect the means or allocation of shared savings and 
losses, and that we define the ``proper'' allocation of such savings or 
losses.
7. Existing Exception and Safe Harbor for Electronic Health Records
    We sought comments in the Waiver Designs Notice addressing whether, 
in connection with the Shared Savings Program, we should use the 
authority at section 1899(f) of the Act to waive the Physician Self-
Referral Law and the Federal anti-kickback statute for ACO arrangements 
that satisfy the existing exception and safe harbor \6\ for EHR 
arrangements but that are expected to occur after the sunset date of 
2013. Some commenters requested that the agencies waive the current 
sunset date of 2013 that applies to the existing EHR exception and safe 
harbor, and suggested that the agencies protect the EHR arrangements of 
ACOs in the Medicare Shared Savings Program after 2013 on the same 
terms as the existing exception and safe harbor. Some commenters 
particularly argued that the Shared Savings Program proposed rule's 
standard of 50 percent meaningful use

[[Page 67999]]

of EHRs demonstrated the need to extend the waiver to relationships 
intended to reach that standard.
---------------------------------------------------------------------------

    \6\ 42 CFR 411.357(w) and 42 CFR 1001.952(y), respectively.
---------------------------------------------------------------------------

    One commenter disagreed with waiving the EHR exception and safe 
harbor and suggested rescinding the exception and safe harbor or 
specifically excluding these types of arrangements from the waiver, 
because the EHR incentive in American Recovery and Reinvestment Act of 
2009 was sufficient to achieve the exception's and safe harbor's 
original purpose of promoting adoption of technology. However, most 
commenters addressing this topic requested that we make the exception 
and safe harbor permanent, extend them for several years, or protect 
ACOs at any time after the sunset on the same terms as the exception 
and safe harbor.
8. Beneficiary Inducements
    Most commenters addressing this topic supported a waiver of the 
Beneficiary Inducements CMP, section 1128A(a)(5) of the Act, although 
some of them expressed opposition. Among commenters supporting a 
waiver, many cited the need for a waiver to promote greater preventive 
care, to incentivize patients to follow treatment or follow-up care 
regimes, and to increase participation in ACOs in order to achieve the 
goals of the Shared Savings Program. Several supporters of a waiver 
suggested that the waiver cover reduced or eliminated beneficiary cost-
sharing, or other financial incentives, such as allowing beneficiaries 
to share in ACO cost savings. Commenters opposing a Beneficiary 
Inducements CMP waiver stated it could negatively impact patient choice 
by promoting incentives that might induce beneficiaries to seek care 
only within a particular ACO.
9. Timing of Waivers
    Generally, commenters supported issuance of the waivers prior to or 
at the same time as the Shared Savings Program final rule in order to 
afford prospective ACOs, their ACO participants, and ACO providers/
suppliers as much time as possible to prepare for application to the 
Shared Savings Program with known waiver protection.
10. Other Issues Related to Shared Savings Program Waivers
    Commenters raised a number of other issues related to the waivers. 
Some commenters requested that the waivers apply to clinically 
integrated organizations that do not participate in the Shared Savings 
Program. Others raised the issue that waivers of the Physician Self-
Referral Law, Federal anti-kickback statute, and Gainsharing CMP laws 
do not offer protection with respect to State laws. Several commenters 
asked the agencies to clarify how the proposed waivers would affect 
programs outside the Shared Savings Program. Commenters proposed that 
CMS should extend uniform waivers for all Medicare projects involving 
coordinated care, including the Independence at Home project, Bundled 
Payment project, and demonstrations sponsored by the Innovation Center. 
One commenter requested that the waiver apply to healthcare providers 
other than ACO participants or ACO providers/suppliers, while others 
requested that waivers apply to all arrangements between ACO 
participants and/or ACO providers/suppliers, and individuals or 
entities outside the Shared Savings Program.
    We also received a number of comments that are outside the scope of 
this rulemaking. Those comments are not summarized here.

IV. Provisions of the Interim Final Rule With Comment Period: Waiver 
Requirements

A. Overview

    Section IV.B. of this IFC sets forth the specific waivers and 
waiver requirements, pursuant to the authority granted under section 
1899(f) of the Act. The waivers apply only to the specific provisions 
of the laws enumerated in the waivers and do not apply to any other 
provisions of Federal or State law, including, without limitation, any 
provisions of the IRC. We invite the public to comment on the waivers 
set forth in section IV.B. of this IFC.
    To promote efficiency and ease of use, we crafted the waivers to 
apply consistently across the waived fraud and abuse laws to the extent 
possible. The waivers apply uniformly to each ACO, ACO participant, and 
ACO provider/supplier (as those terms are defined in section IV.B. of 
this IFC pursuant to the Shared Savings Program) participating in the 
Shared Savings Program. The waivers are intended to be self-
implementing. Apart from meeting applicable waiver conditions, no 
special action (such as the submission of a separate application for a 
waiver) is required by parties in order to be covered by a waiver. 
Parties need not apply for an individualized waiver.
    This IFC includes five waivers. The multiplicity of waivers is 
intended to afford flexibility to ACOs in varying circumstances and to 
be responsive to public comments outlining a wide variety of 
arrangements that ACOs of various types might need to undertake in 
order to be successful at carrying out the Shared Savings Program. 
While the waivers contain many common elements, there are distinctions 
among them tailored to address particular circumstances, including 
particular fraud and abuse risks. The first two waivers are an ACO pre-
participation waiver and an ACO participation waiver that should, 
collectively, address the majority of ACO-related start-up and 
operating arrangements identified by public comments and the DHHS's own 
analysis as necessary to carry out the Shared Savings Program. Two 
additional waivers--for shared savings distributions and arrangements 
that are in compliance with the Physician Self-Referral Law--were 
described in the Waiver Designs Notice and are being established in 
this IFC with minor modifications. Many arrangements covered by these 
waivers could also be protected under the ACO pre-participation and ACO 
participation waivers. However, some parties may find these two 
additional waivers more suitable to their particular needs, and we have 
elected to make them available. The remaining waiver addresses 
incentives offered to beneficiaries to foster preventive health care 
and patient compliance with treatment regimes in order to engage 
patients in quality and care improvement. For ease of reference, the 
entire set of waivers and applicable requirements is set forth in 
section IV.B. of this IFC. We will also make the waiver text available 
on both the CMS and OIG Web sites. Because the waivers cover multiple 
legal authorities and to ensure that the waivers, if modified, remain 
consistent over time and across relevant laws, we are not codifying the 
waivers in the Code of Federal Regulations. We solicit comments about 
this approach.
    Additional explanation appears in section V. of this IFC, as well 
as additional solicitations of comments on possible modifications to 
the waiver designs.

B. The Waivers and Applicable Requirements

    As used in these waivers, ACO, ACO participant, and ACO provider/
supplier have the meanings set forth in 42 CFR 425.20. In the context 
of the ACO pre-participation waiver, these terms refer to individuals 
or entities that would meet the definitions of the terms set forth in 
42 CFR 425.20, if the ACO had a participation agreement, but for the 
fact that the ACO has not yet submitted the list required under 42 CFR 
425.204(c)(5) to be provided with the application for the Shared 
Savings Program.

[[Page 68000]]

