[Federal Register Volume 80, Number 209 (Thursday, October 29, 2015)]
[Rules and Regulations]
[Pages 66726-66745]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-27599]



[[Page 66725]]

Vol. 80

Thursday,

No. 209

October 29, 2015

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 Inspector General





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42 CFR Chapter V





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

  Federal Register / Vol. 80 , No. 209 / Thursday, October 29, 2015 / 
Rules and Regulations  

[[Page 66726]]


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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-F]
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: Final rule.

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SUMMARY: This final rule finalizes waivers of the application of the 
physician self-referral law, the Federal anti-kickback statute, and the 
civil monetary penalties (CMP) law provision relating to beneficiary 
inducements to specified arrangements involving accountable care 
organizations (ACOs) under section 1899 of the Social Security Act (the 
Act) (the ``Shared Savings Program''), as set forth in the Interim 
Final Rule with comment period (IFC) dated November 2, 2011. As 
explained in greater detail below, in light of legislative changes that 
occurred after publication of the IFC, this final rule does not 
finalize waivers of the application of the CMP law provision relating 
to ``gainsharing'' arrangements. 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: These regulations are effective on October 29, 2015.

FOR FURTHER INFORMATION CONTACT: 
    [email protected], (410) 786-6887, for general issues and 
issues related to the physician self-referral law.
    Meredith Williams, (202) 619-0335, or Elizabeth Isbey, (202) 619-
0335, for general issues and issues related to the Federal anti-
kickback statute or civil monetary penalties.

I. Introduction and Overview

    This final rule sets forth waivers of specified fraud and abuse 
laws necessary to carry out the Shared Savings Program, as previously 
promulgated in the IFC. As explained in greater detail below, these 
laws restrict financial arrangements between hospitals, physicians, and 
other parties (including, in some cases, beneficiaries) in a position 
to generate or receive Medicare referrals, and serve, among other 
things, to prevent and remediate harms often associated with payments 
connected to referrals. As development of the Shared Savings Program 
began, stakeholders expressed concerns that these restrictions 
potentially impede development of innovative integrated-care 
arrangements envisioned by the Shared Savings Program, including shared 
savings arrangements and care coordination arrangements. Congress 
authorized the Secretary to waive these laws as necessary to carry out 
the Shared Savings Program.
    Section I of this final rule gives an introduction and overview of 
this rule. Section II provides background on the Shared Savings 
Program. Section III summarizes public comments received in response to 
the IFC, responds to those comments, and provides additional 
clarification of several issues identified through experience with the 
Shared Savings Program. Section IV sets out the final waivers and 
applicable requirements.

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

    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 program to promote accountability for a Medicare 
patient population, coordinate items 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 CMS's first Shared Savings Program final rule published in the 
Federal Register on November 2, 2011 (Medicare Program: Medicare Shared 
Savings Program: Accountable Care Organizations (76 FR 67802)) 
(hereinafter referred to as the ``2011 Shared Savings Program final 
rule''), the Shared Savings Program is designed to achieve three goals: 
Better care for individuals, better health for populations, and lower 
growth in expenditures. The Shared Savings Program ACOs \1\ are a key 
component of the Medicare delivery system reform initiative designed to 
reduce fragmented or unnecessary care and excessive costs for health 
care services furnished to Medicare fee-for-service beneficiaries.
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    \1\ For purposes of this final rule, the terms ``ACO,'' ``ACO 
participants,'' and ``ACO providers/suppliers'' have the meanings 
presently ascribed to them in 42 CFR 425.20.
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    The physician self-referral law at section 1877 of the Act, the 
Federal anti-kickback statute at section 1128B(b) of the Act, the CMP 
law addressing inducements to beneficiaries at section 1128A(a)(5) of 
the Act (the Beneficiary Inducements CMP), and the CMP law provisions 
at sections 1128A(b)(1) and (2) of the Act (the Gainsharing CMP), as 
described in greater detail elsewhere in this final rule, 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. For purposes of the 
Shared Savings Program, providers must integrate in ways that 
potentially implicate fraud and abuse laws addressing financial 
arrangements between sources of Federal health care program referrals 
and those seeking such referrals. These fraud and abuse laws require 
financial separation between such parties or regulate relationships 
between them. The Shared Savings Program focuses on coordinating care 
between and among providers, including those who are potential referral 
sources for one another. Stakeholders have expressed concern that the 
restrictions these laws place on certain coordinated care arrangements 
may impede some of the innovative integrated-care models envisioned by 
the Shared Savings Program. Stakeholders believe these laws would 
inhibit sharing savings and other incentives that they consider key to 
the success of an ACO, for example, arrangements involving the 
provision of EHR systems, IT services, or free care management 
personnel.
    Section 1899(f) of the Act authorizes the Secretary to waive the 
statutes listed above and certain other laws as necessary to carry out 
the Shared Savings Program. On the basis of stakeholder input, 
experience with the Shared Savings Program over the past several years, 
and other factors, the Secretary has found that it is necessary to 
continue to waive the physician self-referral law, the Federal anti-
kickback statute, and the Beneficiary Inducements CMP in certain 
circumstances in order to carry out the Shared Savings Program. As 
explained below, the Secretary has determined that it is no longer 
necessary to waive the Gainsharing CMP. At the time we published the 
IFC, hospitals were prohibited from knowingly paying physicians to 
induce them to reduce or limit services, including medically 
unnecessary services. The statute was recently amended to prohibit 
hospitals