    As used in these waivers, participation agreement refers to the 
agreement between an ACO and CMS for the ACO's participation in the 
Shared Savings Program that is described in 42 CFR 425.208.
    As used in these waivers, purposes of the Shared Savings Program 
means one or more of the following purposes consistent with section 
1899(a) and (b) of the Act: promoting accountability for the quality, 
cost, and overall care for a Medicare patient population as described 
in the Shared Savings Program, managing and coordinating care for 
Medicare fee-for-service beneficiaries through an ACO, or encouraging 
investment in infrastructure and redesigned care processes for high 
quality and efficient service delivery for patients, including Medicare 
beneficiaries.
    As used in these waivers, start-up arrangements means any items, 
services, facilities, or goods (including non-medical items, services, 
facilities, or goods) used to create or develop an ACO that are 
provided by such ACO, ACO participants, or ACO providers/suppliers.
    ACO Pre-participation Waiver. Pursuant to section 1899(f) of the 
Act, section 1877(a) of the Act (relating to the Physician Self-
Referral Law), sections 1128A(b)(1) and (2) of the Act (relating to the 
Gainsharing CMP), and sections 1128B(b)(1) and (2) of the Act (relating 
to the Federal anti-kickback statute) are waived with respect to start-
up arrangements that pre-date an ACO's participation agreement, 
provided all of the following conditions are met:
    1. The arrangement is undertaken by a party or parties acting with 
the good faith intent to develop an ACO that will participate in the 
Shared Savings Program starting in a particular year (the ``target 
year'') and to submit a completed application to participate in the 
Shared Savings Program for that year. The parties to the arrangement 
must include, at a minimum, the ACO or at least one ACO participant of 
the type eligible to form an ACO (as set forth at 42 CFR 425.102(a)). 
The parties to the arrangement may not include drug and device 
manufacturers, distributors, durable medical equipment (DME) suppliers, 
or home health suppliers.
    2. The parties developing the ACO must be taking diligent steps to 
develop an ACO that would be eligible for a participation agreement 
that would become effective during the target year, including taking 
diligent steps to meet the requirements of 42 CFR 425.106 and 425.108 
concerning the ACO's governance, leadership, and management.
    3. The ACO's governing body has made and duly authorized a bona 
fide determination, consistent with a duty to the ACO that is 
equivalent to the duty owed by ACO governing body members under 42 CFR 
425.106(b)(3), that the arrangement is reasonably related to the 
purposes of the Shared Savings Program.
    4. The arrangement, its authorization by the governing body, and 
the diligent steps to develop the ACO are documented. The documentation 
of the arrangement must be contemporaneous with the establishment of 
the arrangement, the documentation of the authorization must be 
contemporaneous with the authorization, and the documentation of the 
diligent steps must be contemporaneous with the diligent steps. All 
such documentation must be retained for at least 10 years following 
completion of the arrangement (or, in the case of the diligent steps, 
for at least 10 years following the date the ACO submits its 
application or the date the ACO submits its statement of reasons for 
failing to submit an application, as described in item 6) and promptly 
made available to the Secretary upon request. The documentation must 
identify at least the following:
    a. A description of the arrangement, including all parties to the 
arrangement; the date of the arrangement; the purpose(s) of the 
arrangement; the items, services, facilities, and/or goods covered by 
the arrangement (including non-medical items, services, facilities, or 
goods); and the financial or economic terms of the arrangement.
    b. The date and manner of the governing body's authorization of the 
arrangement. The documentation of the authorization should include the 
basis for the determination by the ACO's governing body that the 
arrangement is reasonably related to the purposes of the Shared Savings 
Program.
    c. A description of the diligent steps taken to develop an ACO, 
including the timing of actions undertaken and the manner in which the 
actions relate to the development of an ACO that would be eligible for 
a participation agreement.
    5. The description of the arrangement is publicly disclosed at a 
time and in a place and manner established in guidance issued by the 
Secretary. Such public disclosure shall not include the financial or 
economic terms of the arrangement.
    6. If an ACO does not submit an application for a participation 
agreement by the last available application due date for the target 
year, the ACO must submit a statement on or before the last available 
application due date for the target year, in a form and manner to be 
determined by the Secretary, describing the reasons it was unable to 
submit an application.
    For arrangements that meet all of the preceding conditions, the 
pre-participation waiver applies as follows:
     The waiver period would start on--
    ++ The date of publication of this IFC for target year 2012; or
    ++ One year preceding an application due date (the ``selected 
application date'') for a target year of 2013 or later.
     The waiver period would end--
    ++ For ACOs that submit an application by the selected application 
date and enter into a participation agreement for the target year, on 
the start date for that agreement;
    ++ For ACOs that submit an application by the selected application 
date for the target year, but whose application is denied, on the date 
of the denial notice, except with respect to any arrangement that 
qualified for the waiver before the date of the denial notice, in which 
case the waiver period would end on the date that is 6 months after the 
date of the denial notice; and
    ++ For ACOs that fail to submit an application by the selected 
application due date for the target year, on the earlier of the 
selected application due date or the date the ACO submits a statement 
of reasons for failing to submit an application, except that an ACO 
that has been unable to submit an application, but can demonstrate a 
likelihood of successfully developing an ACO that would be eligible to 
participate in the Shared Savings Program by the next available 
application due date, may apply for an extension of the waiver, 
pursuant to procedures to be established by the Secretary in guidance. 
The determination whether to grant a waiver will be in the sole 
discretion of the Secretary and will not be reviewable.
    ++ An ACO may use the pre-participation waiver (including any 
extensions granted) only one time.
    ACO Participation Waiver. Pursuant to section 1899(f) of the Act, 
section 1877(a) of the Act (relating to the Physician Self-Referral 
Law), sections 1128A(b)(1) and (2) of the Act (relating to the 
Gainsharing CMP), and sections 1128B(b)(1) and (2) of the Act (relating 
to the Federal anti-kickback statute) are waived with respect to any 
arrangement of an ACO, one or more of its ACO participants or its ACO 
providers/suppliers, or a combination thereof, provided all of the 
following conditions are met:

[[Page 68001]]

    1. The ACO has entered into a participation agreement and remains 
in good standing under its participation agreement.
    2. The ACO meets the requirements of 42 CFR 425.106 and 425.108 
concerning its governance, leadership, and management.
    3. The ACO's governing body has made and duly authorized a bona 
fide determination, consistent with the governing body members' duty 
under 42 CFR 425.106(b)(3), that the arrangement is reasonably related 
to the purposes of the Shared Savings Program.
    4. Both the arrangement and its authorization by the governing body 
are documented. The documentation of the arrangement must be 
contemporaneous with the establishment of the arrangement, and the 
documentation of the authorization must be contemporaneous with the 
authorization. All such documentation must be retained for at least 10 
years following completion of the arrangement and promptly made 
available to the Secretary upon request. The documentation must 
identify at least the following:
    a. A description of the arrangement, including all parties to the 
arrangement; date of the arrangement; the purpose of the arrangement; 
the items, services, facilities, and/or goods covered by the 
arrangement (including non-medical items, services, facilities, or 
goods); and the financial or economic terms of the arrangement.
    b. The date and manner of the governing body's authorization of the 
arrangement. The documentation should include the basis for the 
determination by the ACO's governing body that the arrangement is 
reasonably related to the purposes of the Shared Savings Program.
    5. The description of the arrangement is publicly disclosed at a 
time and in a place and manner established in guidance issued by the 
Secretary. Such public disclosure shall not include the financial or 
economic terms of the arrangement.
    For arrangements that meet all of the preceding conditions, the 
waiver period will start on the start date of the participation 
agreement and will end 6 months following the earlier of the expiration 
of the participation agreement, including any renewals thereof, or the 
date on which the ACO has voluntarily terminated the participation 
agreement. However, if CMS terminates the participation agreement, the 
waiver period will end on the date of the termination notice.
3. Shared Savings Distribution Waiver
    Pursuant to section 1899(f) of the Act, section 1877(a) of the Act 
(relating to the Physician Self-Referral Law), sections 1128A(b)(1) and 
(2) of the Act (relating to the Gainsharing CMP), and sections 
1128B(b)(1) and (2) of the Act (relating to the Federal anti-kickback 
statute) are waived with respect to distributions or use of shared 
savings earned by an ACO, provided all of the following conditions are 
met:
    1. The ACO has entered into a participation agreement and remains 
in good standing under its participation agreement;
    2. The shared savings are earned by the ACO pursuant to the Shared 
Savings Program;
    3. The shared savings are earned by the ACO during the term of its 
participation agreement, even if the actual distribution or use of the 
shared savings occurs after the expiration of that agreement.
    4. The shared savings are--
    a. Distributed to or among the ACO's ACO participants, its ACO 
providers/suppliers, or individuals and entities that were its ACO 
participants or its ACO providers/suppliers during the year in which 
the shared savings were earned by the ACO; or
    b. Used for activities that are reasonably related to the purposes 
of the Shared Savings Program.
    5. With respect to the waiver of sections 1128A(b)(1) and (2) of 
the Act (relating to the Gainsharing CMP), payments of shared savings 
distributions made directly or indirectly from a hospital to a 
physician are not made knowingly to induce the physician to reduce or 
limit medically necessary items or services to patients under the 
direct care of the physician.
4. Compliance With the Physician Self-Referral Law Waiver
    Pursuant to section 1899(f) of the Act, sections 1128A(b)(1) and 
(2) of the Act (relating to the Gainsharing CMP) and sections 
1128B(b)(1) and (2) of the Act (relating to the Federal anti-kickback 
statute) are waived with respect to any financial relationship between 
or among the ACO, its ACO participants, and its ACO providers/suppliers 
that implicates the Physician Self-Referral Law, provided all of the 
following conditions are met:
    1. The ACO has entered into a participation agreement and remains 
in good standing under its participation agreement.
    2. The financial relationship is reasonably related to the purposes 
of the Shared Savings Program.
    3. The financial relationship fully complies with an exception at 
42 CFR 411.355 through 411.357.
    For arrangements that meet all of the preceding conditions, the 
waiver period will start on the start date of the participation 
agreement and will end on the earlier of the expiration of the term of 
the participation agreement, including any renewals thereof, or the 
date on which the participation agreement has been terminated.
5. Waiver for Patient Incentives
    Pursuant to section 1899(f) of the Act, section 1128A(a)(5) of the 
Act (relating to the beneficiary inducements CMP) and sections 
1128B(b)(1) and (2) of the Act (relating to the Federal anti-kickback 
statute) are waived with respect to items or services provided by an 
ACO, its ACO participants, or its ACO providers/suppliers to 
beneficiaries for free or below fair-market-value if all four of the 
following conditions are met:
    1. The ACO has entered into a participation agreement and remains 
in good standing under its participation agreement.
    2. There is a reasonable connection between the items or services 
and the medical care of the beneficiary.
    3. The items or services are in-kind.
    4. The items or services--
    a. Are preventive care items or services; or
    b. Advance one or more of the following clinical goals:
    i. Adherence to a treatment regime.
    ii. Adherence to a drug regime.
    iii. Adherence to a follow-up care plan.
    iv. Management of a chronic disease or condition.
    For arrangements that meet all of the preceding conditions, this 
waiver period will start on the start date of the participation 
agreement and will end on the earlier of the expiration of the term of 
the participation agreement, including any renewals thereof, or the 
date on which the participation agreement has been terminated, provided 
that a beneficiary may keep items received before the participation 
agreement expired or terminated, and receive the remainder of any 
service initiated before the participation agreement expired or 
terminated.

V. Provisions of the Interim Final Rule With Comment Period: 
Explanation of Waiver Requirements

    This section explains the waivers set forth in section IV.B. of 
this IFC and responds to public comments. We are providing guidance in 
this section V. of this IFC to help stakeholders interpret

[[Page 68002]]

the waiver requirements. We remind readers that the waivers should be 
interpreted in a reasonable manner. We are soliciting comments about 
our approach, whether we should provide greater specificity, and, if 
so, how and for which waivers and waiver conditions.

A. Reasonably Related to the Purposes of the Shared Savings Program

    Several waivers described in section IV.B. of this IFC require that 
arrangements be ``reasonably related to the purposes of the Shared 
Savings Program.'' We have defined ``purposes of the Shared Savings 
Program'' consistent with the purposes set forth in Section 1899(a) and 
(b) of the Act. We are using the statutory purposes of the Shared 
Savings Program in the waiver context because the waiver authority 
speaks to carrying out the Shared Savings Program. As used in these 
waivers, the purposes of the Shared Savings Program consist of 
promoting accountability for the quality, cost, and overall care for a 
Medicare population as described in the Shared Savings Program; 
managing and coordinating care for Medicare fee-for-service 
beneficiaries through an ACO; and encouraging investment in 
infrastructure and redesigned care processes for high quality and 
efficient service delivery for patients, including Medicare 
beneficiaries. As further explained in the statute and regulations, 
these purposes can involve, for example, promoting evidence-based 
medicine and patient engagement; meeting requirements for reporting on 
quality and cost measures; coordinating care, such as through the use 
of telehealth, remote patient monitoring, and other enabling 
technologies; establishing clinical and administrative systems for the 
ACO; meeting the clinical integration requirements of the Shared 
Savings Program; or meeting the quality performance standards of the 
Shared Savings Program. Additional purposes consistent with the statute 
and regulations include, for example, evaluating health needs of the 
ACO's assigned population; communicating clinical knowledge and 
evidence based medicine to beneficiaries; and developing standards for 
beneficiary access and communication, including beneficiary access to 
medical records.
    Arrangements with similar purposes but that are unrelated to the 
Shared Savings Program are not covered by the term ``purposes of the 
Shared Savings Program.'' Arrangements that involve care for non-
Medicare patients as well as Medicare beneficiaries are eligible for 
the waiver. We interpret the purpose of ``efficient service delivery'' 
in section 1899 of the Act to include, among other things, appropriate 
reduction of costs to, or growth in expenditures of, the Medicare 
program, consistent with quality of care, physician medical judgment, 
and patient freedom of choice. The definition of ``purposes of the 
Shared Savings Program'' applies uniformly to all waivers in which it 
appears.
    When a waiver requires that the terms of the arrangement be 
``reasonably related to the purposes of the Shared Savings Program,'' 
the arrangement need only be reasonably related to one enumerated 
purpose, although we would expect that many arrangements would relate 
to multiple purposes. Where a reasonable relationship exists, it should 
not be difficult for parties to articulate clearly the nexus between 
their arrangement and the purposes of the Shared Savings Program. 
Consistent with our goal to foster flexibility, adaptability, and 
innovation, we are not further describing in the waiver text the 
specific arrangements that will be considered reasonably related to the 
purposes of the Shared Savings Program or providing in the waiver text 
a list of acceptable arrangements. To provide additional assurance to 
ACOs, we have provided in this section V of this IFC an illustrative, 
non-exhaustive list of arrangements that constitute start-up 
arrangements for purposes of the pre-participation waiver.
    As described previously in this IFC, public comments reflected 
significant variation and scope of anticipated ACO arrangements. We 
expect parties to apply a reasonable interpretation of the waiver 
terms. We are, however, soliciting comments on whether we should 
further define the ``reasonably related to purposes of the Shared 
Savings Program'' standard and, if so, how. We note that we are not 
using the proposed language from our Waiver Designs Notice requiring 
arrangements to be ``necessary for and directly related to ACO 
purposes.'' Several public commenters expressed concern that this 
language was not clear. We believe the language that we are using in 
the waivers is simpler and addresses public comments. We note that 
arrangements that are necessary for and directly related to the 
purposes of the Shared Savings Program would be among those that meet 
the ``reasonably related'' standard.

B. Eligibility for Waiver

    In general, four of the five waivers set forth in this IFC are 
available to protect arrangements involving an ACO, its ACO 
participants, and/or its ACO providers/suppliers, if the ACO has a 
participation agreement and remains in good standing under that 
agreement. We are considering whether to require expressly that an ACO 
that is under a corrective action plan (CAP) be in compliance with the 
CAP as a condition of a waiver. We solicit comments on these 
requirements.
    The fifth waiver, the ACO pre-participation waiver, is available 
for start-up arrangements (as defined in the waiver) provided that the 
ACO is making good faith efforts to form an ACO and to submit an 
application to participate in the Shared Savings Program, and all other 
conditions of the waiver are satisfied. To qualify for the pre-
participation waiver, the parties to the arrangement must include, at a 
minimum, the ACO or at least one individual or entity that is eligible 
to form an ACO (as defined in the Shared Savings Program final rule). 
In the context of the ACO pre-participation waiver, the terms ACO, ACO 
participant, and ACO provider/supplier refer to individuals or entities 
that would meet the definitions of those terms set forth in the Shared 
Savings Program regulations at 42 CFR 425.20, if the ACO had a 
participation agreement (but for the fact that the required list under 
the regulations has not yet been submitted to CMS). Individuals or 
entities that are prospective ACO participants or ACO providers/
suppliers should be those that would be on the list if it were to be 
submitted. The pre-participation waiver does not cover arrangements 
involving drug and device manufacturers, distributors, DME suppliers, 
or home health suppliers. Drug and device manufacturers and 
distributors are not Medicare enrolled suppliers and providers; DME and 
home health suppliers have historically posed a heightened risk of 
program abuse.

C. Pre-Participation and Participation Waivers

1. Scope
    The intent of the pre-participation and participation waivers in 
this IFC is to establish pathways to protect bona fide ACO investment, 
start-up, operating, and other arrangements that carry out the Shared 
Savings Program, subject to certain safeguards. We do not believe it is 
feasible at this time to enumerate in the waiver text specific 
protected arrangements given the anticipated wide variation in ACO 
composition, size, resources, and ACO readiness, as well as the goal of 
the program to foster innovation, adaptability, and variation in 
furtherance of quality, efficiency, and