[[Page 66727]]

from knowingly paying physicians to induce them to reduce or limit 
medically necessary services. The amended statute obviates the need to 
waive this provision to carry out the Shared Savings Program.
    In this final rule, we are finalizing the five waivers from the IFC 
that waived certain provisions of the physician self-referral law, the 
Federal anti-kickback statute, and the Beneficiary Inducements CMP as 
necessary to carry out the provisions of section 1899 of the Act. We 
are waiving 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 the development and operation 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 final rule are promulgated pursuant 
to the specific authority at section 1899(f) of the Act. This authority 
applies only to the Shared Savings Program. The Affordable Care Act 
includes separate authority for the Secretary to waive certain laws, 
including certain fraud and abuse laws, for some other demonstrations 
and pilot programs. Guidance regarding such waivers, if any, is issued 
separately.

B. Medicare Shared Savings Program: Related Regulatory History

    On April 7, 2011, CMS published a proposed rule setting forth 
proposed requirements for ACOs under the Shared Savings Program 
(Medicare Shared Savings Program: Accountable Care Organizations (76 FR 
19528)) and soliciting public comments. As described above, CMS next 
published the 2011 Shared Savings Program final rule on November 2, 
2011. CMS proposed and finalized changes to the ACO quality measurement 
reporting methodology and quality performance measures in the Calendar 
Year (CY) 2014 and CY 2015 Physician Fee Schedules. 78 FR 74230 (Dec. 
10, 2013); 79 FR 67548 (Nov. 13, 2014). Additionally, on December 8, 
2014, CMS published a proposed rule setting forth new proposed 
requirements for ACOs, and proposed revisions and clarifications to the 
2011 Shared Savings Program final rule (Medicare Shared Savings 
Program: Accountable Care Organizations (79 FR 72760)). CMS finalized 
certain of these proposed requirements, revisions, and clarifications 
in the Federal Register on June 9, 2015 (Medicare Shared Savings 
Program: Accountable Care Organizations (80 FR 32692)) (the ``2015 
Shared Savings Program final rule''). On July 15, 2015, CMS proposed 
further changes to the Shared Savings Program (Revisions to Payment 
Policies under the Physician Fee Schedule and Other Revisions to Part B 
for CY 2016 (80 FR 41686)).

C. 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)). On 
November 2, 2011, CMS and OIG jointly published the IFC, which 
established waivers of the application of certain provisions of the 
physician self-referral law, the Federal anti-kickback statute, the 
Gainsharing CMP, and the Beneficiary Inducements CMP (Medicare Program: 
Final Waivers in Connection With the Shared Savings Program (76 FR 
67992)). Prior to the statutory expiration of the IFC,\2\ CMS and OIG 
jointly published the ``Final Waivers in Connection with the Shared 
Savings Program; Continuation of Effectiveness and Extension of 
Timeline for Publication of Final Rule,'' extending the effectiveness 
of the IFC and the timeline for publication of a final rule through 
November 2, 2015 (79 FR 62356 (Oct. 17, 2014)). We issued this 
continuation notice because CMS was developing a proposed rule 
regarding the Shared Savings Program and we wished to ensure the final 
waiver regulations aligned with the programmatic requirements. On 
February 12, 2015, CMS and OIG issued additional guidance on the 
waivers promulgated in the IFC (the ``Additional Waiver Guidance'').\3\ 
The Additional Waiver Guidance provides guidance on: (1) Public 
disclosures required under the pre-participation waiver; (2) 
notification of failure to submit a timely application by parties who 
used the pre-participation waiver; and (3) requests for an extension of 
the pre-participation waiver period.
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    \2\ Pursuant to section 1871(a)(3) of the Act, a Medicare 
interim final rule shall not continue in effect if the final rule is 
not published before the expiration of the regular timeline. After 
consultation with the director of the Office of Management and 
Budget (OMB), the Department of Health and Human Services (HHS or 
the Department), through CMS, published a notice in the December 30, 
2004, Federal Register (69 FR 78442) establishing a general 3-year 
timeline for publishing Medicare final rules after the publication 
of an interim final rule. Based on this timeline, the IFC, which is 
a Medicare interim final rule under Title XVIII, would have expired 
on November 2, 2014.
    \3\ The Additional Waiver Guidance, which may be amended from 
time to time, is available on CMS's Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-Service-Payment/sharedsavingsprogram/Downloads/Additional-MSSP-Waiver-Guidance.pdf, and on OIG's Web site 
at: http://oig.hhs.gov/compliance/accountable-care-organizations/index.asp.
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    CMS and OIG are jointly finalizing waivers in this final rule to 
provide stakeholders with a coordinated approach for the application of 
certain fraud and abuse laws in connection with the Shared Savings 
Program. Administration of the physician self-referral law is the 
responsibility of CMS; 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 Beneficiary Inducements CMP is enforced by 
OIG.
    For reasons elaborated in more detail elsewhere in this final rule, 
including the consideration of public input, the Department's own 
analysis, and CMS's experience over the last four years with the Shared 
Savings Program, the Secretary has determined that the waivers in this 
final rule are necessary to carry out the Shared Savings Program. To 
date, information available to CMS and OIG suggests that the waivers 
are adequately protecting beneficiaries and Federal health care 
programs while promoting innovative structures within the Shared 
Savings Program. We will continue to monitor the development of ACOs 
and shared savings arrangements and may consider additional rulemaking, 
if warranted.
    This final rule finalizes the waivers as promulgated in the IFC, 
with the exception of the following changes:
     The waivers no longer waive the Gainsharing CMP;
     In condition 4 of the pre-participation and participation 
waivers, we have changed ``should'' to ``must'' consistent with our 
stated intent in the IFC that the ACO governing body's documentation of 
its authorization must provide the basis for the determination that an 
arrangement is reasonably related to the purposes of the Shared Savings 
Program;
     We are clarifying that, for purposes of this final rule, 
the term ``home health supplier'' means a provider, supplier or other 
entity that is primarily engaged in furnishing home health services; 
and
     We have corrected certain technical or scrivener's errors.
    Therefore, we are finalizing five waivers as follows:
     An ``ACO pre-participation'' waiver of the physician self-
referral law and the Federal anti-kickback statute that applies to ACO-
related start-up arrangements in anticipation of participating in the 
Shared Savings