[[Page 68003]]

economy. We are concerned that, given the limitations of foresight in 
the context of a new program, a fixed list might be under-inclusive and 
omit arrangements that are necessary for bona fide ACO activities.
    The pre-participation waiver covers a broad array of start-up 
arrangements, as defined in the waiver text and discussed in this 
section, subject to certain conditions. The participation waiver covers 
any arrangement that meets its conditions, including start-up 
arrangements. Many commenters observed that arrangements necessary to 
develop an ACO may occur both before and after the ACO enrolls in the 
Shared Savings Program.
    Consistent with views expressed by many commenters, both the pre-
participation and participation waivers rely, as a threshold matter, on 
the programmatic requirements of the Shared Savings Program to 
safeguard Medicare beneficiaries and the Medicare program. The design 
of the waivers is premised on our expectation that risks of fraud and 
abuse, such as overutilization, inappropriate utilization, and 
underutilization, will be mitigated, in the first instance, by the 
Shared Savings Program design, including, for example, the eligibility 
requirements, the quality of care and accountability provisions, and 
the program integrity provisions. In these waivers, we are adding 
additional safeguards in the form of governance responsibility, 
transparency, and a documented audit trail. These points are explained 
in more detail later in this IFC. We are aiming for an approach that 
will provide ACOs with flexibility, certainty, and latitude for 
beneficial innovation and variation in connection with the new Shared 
Savings Program, while also protecting Medicare beneficiaries and the 
Medicare program from fraud and abuse.
2. Start-Up Arrangements for the Pre-Participation Waiver
    We are limiting the pre-participation waiver so that it applies to 
``start-up arrangements.'' We define the term start-up arrangements to 
mean any items, services, facilities, or goods (including non-medical 
items, services, facilities, or goods) used to create or develop an ACO 
that are provided by such ACO, ACO participants, or ACO providers or 
suppliers. We also consider the provision of a subsidy for these items, 
services, facilities, or goods to be a start-up arrangement. Even 
though the definition of start-up arrangements is specifically included 
in the pre-participation waiver, we anticipate that many start-up 
arrangements will also take place during the participation phase of an 
ACO's existence; those arrangements can qualify for the participation 
waiver.
    Based on comments received, we recognize that ACOs may have a 
difficult time anticipating all necessary start-up arrangements that 
will need waiver protection. While we are not providing a specific list 
of ACO start-up arrangements in the waiver text, in order to provide 
additional assurance to developing ACOs, we offer additional guidance 
in this section. By way of example only, we consider the provision of 
the folliowng items, services, facilities, and goods to be start-up 
arrangements:
    (1) Infrastructure creation and provision;
    (2) Network development and management, including the configuration 
of a correct ambulatory network and the restructuring of existing 
providers and suppliers to provide efficient care;
    (3) Care coordination mechanisms, including care coordination 
processes across multiple organizations;
    (4) Clinical management systems;
    (5) Quality improvement mechanisms including a mechanism to improve 
patient experience of care;
    (6) Creation of governance and management structure;
    (7) Care utilization management, including chronic disease 
management, limiting hospital readmissions, creation of care protocols, 
and patient education;
    (8) Creation of incentives for performance-based payment systems 
and the transition from fee-for-service payment system to one of shared 
risk of losses;
    (9) Hiring of new staff, including:
    a. Care coordinators including nurses, technicians, physicians, 
and/or non-physician practitioners;
    b. Umbrella organization management;
    c. Quality leadership;
    d. Analytical team;
    e. Liaison team;
    f. IT support;
    g. Financial management;
    h. Contracting;
    i. Risk management;
    (10) Information Technology, including:
    a. EHR systems;
    b. Electronic health information exchanges that allow for 
electronic data exchange across multiple platforms;
    c. Data reporting systems, including all payer claims data 
reporting systems;
    d. Data analytics, including staff and systems, such as software 
tools, to perform such analytic functions;
    (11) Consultant and other professional support, including:
    a. Market analysis for antitrust review;
    b. Legal services;
    c. Financial and accounting services;
    (12) Organization and staff training costs;
    (13) Incentives to attract primary care physicians;
    (14) Capital investments including loans, capital contributions, 
grants and withholds.
    In order to foster innovation and creativity within ACOs, we 
recognize that it is impossible to create an exhaustive list of bona 
fide start-up arrangements. We solicit comments on our definition of 
start-up arrangements and specifically seek input as to whether this 
definition allows for sufficient innovation in the creation and 
development of ACOs.
3. Additional Safeguards
    The pre-participation waiver and the participation waiver require 
that the governing body of the ACO make a bona fide determination that 
the arrangement for which waiver protection is sought is reasonably 
related to the purposes of the Shared Savings Program (as described 
previously in this IFC) and that the governing body duly authorize the 
arrangement. (For the ACO participation waiver, the governance, as well 
as the leadership and management of the ACO, must additionally be in 
compliance with the applicable rules under the Shared Savings Program 
final rule at 42 CFR 425.106 and 425.108.) The intent of this 
requirement is to ensure that any arrangement for which waiver 
protection is sought falls under the auspices of the ACO; is 
transparent within the ACO to ACO participants and members of the 
governing body; and is integral to the ACO's mission and plans to 
effectuate its role in the Shared Savings Program. This approach 
interposes the ACO's governing body as an intermediary responsible, in 
the first instance, for ensuring that all protected arrangements are in 
furtherance of ACO purposes and are not isolated arrangements 
furthering the individual financial or business interests of ACO 
participants or ACO providers/suppliers.
    We are not specifying in the waivers how the ACO governing body 
makes the bona fide determination or duly authorizes it. The 
determination and authorization must be contemporaneously documented. 
Documentation must include the basis for the determination that the 
arrangement is reasonably related to the purposes of the Shared Savings 
Program. We note that the governing body under the Shared Savings 
Program final rule must have a meaningful

[[Page 68004]]

conflicts of interest policy for its members (42 CFR 425.106(d)). We 
are considering, and soliciting comments on, whether we should specify 
particular methods by which governing bodies make determinations and 
authorize arrangements to ensure that ACOs are making bona fide, 
meaningful determinations and authorizations, such that arrangements 
covered by these waivers are truly furthering the interests of the ACO 
as a whole in meeting the objectives of the Shared Savings Program. We 
note that the pre-participation and participation waivers are intended 
to cover arrangements, among others, in which an ACO might receive 
funding or in-kind items or services from ACO participants or ACO 
providers/suppliers and, subject to an independent ACO governing body 
determination, redistribute them to other ACO participants or ACO 
providers/suppliers.
    An ACO governing body must make a bona fide determination that an 
arrangement is reasonably related to the purposes of the Shared Savings 
Program. Depending on the waiver, the ACO governing body can make this 
determination for a wide range of arrangements, including, without 
limitation, start-up arrangements and ACO operating activities, as well 
as performance-based compensation (``results-based'' compensation) that 
is dependent upon achieving quality thresholds or efficiency measures 
of the Shared Savings Program. Members of the ACO governing body would 
be well-advised to exercise diligence in ensuring that arrangements are 
reasonably related to one or more purposes of the Shared Savings 
Program and to articulate clearly the bases for their determinations 
and authorizations. Arrangements should be scrutinized with care to 
ensure that the reasonable relationship between an arrangement and the 
purposes of the Shared Savings Program can be clearly identified. Not 
every arrangement will be reasonably related to the purposes of the 
Shared Savings Program. For example, we do not believe that a per-
referral payment (such as, expressly paying a specialist $500 for every 
referral generated by the specialist or paying a nursing facility staff 
member $100 for every patient transported to the ACO's hospital) would 
be reasonably related to the purposes of the Shared Savings Program. 
However, by way of example only, arrangements with specialists or 
nursing facility staff members to engage in care coordination for ACO 
beneficiaries or implement evidence-based protocols could be reasonably 
related to the purposes of the Shared Savings Program even if the 
arrangement were to reflect a likelihood that the patient might be 
referred to or within an ACO. (Importantly, parties remain obligated to 
comply with the provisions at 42 CFR 425.304(c) that prohibit certain 
required referrals and cost-shifting.)
    Next, the ACO pre-participation and ACO participation waivers 
require an audit trail of contemporaneous documentation that identifies 
core characteristics of the arrangement (as listed in the waiver text), 
is maintained for 10 years, and is available to the Secretary, upon 
request. We are not specifying in the waivers any particular form of 
documentation, which can be in paper or electronic form. Notably, the 
waivers do not require an agreement signed by the parties, although 
such an agreement is a best documentation practice (and would typically 
be required for compliance with the Physician Self-Referral Law if a 
waiver does not apply). The core characteristics of the arrangement 
should be evident from the documentation with sufficient clarity that 
the government or another third party reviewing the documentation would 
be able to ascertain the material terms of the arrangement, including 
the information listed in item 4 of the pre-participation and 
participation waivers. Material amendments and modifications to the 
arrangement should be similarly documented and subject to governing 
body approval and disclosure. The pre-participation waiver also 
requires contemporaneous documentation of the diligent steps the 
parties are taking to develop the ACO. Documentation of the diligent 
steps must be retained for at least 10 years following that date that 
the ACO submits its application or the date the ACO submits its 
statement of reasons for failing to submit an application, as described 
later in this IFC. As set forth in more detail in the Shared Savings 
Program final rule, ACOs will be monitored, and we will make periodic 
requests for documentation of arrangements protected by waivers.
    The third main safeguard included in these waivers is a 
transparency requirement that requires arrangements for which waiver 
protection is desired to be publicly disclosed. The public disclosure 
will include the description of the arrangement, but shall not include 
the financial or economic terms of the arrangement. Our decision to 
shield financial or economic terms from the public transparency 
requirement is premised, among other considerations, on potential 
antitrust implications. (We note that, while not subject to the public 
transparency requirement, the financial or economic terms of the 
arrangement are among the matters that must be documented pursuant to 
the documentation requirements of the waivers and made available to the 
Secretary upon request.)
    The goals of this transparency requirement are three-fold. First, 
the requirement recognizes that secrecy is necessary for most criminal 
or fraudulent conduct, and we are declining to protect hidden 
arrangements. Second, the requirement makes information about waived 
arrangements more readily available to parties involved with the ACO, 
regulators, and the public.\7\ Third, transparency creates an incentive 
for ACOs to exercise due diligence when arrangements are being 
established to ensure that they are waiver compliant and otherwise 
consistent with the ACO's mission and the duty each member of the 
governing body owes to make decisions in the interests of the ACO. We 
do not expect that the disclosure requirements, to be determined by the 
Secretary in additional guidance, will be onerous.
---------------------------------------------------------------------------