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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 and the Federal anti-kickback statute 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 and the Federal anti-kickback statute 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 Federal anti-kickback statute for ACO arrangements that 
implicate the physician self-referral law and satisfy the requirements 
of 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, ACO participants, or ACO providers/
suppliers under the Shared Savings Program to beneficiaries to 
encourage preventive care and compliance with treatment regimes.
    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 additional safeguards in the Shared Savings Program 
regulations at 42 CFR part 425, subpart D, 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.
    In order to receive waiver protection, an arrangement need only fit 
in one waiver, although in some cases an arrangement may meet the 
criteria of more than one waiver. 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.

II. Shared Savings Program: Background

A. Section 1899 of the Social Security Act

    Section 1899 of the Act establishes the Shared Savings Program to 
foster the development of ACOs in Medicare. 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 stimulate 
investment in infrastructure and redesigned care processes for high 
quality and efficient service delivery. CMS's analysis of ACOs has 
shown improved patient care and savings for the Program.\4\
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    \4\ A press release describing the improved patient care and 
savings resulting from ACOs can be found at https://www.cms.gov/Newsroom/MediaReleaseDatabase/Press-releases/2015-Press-releases-items/2015-08-25.html.
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    Under section 1899(b)(2)(B) of the Act and 42 CFR 425.200, ACOs 
must enter into an agreement with the Secretary to participate in the 
Shared Savings Program for no less than a three-year period. ACOs in 
the Shared Savings Program must comply with requirements addressing 
governance, management, and leadership of the ACO, as well as program 
integrity, transparency, compliance plan, and certification 
requirements, among others. Pursuant to 42 CFR 425.204(e), an ACO must 
select one of three tracks, which allows an ACO to choose whether to 
assume one- or two-sided performance-based risk as well as the degree 
of such performance risk. Under Track 1, described at 42 CFR 
425.600(a)(1), an ACO has the opportunity to share in savings generated 
during the term of the participation agreement. A Track 1 ACO has one-
sided risk (i.e., no liability for shared losses). As set forth in 42 
CFR 425.600(a)(2), an ACO that selects Track 2 operates under a two-
sided performance-based risk model in which it is eligible to receive a 
higher share of savings than a Track 1 ACO, but is required to repay a 
portion of the losses sustained by the Medicare program if costs for 
the ACO's assigned beneficiaries exceed certain thresholds. An ACO that 
selects Track 3, described in 42 CFR 425.600(a)(3), also operates under 
a two-sided performance-based risk model, but can receive a higher 
share of savings than a Track 2 ACO, in exchange for accepting 
accountability for repaying a greater share of losses. For any of the 
three tracks, in order to share a percentage of achieved savings with 
the Medicare program, an ACO must successfully meet quality and savings 
requirements and certain other conditions under the Shared Savings 
Program. ACO participants and ACO providers/suppliers continue to 
receive fee-for-service payments, and the ACO may choose how it 
distributes shared savings or allocates risk among its ACO participants 
and its ACO providers/suppliers.

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. As further described elsewhere in this final rule, the 
waivers are intended to foster innovative ACO arrangements--including 
care coordination arrangements--that further the quality and efficiency 
goals of the Shared Savings Program, while also protecting 
beneficiaries and the Shared Savings Program from fraud and abuse.
    A waiver of a 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. Where a waiver of a fraud and abuse law 
exists, failure to fit in the waiver is not, in and of itself, a 
violation of 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 Beneficiary Inducements CMP. Existing 
exceptions and safe harbors might apply to ACO arrangements, depending 
on the circumstances.\5\ These include exceptions to the physician 
self-referral law for bona fide employment relationships, personal 
service arrangements, in-office ancillary services, electronic health 
records (EHR) arrangements, risk-sharing, and indirect compensation 
arrangements. Potential Federal anti-kickback statute safe harbors 
include those for employment, personal services and management 
contracts, EHR arrangements, and managed care arrangements.
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    \5\ Section 1128A(i)(6) of the Act; 42 CFR 411.355 through 
411.357; 42 CFR 1001.952.
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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 final rule 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

[[Page 66729]]

final rule changes any Medicare program payment or coverage rule or 
alters any obligations parties may have under the Shared Savings 
Program. Although the waivers described in this final rule are 
necessary to ensure that the fraud and abuse laws do not unduly impede 
development and operation of ACOs in connection with the Shared Savings 
Program, the waivers are not intended to suggest that any particular 
arrangement between specific parties is necessary to participate in 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 a physician from making 
referrals for Medicare ``designated health services,'' including 
hospital services, to an entity with which the physician or an 
immediate family member of the physician has a financial relationship, 
unless an exception applies. An entity may not bill Medicare for 
designated health services furnished 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. Violations of the physician self-referral law may also result in 
liability under the False Claims Act (31 U.S.C. 3729-33). An ACO 
arrangement involving a physician who makes referrals for designated 
health services to an entity with which he or she or an immediate 
family member has a financial relationship is prohibited under the 
physician self-referral law, unless an exception applies.
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 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. For purposes of the anti-kickback statute, 
``remuneration'' includes the transfer of anything of value, directly 
or indirectly, overtly or covertly, in cash or in kind. 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). 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. The statute has been interpreted to cover any arrangement 
where one purpose of the remuneration was to obtain money for the 
referral of services or to induce further referrals. For example, the 
distribution of shared savings by ACOs to or among its 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 could 
implicate the Federal anti-kickback statute and might not comply with 
an existing safe harbor. Arrangements for the provision of EHR 
technology or to engage specialists in care coordination might also 
potentially implicate the Federal anti-kickback statute and might not 
comply with an existing safe harbor.
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 an individual or entity from 
offering or transferring remuneration to a Medicare or Medicaid 
beneficiary 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 item or service 
payable by Medicare or a State health care program (including 
Medicaid). Existing exceptions to the Beneficiary Inducements CMP are 
found at section 1128A(i)(6) of the Act. The CMP defines 
``remuneration'' as including transfers of items or services for free 
or for other than fair market value. OIG has previously taken the 
position that incentives that are only nominal in value are not 
prohibited by the statute and has interpreted nominal in value to mean 
no more than $10 per item, or $50 in the aggregate on an annual basis. 
See 65 FR 24400.
    Stakeholders have indicated that a waiver of this law is needed to 
promote greater preventive care, to incentivize patients to follow 
treatment or follow-up care regimes, and to increase participation in 
ACOs. Without this waiver, the Beneficiary Inducements CMP could 
prohibit ACOs, ACO providers/suppliers, and ACO participants from using 
appropriate incentives to help achieve better health and better care 
for their Medicare patients, two of the goals of the Shared Savings 
Program. For example, the provision of a blood pressure cuff for a 
hypertensive patient participating in an ACO's chronic disease 
management program may, depending on the circumstances, implicate the 
Beneficiary Inducements CMP.
4. Prohibition on Hospital Payments to Physicians to Induce Reduction 
or Limitation of Medically Necessary 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. Hospitals that make (and 
physicians who receive) payments prohibited by the Gainsharing CMP are 
liable for CMPs of up to $2,000 per patient covered by the payments 
(sections 1128A(b)(1) and (2) of the Act). When the IFC was published 
on November 2, 2011, under section 1128A(b)(1) of the Act, a hospital 
was prohibited from knowingly making a payment, directly or indirectly, 
to induce a physician to reduce or limit services to Medicare or State 
health care program beneficiaries under the physician's direct care, 
including medically unnecessary services. In the IFC, we included a 
waiver of the Gainsharing CMP in the pre-participation, participation, 
shared savings distribution, and compliance with the physician self-
referral law waivers. See 76 FR 68000-68001.
    Section 512(a) of the Medicare Access and CHIP Reauthorization Act 
of 2015 (MACRA), Public Law 114-10, revised the Gainsharing CMP so that 
it prohibits hospitals from knowingly making payments, directly or 
indirectly, to induce physicians to reduce or limit ``medically 
necessary'' services provided to Medicare or State health care program 
beneficiaries under the physician's direct care. In light of the 
statutory change, payments by hospitals to induce physicians to reduce 
or limit medically unnecessary services no longer implicate the 
Gainsharing CMP. In other words, arrangements between hospitals and 
physicians that incentivize greater efficiency and reduction of waste, 
which previously