    \7\ For example, currently, the government has limited 
information regarding actual usage of existing safe harbors and 
exceptions.
---------------------------------------------------------------------------

    We expect that ACOs will be able to use the same disclosure process 
that will apply to disclosure of organizational, quality, and 
performance information under the Shared Savings Program final rule at 
42 CFR 425.308. ACOs using the pre-participation waiver will be able to 
use a similar disclosure process. We are soliciting comments on 
additional methods for public disclosure that would be minimally 
burdensome, as well as the timing for disclosures. In the latter 
regard, we are considering whether to require disclosures on a rolling 
basis or on a fixed interval basis. We are also interested in comments 
addressing whether, in lieu of additional guidance, the disclosure 
requirements should be set out with greater specificity in the waiver 
text. Until such time as additional guidance is issued, parties seeking 
to use the ACO pre-participation or participation waivers should meet 
the disclosure requirement by posting information identifying the 
parties to the arrangement and the type of item, service, good, or 
facility provided under the arrangement on a public Web site belonging 
to the ACO or an individual or entity forming the ACO, clearly labeled 
as an arrangement for which waiver protection is sought, within 60 days 
of the date of the

[[Page 68005]]

arrangement. The Web site must include the name of the ACO (or, if the 
name of the ACO is not known, the parties forming the ACO) and other 
identifying information sufficient to allow individuals conducting an 
electronic internet search using a widely available search engine to 
readily locate the Web site.
    The current design of these waivers applies to arrangements within 
the ACO (that is, between or among the ACO, its ACO participants, and/
or its ACO providers/suppliers), as well as ACO-related arrangements 
with outside providers and suppliers, such as hospitals, specialists, 
or post-acute care facilities that might not be part of the ACO but 
have a role in coordinating and managing care for ACO patients. (The 
pre-participation waiver excludes drug and device manufacturers, 
distributors, DME suppliers, and home health suppliers.) All such 
arrangements must be reasonably related to the purposes of the Shared 
Savings Program. We are soliciting comments on whether we should modify 
the waivers to exclude outside party arrangements. We are also seeking 
comments on whether we should add additional conditions to the 
participation waiver--such as conditions requiring commercial 
reasonableness or fair market value or prohibiting exclusivity--that 
would apply to ACO relationships with outside parties, such as 
laboratories, equipment or supply companies, drug and device 
manufacturers, or distributors or purchasing organizations.
    The waiver text sets forth specific duration periods for the pre-
participation waiver to account for the varying circumstances of ACOs 
that submit applications that are accepted, submit applications that 
are rejected, or are unable to submit an application. These 
specifications are necessary to ensure that the waiver covers only pre-
participation arrangements that are closely linked to the Shared 
Savings Program. The ACO pre-participation waiver covers arrangements 
undertaken by parties acting with good faith intent to develop an ACO 
that will participate in the Shared Savings Program starting in a 
particular year (the ``target year''). For ACOs pursuing target year 
2012, the waiver period starts on the date of publication of this IFC. 
For ACOs pursuing later target years, the waiver period would begin one 
year preceding an application due date for the target year (the 
``selected application date''). Application due dates for these years 
will be established in later guidance by CMS but, by way of 
illustration only, if an application due date for target year 2014 were 
September 1, 2013, the ACO pre-participation waiver period would begin 
on September 1, 2012.
    For an ACO that submits an application and enters into a 
participation agreement, the pre-participation waiver lasts until the 
start date of the participation agreement, at which point waiver 
protection merges seamlessly into the participation waiver, and no 
further governing body approval is required for arrangements that had 
been protected by the pre-participation waiver. If the application is 
denied, the waiver lasts until the date of the denial notice, except 
that waiver protection extends for 6 months after the date of the 
denial notice for arrangements that qualified for the waiver before the 
date of the denial notice. However, no newly created arrangements would 
be protected during the 6-month period. The waiver period will end for 
ACOs that fail to submit an application on the final application due 
date for the target year. ACOs that fail to submit an application by 
the final application due date must instead submit a statement 
describing the reasons the ACO failed to submit a timely application.
    ACOs that do not submit an application for the selected application 
date, may apply for an extension of the waiver period. The ACO must 
submit documentation of its diligent steps, as required under the 
waiver, and make a showing that it is likely to successfully develop an 
ACO that would be eligible to participate in the Shared Savings Program 
by the next available application due date. The Secretary will 
establish procedures in guidance for the extension process. The 
determination whether to grant a waiver will be in the sole discretion 
of the Secretary and will not be reviewable. If an extension is 
granted, the next available application due date will become the 
selected application date and the new waiver period will end in 
accordance with the terms of the pre-participation waiver. An ACO may 
only use the pre-participation waiver one time. If an extension is not 
granted, the ACO may no longer rely on the pre-participation waiver.
    We are considering whether to further limit the pre-participation 
waiver by, for example, requiring that parties submit a notice of 
intent to form an ACO; limiting the waiver for target years after 2013 
to ACOs that file applications to enroll in the Shared Savings Program; 
or curtailing the availability or scope of the pre-participation waiver 
in future years once ACO structures have become better established.
    As described previously in this IFC, for some circumstances, the 
pre-participation and participation waivers include a 6-month ``tail'' 
period applicable to protected arrangements in existence at the time 
the waiver expires or terminates; this ``tail'' period responds to 
public comments urging that waivers allow for the orderly unwinding or 
restructuring of arrangements as necessary to ensure continued 
compliance with the law. The ``tail'' periods protect only arrangements 
that were in place and otherwise qualified for the waiver at the time 
the waiver expires or terminates. No ``tail'' period applies to ACOs 
that CMS terminates. We considered both shorter and longer periods for 
the ``tail'' period and are soliciting comments on whether we should 
modify the ``tail'' periods of the waivers.

D. Waiver for Shared Savings Distributions

    The intent behind the waiver for shared savings distributions is to 
protect arrangements created by the distribution of shared savings 
within an ACO that qualifies for the waiver, as well as arrangements 
created by the use of shared savings to pay parties outside such an ACO 
if those payments are reasonably related to the purposes of the Shared 
Savings Program. This waiver permits shared savings to be distributed 
or used within the ACO in any form or manner, including ``downstream'' 
distributions or uses of shared savings funds between or among the ACO, 
its ACO participants, and its ACO providers/suppliers. This less 
restrictive waiver for shared savings distributions within the ACO is 
premised, in part, on recognition that an award of shared savings 
necessarily reflects the collective achievement by the ACO and its 
constituent parts of the quality, efficiency, and cost reduction goals 
of the Shared Savings Program. These goals are consistent with 
interests protected by the fraud and abuse laws. This waiver also 
affords ACOs latitude to use shared savings in arrangements with 
outside parties, provided that the arrangements are reasonably related 
to the purposes of the Shared Savings Program.
    Because the payment of shared savings by CMS to an ACO under the 
Shared Savings Program may not occur until after expiration of the 
ACO's 3-year agreement, the waiver applies to distributions and uses of 
shared savings earned during the term of the agreement, even if 
distributed subsequently. Similarly, the waiver applies to 
distributions of shared savings to individuals or entities that were 
ACO participants and ACO providers/suppliers at the time the shared 
savings were earned, even if they

[[Page 68006]]

are not part of the ACO at the time of the actual distribution.
    This waiver is limited to distributions of shared savings; all 
other arrangements would still need to qualify for one of the other 
waivers outlined in section IV. of this IFC, fit in an existing 
exception or safe harbor, or otherwise comply with the laws. This 
waiver does not protect distributions of shared savings to referring 
physicians outside the ACO, unless those referring physicians are being 
compensated (using shared savings) for activities that are reasonably 
related to the purposes of the Shared Savings Program or were ACO 
participants or ACO providers/suppliers during the year in which the 
shared savings were earned by the ACO.
    Some commenters to the Waiver Designs Notice inquired about our 
proposal, which we are adopting here, to exclude from the shared 
savings distributions waiver of the Gainsharing CMP situations in which 
a payment is made knowingly to reduce or limit medically necessary 
services to patients under the physician's direct care. This limitation 
is consistent with the quality and patient care goals of the Shared 
Savings Program and must be interpreted in that context. In the context 
of waivers designed to carry out the Shared Savings Program, 
distributions of shared savings by an ACO, including downstream 
arrangements, that incentivize the provision of alternate and 
appropriate medically necessary care consistent with the purposes of 
the Shared Savings Program (such as the provision of coordinated 
outpatient care rather than inpatient services or the use of evidence-
based protocols for medically necessary care) are protected by this 
waiver. Knowing payments by a hospital to induce a physician to reduce 
or limit medically necessary care without providing acceptable 
alternative medically necessary care (for example, payments to 
discharge patients without regard to appropriate care transitions or 
payments to use a drug or device known to be clinically less effective) 
would not qualify for the waiver. We will interpret ``medical 
necessity'' consistent with Medicare program rules and accepted 
standards of practice. We also note that distributions of shared 
savings payments also may be structured to fit in the other waivers.
    Finally, we have not included in this IFC specific waiver 
protection for the distribution of shared savings earned by an ACO 
enrolled in the Shared Savings Program under a comparable program 
sponsored by a commercial health plan. We recognize that ACOs 
participating in the Shared Savings Program may also receive similar 
performance-based payments from commercial plans and that those 
payments may reflect care coordination, quality improvement, and cost-
effectiveness activities similar to those promoted by the Shared 
Savings Program. However, at this time, we are not persuaded that a 
specific waiver for such payments is necessary to carry out the Shared 
Savings Program. In addition, we lack an adequate basis for identifying 
comparable private payer arrangements of ACOs that would be subject to 
the waiver.
    Shared savings or similar performance-based payments received from 
a commercial plan do not necessarily implicate the fraud and abuse 
laws; however, in some circumstances, funds are calculated or used in 
downstream arrangements in ways that influence the referring of, or 
ordering for, Medicare or other Federal health care program patients. 
Moreover, we are mindful of the concerns expressed by commenters that 
some private payer arrangements may be sensitive to the volume of 
business generated for downstream providers or suppliers and that this 
characteristic may have implications for the application of the 
Physician Self-Referral Law.
    Although we are not providing a specific waiver for private payer 
arrangements at this time, we believe avenues exist to provide 
flexibility for ACOs participating in commercial plans. First, nothing 
precludes arrangements ``downstream'' of commercial plans (for example, 
arrangements between hospitals and physician groups) from qualifying 
for the participation waiver described in section IV. of this IFC. The 
participation waiver does not turn on the source of the funds for the 
arrangement. Second, many commercial shared savings arrangements are, 
or can be, structured to fit within the Physician Self-Referral Law 
exception for risk-sharing arrangements at 42 CFR 411.357(n) and some 
may be structured to fit in other exceptions. Some private payer 
arrangements may also fit in existing Federal anti-kickback statute 
safe harbors, such as the managed care safe harbors. Finally, as noted 
previously in this IFC, no waiver or other protection is needed for 
private payer arrangements that do not implicate the fraud and abuse 
laws.
    We are soliciting comments on our approach to shared savings 
arrangements with commercial plans, whether our approach is consistent 
with the needs of ACOs participating in the Shared Savings Program, and 
whether a specific waiver should apply to shared savings derived from 
commercial plans comparable to the Shared Savings Program (and, if so, 
how we should define a comparable program with sufficient precision).

E. Compliance With the Physician Self-Referral Law Waiver

    This waiver is intended to ease the compliance burden on providers 
that might elect to use existing Physician Self-Referral Law exceptions 
for their ACO arrangements and to reassure those with existing 
arrangements that already fit in such an exception that they need not 
undertake a separate legal review under the Federal anti-kickback 
statute or Gainsharing CMP. This waiver covers arrangements that 
otherwise implicate the Physician Self-Referral Law, meaning, for 
example, arrangements involving designated health services entities, as 
defined at 42 CFR 411.351, and referring physicians, as defined at 42 
CFR 411.351. Arrangements that cannot qualify for a Physician Self-
Referral Law exception because they are not within the ambit of the 
law, such as arrangements between facilities that do not involve 
referring physicians, can qualify for the other waivers described in 
this IFC. Ordinarily, compliance with an exception to the Physician 
Self-Referral Law does not operate to immunize conduct under the 
Federal anti-kickback statute or Gainsharing CMP, and arrangements that 
comply with the Physician Self-Referral Law are still subject to 
scrutiny under the Federal anti-kickback statute and Gainsharing CMP. 
Here, however, we are deviating from this general rule in view of the 
specific safeguards in the Shared Savings Program, the authority under 
section 1899(f) of the Act for the Secretary to waive the Federal anti-
kickback statute and Gainsharing CMP as necessary to carry out the 
Shared Savings Program, and our desire to minimize burdens on entities 
establishing or operating ACOs under the Shared Savings Program.
    This waiver is structured to apply until the participation 
agreement, including any renewals thereof, expires or terminates. We 
are considering whether it might be necessary for this particular 
waiver to continue for some period of time, perhaps in the range of 3 
to 12 months, after expiration or termination of an ACO's participation 
agreement. We are soliciting comments on this consideration.

F. Waiver for Patient Incentives

    As described in section III of this IFC, several public commenters 
indicated that, in carrying out the quality and cost reduction goals of 
the Shared Savings

[[Page 68007]]

Program, ACOs would need to engage patients in better managing their 
own health care, including obtaining preventive care and complying with 
treatment plans for chronic conditions. Therefore, in light of this 
need, this IFC promulgates a waiver of the Federal anti-kickback 
statute and Beneficiary Inducements CMP to address arrangements 
pursuant to which ACOs, ACO participants, and ACO providers/suppliers 
provide beneficiaries with free or below-fair market value items and 
services that advance the goals of preventive care, adherence to 
treatment, drug, or follow-up care regimes, or management of a chronic 
disease or condition. This waiver will help ACOs foster patient 
engagement in improving quality and lowering costs for Medicare and 
beneficiaries by removing any perceived obstacles presented by the 
Beneficiary Inducements CMP or Federal anti-kickback statute. 
Beneficiary compliance with care management programs is critical to the 
success of ACOs, and ACOs should have the flexibility to develop 
incentives to that end, with certain safeguards. In the interest of 
promoting broad improvement in care coordination and quality for all 
beneficiaries and in light of the mechanisms for assigning 
beneficiaries under the Shared Savings Program final rule, at this time 
we are not limiting this waiver to beneficiaries assigned to the ACO. 
However, we are soliciting comments on whether the waiver could and 
should be limited to beneficiaries assigned to the ACO.
    In order to balance the goal of beneficiary compliance with care 
management programs against the risk that ACOs could use extravagant 
incentives to steer beneficiaries, we are requiring that there be a 
reasonable connection between the incentives and the medical care of 
the individual. By way of example, the waiver would cover blood 
pressure cuffs for hypertensive patients, but not beauty products or 
theatre tickets. The waiver will protect incentives that are in-kind 
items or services, but not financial incentives, such as waiving or 
reducing patient cost sharing amounts (that is, copayment or 
deductible), which we believe are prone to greater abuse. We note that 
the Shared Savings Program at 42 CFR 425.304(a)(1) itself prohibits 
ACOs, ACO participants, ACO providers/suppliers, and other individuals 
or entities performing functions or services related to ACO activities 
from providing gifts or other remuneration to beneficiaries as 
inducements for receiving items or services from, or remaining in, an 
ACO or with providers in a particular ACO or receiving items or 
services from ACO participants or ACO providers/suppliers; clearly 
then, such incentives are not covered by this waiver. As further 
provided in the Shared Savings Program final rule, 42 CFR 425.304(a)(2) 
permits certain incentives that are consistent with the requirements of 
42 CFR 425.304(a)(1) and the terms of this waiver. This waiver applies 
only to the application of the Federal anti-kickback statute and 
Gainsharing CMP; nothing in this waiver supplants any applicable 
requirement in the Shared Savings Program final rule or other Medicare 
payment or coverage rules. We are not defining preventive care for 
purposes of this waiver in order to provide some flexibility as care 
models develop in the Shared Savings Program and evidence-based care 
programs are adopted by ACOs. However, we are soliciting comments on 
whether we should provide a specific definition.
    This waiver does not protect the provision of free or below fair 
market value items or services by manufacturers or other vendors to 
beneficiaries, the ACO, ACO participants, or ACO providers/suppliers. 
The patient incentives waiver would cover ACOs, ACO participants, and 
ACO provider/suppliers that give beneficiaries items or services that 
they have received from manufacturers at discounted rates. However, the 
waiver would not cover the discount arrangement (or any arrangement for 
free items and services) between the manufacturer and the ACO, ACO 
participant, or ACO provider/supplier.
    This waiver applies during the term of the ACO's participation 
agreement. However, to ensure continuity of care for beneficiaries if 
an ACO's agreement terminates or is not renewed, we are providing that 
a beneficiary may keep any items received during the term of the ACO's 
participation agreement pursuant to the waiver and may continue to 
receive any service initiated during the term of the ACO's 
participation agreement pursuant to the waiver, if the service was in 
progress when the participation agreement terminated. Illustrative 
examples could include, but would not be limited to, a post-surgical 
patient receiving free home visits to coordinate in-home care during 
the recovery period, a hypertensive patient using home telehealth 
monitoring of blood pressure, or a beneficiary halfway through a normal 
course of smoking cessation treatment. Nothing precludes ACOs, ACO 
participants, or ACO providers/suppliers from offering patient 
incentives to promote their clinical care if the incentives fit in an 
applicable safe harbor or exception or do not otherwise violate the 
Federal anti-kickback statute and Beneficiary Inducements CMP. For 
example, many such arrangements may fit in the exception to the 
Beneficiary Inducements CMP for incentives given to individuals to 
promote the delivery of preventive care at section 1128A(i)(6)(D) of 
the Act; 42 CFR 1003.101.