[[Page 66730]]

may have run afoul of the Gainsharing CMP, would no longer implicate 
the provision, provided those arrangements do not involve reductions or 
limitations in medically necessary care. Thus, a waiver of the 
Gainsharing CMP is no longer necessary to carry out the Shared Savings 
Program, which, by its terms, promotes quality and patient care goals 
like fostering efficient medically necessary care, but not stinting on 
medically necessary care. Accordingly, we are not finalizing the 
waivers of the Gainsharing CMP that were promulgated in the IFC. See 76 
FR 68000-68001. This decision will not affect the ability of parties to 
enter into arrangements that previously fit into a waiver of the 
Gainsharing CMP in the IFC.
    Both the amended Gainsharing CMP and the waivers of the Gainsharing 
CMP in the IFC permit payments from hospitals to physicians to reduce 
or limit medically unnecessary (e.g., wasteful, inefficient) services. 
Payments from hospitals to physicians to reduce or limit medically 
necessary services are not, and never have been, consistent with the 
purposes of the Shared Savings Program, were not protected by the 
waivers in the IFC, are not permitted by the amended Gainsharing CMP, 
and are not protected by the waivers in this final rule. CMS stated in 
the 2015 Shared Savings Program final rule that it has and will 
continue to use, among other tools, its monitoring authorities (set 
forth in 42 CFR 425.316(b)) to ensure that ACOs, ACO participants, and 
ACO providers/suppliers do not stint on medically necessary care. 80 FR 
32781.
    By way of example, we explained in the IFC that knowing payments by 
a hospital to induce a physician 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 protection 
under the shared savings distribution waiver. In contrast, we explained 
in the IFC that we would protect payments from shared savings designed 
to ``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).'' 76 FR 68006 (emphasis in original).
    For clarity and consistency with the amended Gainsharing CMP, and 
for the reasons noted above, we are modifying the pre-participation 
waiver, participation waiver, shared savings distribution waiver, and 
compliance with the physician self-referral law waiver to remove the 
waiver of the Gainsharing CMP. In the IFC, we excluded from the shared 
savings distribution 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.'' 76 
FR 68006 (emphasis in original). Because we are removing the waiver of 
the Gainsharing CMP, we are also removing this condition from the 
shared savings distribution waiver.
    We emphasize that this modification does not alter the scope of 
permissible arrangements under the Gainsharing CMP and will not affect 
the ability of parties to enter into arrangements that qualified for 
protection under the waivers of the Gainsharing CMP in the IFC. Going 
forward, ACO arrangements involving payments from hospitals to 
physicians to reduce or limit services must comply with the Gainsharing 
CMP, as amended. For purposes of this final rule, we will continue to 
interpret ``medical necessity'' consistent with Medicare program rules 
and accepted standards of practice, including the IFC guidance 
regarding alternate and appropriate medical care.

III. Explanation of Waiver Requirements, Clarifications of Certain 
Provisions, Summaries of Comments, and Responses to Comments

A. Overview

    The entire set of waivers and applicable requirements are set forth 
in section IV of this final rule, pursuant to the authority granted 
under section 1899(f) of the Act. The waivers apply uniformly to each 
ACO, ACO participant, and ACO provider/supplier participating in the 
Shared Savings Program. The waivers are self-implementing. Apart from 
meeting applicable waiver conditions (which include some required 
actions), no special procedures (such as the submission of a separate 
application for a waiver) are required by parties in order to be 
covered by a waiver. Parties need not apply for an individualized 
waiver. As stated below, we will also make the waiver text available 
via both the CMS and OIG Web sites.
    The Department has taken several opportunities to solicit and reply 
to public comments on the Shared Savings Program.\6\ The Department 
received a total of 15 timely filed comments in response to the IFC 
from entities and individuals, and section III summarizes and responds 
to these public comments. Overall, commenters supported the waivers and 
generally agreed that they provide the flexibility needed to permit 
innovation in the Shared Savings Program. However, we received some 
specific comments about various aspects of the waivers. In addition, we 
received comments that are outside the scope of this rulemaking; those 
comments are not summarized or responded to here.
---------------------------------------------------------------------------

    \6\ See Request for Information Regarding Accountable Care 
Organizations and the Shared Savings Program, 75 FR 70165 (Nov. 10, 
2010), and ``Workshop Regarding Accountable Care Organizations, and 
Implications Regarding Antitrust, Physician Self-Referral, Anti-
Kickback, and Civil Monetary Penalty (CMP) Laws'' at http://oig.hhs.gov/compliance/accountable-care-organizations/index.asp.
---------------------------------------------------------------------------

    In section III, we are adopting, in large part, the guidance from 
section V of the IFC in order to provide the public with a 
comprehensive document regarding the Shared Savings Program fraud and 
abuse waivers. In addition, section III explains the minor 
clarifications made to the waivers found in section IV of this final 
rule as well as our position with respect to several of the waiver 
requirements.

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

    Several waivers contain language specifying that an arrangement be 
``reasonably related to the purposes of the Shared Savings Program.'' 
As we stated in the IFC, under this standard, an arrangement ``need 
only be reasonably related to one enumerated purpose, although we would 
expect that many arrangements would relate to multiple purposes.'' 76 
FR 68002. In the IFC, we defined ``purposes of the Shared Savings 
Program'' consistent with the purposes set forth in sections 1899(a) 
and (b) of the Act. In this final rule, we continue to define the 
purposes of the Shared Savings Program in accordance with the statutory 
purposes, namely, 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. In addition, we continue to interpret the purpose of 
``efficient service delivery'' 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.