G. Application of Waivers to Innovation Center Demonstrations

    Several commenters inquired about the application of these waivers 
to ACO demonstration programs sponsored by the Innovation Center, 
including application to the Pioneer ACOs. The waivers in this IFC are 
promulgated under section 1899(f) of the Act and, as set forth in the 
statute, are limited to the Shared Savings Program. Section 3021 of the 
Affordable Care Act includes a similar waiver authority that may be 
exercised for Innovation Center demonstration programs, including the 
Pioneer ACOs. We will address the exercise of that waiver authority in 
guidance relevant to those programs. As noted previously in this IFC, 
the waivers in this IFC will apply to ACOs participating in the Advance 
Payment Initiative because those ACOs also participate in the Shared 
Savings Program.

H. Additional Policy Considerations and Solicitation of Comments

    The waivers adopted in this IFC take into account the specific 
redesigned care delivery incentives and processes of the Shared Savings 
Program, as well as the obligation of ACOs, ACO participants, and ACO 
providers/suppliers to comply with the Shared Savings Program rules, 
including requirements addressing governance, management, leadership, 
transparency, data, quality, performance, compliance, patient freedom 
of choice, and others. Moreover, the Shared Savings Program requires 
ACOs and their constituent parts to demonstrate a meaningful commitment 
to the Shared Savings Program. The waivers emanate from the expectation 
that ACOs and their constituent parts will act in compliance with 
program rules and in the best interests of patients and the Medicare 
program, including the Shared Savings Program. The waivers are an 
attempt to promote a high degree of certainty, innovation, and 
variation in the development of ACOs to improve quality of care, as 
well as economy and efficiency in the Medicare program.
    The government's enforcement experience reflects that, to varying 
degrees, all Federal health care

[[Page 68008]]

programs are susceptible to fraud and abuse. These waivers should not 
be read to reflect any diminution of our commitment to protect programs 
and beneficiaries from harms associated with kickbacks and referral 
payments, including overutilization, increased costs, and substandard 
or poor quality care. DHHS will monitor ACOs and the Shared Savings 
Program as a whole for fraud or abuse, such as billing for medically 
unnecessary or upcoded services, submitting false or fraudulent data, 
or providing worthless or substandard care. If these or other 
problematic practices are found, the government has a number of tools 
to address the problem. In appropriate cases, we will use these tools 
to protect the interests of beneficiaries and the Medicare program.
    We intend to closely monitor ACOs entering the program in 2012 
through June 2013. We plan to narrow the waivers established in this 
IFC unless the Secretary determines that information gathered through 
monitoring or other means suggests that such waivers have not had the 
unintended effect of shielding abusive arrangements.\8\ In particular, 
if we find that undesirable effects (for example, aberrant patterns of 
utilization) have occurred because of the waivers, we will revise this 
IFC to address those problems by narrowing the waivers. Modifications 
to the waivers would apply to future ACO applicants beyond July 2013 
and to ACOs that renew their participation agreements. There are 
several options for modifying the waivers to address problems that may 
arise. Should we identify specific areas of fraud and abuse resulting 
from arrangements covered by the waivers, we could modify the waivers 
to add or substitute conditions tailored to address specific abusive 
conduct. We could also limit ACO arrangements involving referral 
sources to those that are fair market value or commercially reasonable 
or involve services performed by the referral source. This approach 
could include exceptions for specified arrangements, including, for 
example, a limited amount of start-up costs, information technology, 
medical training, care coordination, or goods or services provided to 
referral sources' patients. In addition, we could preclude waiver 
protection for arrangements that involve individuals or entities that 
are not part of the ACO or we could include a requirement that ACOs 
submit reports to the Secretary regarding their arrangements. We 
solicit comments in this rulemaking regarding these narrow waivers. We 
also seek comments on additional categories of arrangements that would 
require protection through a waiver and how the categories should be 
defined and what limits, if any, should be imposed.
---------------------------------------------------------------------------

    \8\ As described in section III of this IFC, several commenters 
suggested that we establish either narrow waivers or none at all; 
some commenters suggested specific additional conditions for waivers 
that we have not adopted,
---------------------------------------------------------------------------

    We are establishing waivers under section 1899(f) of the Act to 
foster the success of the Shared Savings Program, the purposes of which 
are to promote accountability for a Medicare patient population, manage 
and coordinate care for Medicare fee-for-service beneficiaries, and 
encourage redesigned care processes to improve quality. Our goal is to 
balance effectively the need for ACO certainty, innovation, and 
flexibility in the Shared Savings Program with protections for 
beneficiaries and the Medicare program. It is our expectation that the 
waivers promulgated in this IFC will be used for their intended 
purposes to carry out the Shared Savings Program. We will closely 
monitor the program and ACO conduct. We plan to narrow the waivers in 
this IFC unless information gathered through monitoring or other means 
suggests that the waivers in this IFC are adequately protecting the 
Medicare program and beneficiaries from the types of harms associated 
with referral payments or payments to reduce or limit services. We are 
soliciting comment on the specific narrowed waivers described above.

VI. Procedural Rulemaking Matters

A. Waiver of Proposed Rulemaking

    Under the Administrative Procedures Act (5 U.S.C. 553(b)), an 
agency may waive publication of a notice of proposed rulemaking if the 
agency finds good cause that the notice and comment procedure is 
impracticable, unnecessary, or contrary to the public interest and the 
agency incorporates into the rule a statement of, and the reasons for, 
such a finding. For the reasons discussed later in this IFC, we find 
that it would be unnecessary, impracticable, and contrary to the public 
interest to delay the issuance of the waivers granted in this IFC until 
after a public notice and comment process is completed.
    In section 1899(a)(1) of the Act, Congress expressly required the 
Secretary to establish the Shared Savings Program no later than January 
1, 2012. As noted earlier in this document, Congress authorized the 
Secretary to waive the requirements of sections 1128A and 1128B and 
title XVIII of the Act as may be necessary to carry out the Shared 
Savings Program. The Physician Self-Referral Law, the Federal anti-
kickback statute, the Gainsharing CMP, and the Beneficiary Inducements 
CMP, discussed elsewhere in this IFC, are important tools to protect 
patients and the Federal health care programs from fraud, improper 
referral payments, unnecessary utilization, underutilization, and other 
harms.
    We recognize, however, that these laws may prohibit or 
significantly restrict certain arrangements necessary for the formation 
of ACOs under the Shared Savings Program. Moreover, the significant 
financial consequences of noncompliance with these laws (and the 
potential False Claims Act liability) will likely have a chilling 
effect on the willingness of health care providers to participate in 
the Shared Savings Program at its inception if these provisions are not 
waived. Delaying the issuance of final waivers would effectively delay 
the program's establishment well beyond the statutory deadline and 
delay the savings that the program is expected to achieve at a time 
when reducing the Federal budget is a critical priority. For this 
reason, it is impracticable and contrary to the public interest to 
issue the waivers of these laws only after additional months of notice 
and comment rulemaking. In addition, the failure to simultaneously 
issue the Shared Savings Program final rule and the waivers promulgated 
in this IFC would impede development of the innovative integrated-care 
models envisioned by the Shared Savings Program and deny Medicare 
beneficiaries the opportunity to benefit from a new approach to the 
delivery of health care that is designed to result in better care for 
individuals, and better health for populations, as well as lower growth 
in expenditures. Neither result is in the public interest.
    We also believe it is unnecessary to offer what would essentially 
be a second opportunity to comment on these waivers and thereby delay 
finalizing waivers that will permit arrangements that are essential to 
the implementation success of the Shared Savings Program. On April 7, 
2011, we published the Waiver Designs Notice. That notice solicited 
public comment regarding possible waivers of the application of the 
Physician Self-Referral Law, the Federal anti-kickback statute, and 
certain civil monetary penalties law provisions to specified 
arrangements involving ACOs under the Shared Savings Program. This IFC 
responds to public comments received on that notice. Moreover, the 
public will nonetheless receive an opportunity to