[[Page 66731]]

    In the IFC, we gave the following examples of activities that would 
be reasonably related to the purposes of the Shared Savings Program, 
which remain applicable in this final rule: (1) Promoting evidence-
based medicine and patient engagement; (2) meeting requirements for 
reporting on quality and cost measures; (3) coordinating care, such as 
through the use of telehealth, remote patient monitoring, and other 
enabling technologies; (4) establishing clinical and administrative 
systems for the ACO; (5) meeting the clinical integration requirements 
of the Shared Savings Program; (6) meeting the quality performance 
standards of the Shared Savings Program; (7) evaluating health needs of 
the ACO's assigned population; (8) communicating clinical knowledge and 
evidence-based medicine to beneficiaries; and (9) developing standards 
for beneficiary access and communication, including beneficiary access 
to medical records. 76 FR 68002.
    Arrangements that are unrelated to the Shared Savings Program, but 
that may have similar underlying purposes, are not covered by the term 
``purposes of the Shared Savings Program.'' 76 FR 68002. We continue to 
believe that arrangements involving care for ACO beneficiaries, but 
that also encompass care for non-ACO beneficiaries, may be eligible for 
waiver protection; such arrangements can further the purposes of the 
Shared Savings Program. The definition of ``purposes of the Shared 
Savings Program'' applies uniformly to all waivers in which it appears.
    Comment: Some commenters objected to the ``reasonably related'' 
standard as overly broad, vague, or ambiguous. One commenter suggested 
that our ``reasonably related'' standard was not sufficiently narrow so 
as to waive only such requirements of sections 1128A and 1128B and 
Title XVIII of the Act as may be ``necessary'' to carry out the 
purposes of the Shared Savings Program.
    Response: We disagree with the commenters. We believe the 
``reasonably related'' standard best achieves our goal of providing 
flexibility to ACOs to develop the innovative arrangements envisioned 
by CMS, while still requiring a verifiable connection with the Shared 
Savings Program so as to minimize the risk of allowing fraudulent or 
abusive arrangements.
    We underscore that not every arrangement connected to an ACO will 
be reasonably related to the purposes of the Shared Savings Program. We 
believe there are a range of arrangements that ACOs, ACO participants, 
and/or ACO providers/suppliers might enter into that have no connection 
to the purposes of the Shared Savings Program. In the IFC, we gave the 
example, which we are adopting here, of a per-referral payment (e.g., 
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) as not being reasonably 
related to the purposes of the Shared Savings Program. 76 FR 68004. 
Other examples of arrangements that are not reasonably related to the 
purposes of the Shared Savings Program include the following: (1) An 
arrangement whereby a physician, a physician practice, or other 
provider is required to pay a sum to receive ACO-related referrals 
(e.g., ``pay-to-play'' arrangements); (2) medical directorships or 
personal service arrangements where referring physicians or other 
providers receive payments for no actual services performed; (3) 
payments to induce a physician or other provider to stint on medically 
necessary care for beneficiaries; or (4) free gifts, such as sporting 
event tickets, to referring ACO providers/suppliers or ACO 
participants. These arrangements are suspect and subject to ordinary 
case-by-case review under all applicable fraud and abuse laws.
    Unlike the examples provided above, and as we pointed out in the 
IFC, arrangements with specialists or other practitioners, such as 
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 resulted in a greater likelihood that the patient might be 
referred to or within an ACO. 76 FR 68004. Similarly, compensation to a 
physician for achieving certain quality metrics for patient care set by 
the ACO could be reasonably related to the purposes of the Shared 
Savings Program, although this arrangement may result in that physician 
being more likely to refer to or within the ACO. We remind parties that 
they must comply with the programmatic safeguard at 42 CFR 425.304(c), 
which prohibits certain required referrals and cost-shifting.

C. Eligibility for the Waivers

    This final rule finalizes four waivers that are available to 
protect certain 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. As noted 
below, some waivers include certain ACO-related arrangements with other 
parties if all waiver conditions are met. (A fifth waiver, described 
below, addresses incentives offered to beneficiaries.)
    The first of the five waivers that we finalize in this final rule, 
the ACO pre-participation waiver, is available for start-up 
arrangements, 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. 
As we stated in the IFC:

    [T]o 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 
[42 CFR 425.102]). 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.

    76 FR 68002. Further, in that rulemaking we stated that the pre-
participation waiver does not cover arrangements involving drug and 
device manufacturers, distributors, durable medical equipment (DME) 
suppliers, or home health suppliers. As we explained in the IFC, drug 
and device manufacturers and distributors are not Medicare enrolled 
suppliers and providers. We also explained that DME suppliers and home 
health suppliers have historically posed a heightened risk of program 
abuse,\7\ and therefore we excluded these entities from the pre-
participation waiver.
---------------------------------------------------------------------------

    \7\ In addition to the government's enforcement and oversight 
experience with these suppliers, we note that CMS has designated 
these entities as high or moderate risk for purposes of provider 
enrollment screening. See e.g. ``Medicare, Medicaid, and Children's 
Health Insurance Programs; Additional Screening Requirements, 
Application Fees, Temporary Enrollment Moratoria, Payment 
Suspensions and Compliance Plans for Providers and Suppliers'', 76 
FR 5862 (Feb. 2, 2011) at http://www.gpo.gov/fdsys/pkg/FR-2011-02-02/pdf/2011-1686.pdf.
---------------------------------------------------------------------------

    Comment: Several commenters requested clarification of the term 
``home health supplier.'' One commenter asked that we confirm that the 
pre-participation waiver protects arrangements with Medicare-certified 
home health agencies or providers. Another commenter questioned whether 
the exclusion applied to those who furnish home health supplies outside

[[Page 66732]]

the Medicare program. A commenter also noted that the term ``home 
health supplier'' is not defined in the Medicare program.
    Additionally, we received several comments objecting to the 
exclusion of all home health agencies from the pre-participation 
waiver. These commenters asked that CMS and OIG clarify whether all 
home health agencies were excluded intentionally from the pre-
participation waiver, regardless of whether they are certified by 
Medicare. In general, these commenters urged us to consider that home 
health agencies are in a position to generate savings for the Shared 
Savings Program through quality, efficient care in a less costly 
setting. One commenter noted that a per se exclusion of home health 
agencies from the pre-participation waiver unfairly punishes good 
actors because of isolated issues of program abuse, and other 
commenters asserted that categorical exclusion of these providers may 
be detrimental to the purposes of the Shared Savings Program and may 
have anti-competitive effects. Several commenters requested that we 
clarify that home health agencies may be parties to arrangements 
protected by the participation, shared savings distributions, 
compliance with the physician self-referral law, and patient incentives 
waivers even if excluded from the pre-participation waiver, and may 
participate in the Shared Savings Program as post-acute care providers.
    One commenter suggested that home health agencies should be 
permitted to participate in start-up arrangements protected by the pre-
participation waiver if they have a compliance program in place that is 
consistent with OIG's Compliance Program Guidance for Home Health 
Agencies. Another commenter suggested that CMS and OIG adopt an 
approach that would exclude a provider from any sector, including home 
health care, from the pre-participation waiver if it is currently 
subject to a corporate integrity agreement, does not maintain a 
compliance program reasonably consistent with OIG guidelines, or is 
subject to a payment suspension.
    Response: This final rule continues to recognize that home health 
plays an important role in care coordination. Under this final rule, 
``home health suppliers'' are permitted to use all waivers offered in 
this final rule, if the applicable waiver conditions are met, except 
the pre-participation waiver. Moreover, certain start-up arrangements 
involving entities that furnish home health services may fit in 
existing safe harbors to the Federal anti-kickback statute or 
exceptions to the physician self-referral law.
    We continue to be concerned that the pre-participation waiver could 
be more prone to abuse than other waivers because, among other things, 
it applies in circumstances that pre-date a prospective ACO's actual 
commitment to the Shared Savings Program and the attendant regulation 
and oversight. We remain concerned about potential misuse of the waiver 
by those who are not acting in good faith to create an ACO for the 
Shared Savings Program. Because of this risk, we have incorporated a 
number of targeted safeguards into the pre-participation waiver. For 
instance, we are requiring notification of failure to submit a timely 
application, and we are prohibiting use of the waiver by certain types 
of entities that are not central to forming a Shared Savings Program 
ACO and have historically posed an elevated risk of fraud, as described 
above.
    One type of entity we excluded from the pre-participation waiver in 
the IFC was ``home health supplier,'' and we agree that we should 
clarify the intended meaning of this term in the final rule. As a 
commenter points out, the term does not have a specific meaning in the 
Medicare program. We are clarifying that, for purposes of this final 
rule, the term ``home health supplier'' means a provider, supplier, or 
other entity that is primarily engaged in furnishing ``home health 
services,'' as that term is defined in section 1861(m) of the Act. The 
term ``home health supplier'' would include freestanding home health 
agencies (as that term is commonly used by CMS and industry 
stakeholders) and their parent entities, which may own one or more 
freestanding home health agencies, if the parent entity is primarily 
engaged in the delivery of home health services.
    A Medicare-enrolled provider or supplier, such as a hospital, 
skilled nursing facility, physician practice, or other provider or 
supplier could be a party to an arrangement protected by the pre-
participation waiver, even if such provider or supplier furnishes home 
health services, so long as the hospital, skilled nursing facility, 
physician practice, or other provider or supplier is not primarily 
engaged in providing home health services.
    This clarification is consistent with our intent in the IFC. We did 
not intend there, and do not intend in this final rule, to exclude from 
the pre-participation waiver hospitals, skilled nursing facilities, 
physician practices, or other providers and suppliers that may furnish 
some home health services. To do otherwise would have precluded from 
the waiver the very types of providers and suppliers the pre-
participation waiver was meant to protect to enable them to form ACOs 
for the Shared Savings Program. To this end, a provider or supplier 
that furnishes home health services could be a party to an arrangement 
covered by the pre-participation waiver, so long as that entity is not 
primarily engaged in the furnishing of home health services.
    Whether a provider, supplier or other entity is excluded as a home 
health supplier under this final rule does not turn on whether the 
supplier is Medicare-certified. Medicare-certified home health agencies 
are excluded if they meet the definition of a home health supplier, set 
forth in this final rule. Finally, we appreciate another commenter's 
suggestions for additional restrictions in the pre-participation 
waiver. We did not propose these restrictions and believe they would 
require further study. We plan to continue to monitor the use and 
impacts of the pre-participation waiver and may consider these 
suggestions in future rulemaking, if warranted. We are not adopting the 
suggestion to permit home health agencies that have compliance plans to 
use the pre-participation waiver.
    In summary, we are finalizing the pre-participation waiver to 
exclude home health suppliers, as defined above, DME suppliers, and 
pharmaceutical and device manufacturers, because of continuing program 
integrity risks, the heightened risks inherent in the pre-participation 
waiver, and an assessment based on four years of program experience 
that the pre-participation waiver is sufficiently broad for purposes of 
the Shared Savings Program. We believe this policy is consistent with 
the goals of the Shared Savings Program and has not created barriers to 
the participation or development of ACOs.