[[Page 68009]]

comment on the specific policy choices made in this rule because we are 
publishing it as an IFC. In accordance with section 1871(a)(3) of the 
Act, we are obligated to consider comments and publish a final rule 
addressing those comments within 3 years.
    Finally, we note that in the absence of final program rules, it 
would have been impracticable, if not impossible, to issue a 
comprehensive notice of proposed rulemaking on fraud and abuse waivers 
that would adequately support the Shared Savings Program. As we stated 
in the Waiver Designs Notice, the requirements of the final program 
rules regarding the structure and operations of ACOs under the Shared 
Savings Program would affect the scope of the waivers. For this reason, 
we indicated in the Waiver Designs Notice that, in drafting the final 
waivers, we would consider comments received on the Shared Savings 
Program proposed rule and the terms of the final rule. We have, in 
fact, done so in creating the waivers set forth in this IFC. Simply 
put, the proposal of definitive waivers was not possible until now.
    For the reasons noted previously in this IFC, we believe that it 
would be impracticable and contrary to the public interest to delay the 
issuance of final waivers until after the receipt and analysis of 
additional public comments. Therefore, we find good cause to waive 
prior notice and comment procedure and to issue this final rule on an 
interim basis. We are providing a 60-day public comment period.

B. Waiver of Delayed Effective Date

    Section 1871(e)(1) of the Act generally requires that a final rule 
become effective at least 30 days after the issuance or publication of 
the rule. This requirement for a 30-day delayed effective date can be 
waived, however, if the Secretary finds that waiver of the 30-day 
period is necessary to comply with statutory requirements or that the 
requirement for a delayed effective date is contrary to the public 
interest.
    As indicated previously in this IFC, section 1899 of the Act 
expressly requires the Secretary to establish the Shared Savings 
Program no later than January 1, 2012. Prospective ACOs that wish to 
participate in the Medicare Shared Savings Program in 2012 must submit 
an application and enter into a participation agreement with CMS that 
commences on April 1, 2012 or July 1, 2012. We expect that the 
application deadline for participation agreements with an April 1, 2012 
start date will be no later than January 1, 2012. Based on the comments 
submitted in response to the Waiver Designs Notice, we believe that a 
significant number of ACO applicants for the Shared Savings Program 
would forego applying to participate in the Shared Savings Program 
until final waivers have become effective and sufficient time has 
elapsed to allow the applicants to use the waivers in a manner that 
would support their applications and the purposes of the program. We 
believe that a 30-day delay in the effective date for the final waivers 
could jeopardize an ACO's ability to submit timely an application for a 
participation agreement commencing in 2012. For this reason, we find 
that waiver of the requirement for a delayed effective date is 
necessary to comply with a statutory requirement.
    We also find that a delayed effective date would be contrary to the 
public interest. The success of the Shared Savings Program depends in 
no small part on allowing prospective ACOs sufficient time to prepare 
for application to the program and to build the innovative, cost 
effective, integrated healthcare delivery models envisioned by the 
Shared Savings Program. Delaying the effective date of this rule would 
be contrary to the public interest because it would effectively delay 
the timely implementation of the Shared Savings Program, thereby 
denying the public the benefits of a new approach to health care 
delivery that is designed to result in better care for individuals, and 
better health for populations, as well as lower growth in expenditures.
    In addition, we find that it is not in the public interest to delay 
the effective date of a rule that does not impose a burden upon anyone. 
This IFC waives the aforementioned authorities, provided certain 
conditions are met. In short, the rule rescinds, rather than adds, 
restrictions with which prospective ACOs, their prospective ACO 
participants, and their prospective ACO providers/suppliers must 
comply. Accordingly, a delay in the effective date of this IFC is 
unnecessary and contrary to the public interest.

VII. Collection of Information Requirements

    While this IFC does include information collection and record 
keeping requirements, section 3022 of the Affordable Care Act provides 
that Chapter 35 of title 44, United States Code, shall not apply to the 
Shared Savings Program. Consequently, the information collection 
requirements contained in this IFC need not be reviewed by the Office 
of Management and Budget.

VIII. Regulatory Impact Statement

    We have examined the impact of this rule as required by Executive 
Order 12866 on Regulatory Planning and Review (September 30, 1993), 
Executive Order 13563 on Improving Regulation and Regulatory Review 
(February 2, 2011), the Regulatory Flexibility Act (RFA) (September 19, 
1980, Pub. L. 96-354), section 1102(b) of the Social Security Act, 
section 202 of the Unfunded Mandates Reform Act of 1995 (March 22, 
1995; Pub. L. 104-4), Executive Order 13132 on Federalism (August 4, 
1999) and the Congressional Review Act (5 U.S.C. 804(2)).
    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). A 
regulatory impact analysis (RIA) must be prepared for major rules with 
economically significant effects ($100 million or more in any 1 year). 
This rule does not reach the economic threshold and thus is not 
considered a major rule.
    The RFA requires agencies to analyze options for regulatory relief 
of small entities. For purposes of the RFA, small entities include 
small businesses, nonprofit organizations, and small governmental 
jurisdictions. Most hospitals and most other providers and suppliers 
are small entities, either by nonprofit status or by having revenues of 
$7.0 million to $34.5 million in any 1 year. Individuals and States are 
not included in the definition of a small entity. We are not preparing 
an analysis for the RFA because we have determined, and the Secretary 
certifies, that this IFC will not have a significant economic impact on 
a substantial number of small entities.
    In addition, section 1102(b) of the Act requires us to prepare a 
regulatory impact analysis if a rule may have a significant impact on 
the operations of a substantial number of small rural hospitals. This 
analysis must conform to the provisions of section 604 of the RFA. For 
purposes of section 1102(b) of the Act, we define a small rural 
hospital as a hospital that is located outside of a Metropolitan 
Statistical Area for Medicare payment regulations and has fewer than 
100 beds. We are not preparing an analysis for section 1102(b) of the 
Act because we have determined, and the Secretary certifies, that this 
IFC will not have a significant impact on the

[[Page 68010]]

operations of a substantial number of small rural hospitals.
    Section 202 of the Unfunded Mandates Reform Act of 1995 also 
requires that agencies assess anticipated costs and benefits before 
issuing any rule whose mandates require spending in any 1 year of $100 
million in 1995 dollars, updated annually for inflation. In 2011, that 
threshold is approximately $136 million. This rule will have no 
consequential effect on State, local, or tribal governments or on the 
private sector.
    Executive Order 13132 establishes certain requirements that an 
agency must meet when it promulgates a proposed rule (and subsequent 
final rule) that imposes substantial direct requirement costs on State 
and local governments, preempts State law, or otherwise has Federalism 
implications. Since this regulation does not impose any costs on State 
or local governments, the requirements of Executive Order 13132 are not 
applicable.
    In accordance with the provisions of Executive Order 12866, this 
regulation was reviewed by the Office of Management and Budget.
    For the reasons set forth in this preamble, the Centers for 
Medicare & Medicaid Services and the Office of the Inspector General 
are implementing this interim final rule under the authority of section 
1899 of the Act.

    Authority:  Section 1899(f) of the Act.

    Dated: October 6, 2011.
Donald M. Berwick,
Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 19, 2011.
Daniel R. Levinson,
Inspector General, Department of Health and Human Services.
    Approved: October 19, 2011.
Kathleen Sebelius,
Secretary, Department of Health and Human Services.
[FR Doc. 2011-27460 Filed 10-20-11; 11:15 am]
BILLING CODE 4120-01-P; 4152-01-P