D. Pre-Participation and Participation Waivers

1. Scope
    The pre-participation waiver covers a broad array of start-up 
arrangements, subject to certain conditions. The participation waiver 
covers any arrangement that meets its conditions, including start-up 
arrangements. Because these two waivers may serve to protect a wide 
variety of arrangements entered into by and among ACOs, ACO 
participants, and ACO providers/suppliers, and are necessary to carry 
out the purposes of the Shared Savings Program, we are finalizing these 
waivers (minus the Gainsharing CMP waiver)

[[Page 66733]]

with some clarification, as described in more detail below.
    When we developed the pre-participation and participation waivers 
in the IFC, our intent was 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. The pre-
participation and participation waivers rely on the programmatic 
requirements of the Shared Savings Program to safeguard Medicare 
beneficiaries and the Medicare program. 76 FR 68003. As explained in 
the IFC, the waivers reflect our position that risks of fraud and 
abuse, such as overutilization and inappropriate utilization, are 
mitigated, in the first instance, by the Shared Savings Program design, 
the eligibility requirements, the quality of care and accountability 
provisions, and the program integrity provisions. As described in more 
detail below, the waivers include additional safeguards in the form of 
governance responsibility, transparency, and a documented audit trail. 
Id.
2. Start-Up Arrangements Under the Pre-Participation Waiver
    Consistent with the IFC, the pre-participation waiver is limited to 
``start-up arrangements.'' We are making a technical correction to the 
waiver text so that the term ``start-up arrangements'' applies to 
arrangements for items, services, facilities, or goods (including non-
medical items, services, facilities, or goods) that are used to create 
or develop an ACO and that are provided by such an ACO, ACO 
participants, or ACO providers/suppliers. We continue to believe that 
the provision of a subsidy for these items, services, facilities, or 
goods can constitute a start-up arrangement. We note that arrangements 
meeting the definition of a ``start-up arrangement'' can also qualify 
for the participation waiver if they occur after the ACO's start date 
in the Shared Savings Program, provided all other waiver conditions are 
met.
    We believe that the following list, taken from the IFC, remains 
representative of the types of start-up arrangements that ACOs enter 
into, and that may qualify under the pre-participation waiver:
    (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.

76 FR 68003.
    We have included the list in this final rule so that ACOs may 
continue to use these examples as guideposts in determining whether a 
particular arrangement may qualify for protection under this waiver.
3. Additional Safeguards
    One of the key safeguards to mitigate the risk of fraud or abuse 
from arrangements protected under these waivers is the involvement of 
the ACO's governing body in the authorization of each arrangement. In 
the IFC, the pre-participation and the participation waivers require 
the governing body of the ACO to 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 and to 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 42 CFR 
425.106 and 425.108, as recently amended, and the governing body must 
have a meaningful conflicts of interest policy for its members. 76 FR 
68003.) As we observed in the IFC:

    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.

    Id. We are finalizing this policy regarding the ACO governing body 
determination and authorization, with the additional clarification 
provided below.
    Comment: Some commenters supported our requirement in the pre-
participation and participation waivers that an ACO governing body 
document its bona fide determination that an arrangement reasonably 
relates to the purposes of the Shared Savings Program. Commenters 
suggested that we provide additional examples of particular methods by 
which governing bodies may make a bona fide determination regarding an 
arrangement. The commenters also advocated for requiring governing 
bodies to make information regarding the authorization of arrangements 
publicly available. Another commenter suggested that proof that the 
governing body made a meaningful determination should be reflected in 
the minutes of the ACO governing body's meeting when the arrangement 
requiring a waiver is being considered. Others suggested that we 
provide examples of arrangements that cannot be authorized by a 
governing body as reasonably related to the purposes of the Shared 
Savings Program.
    Response: We appreciate the commenters' support for our

[[Page 66734]]

requirement that an ACO governing body make a bona fide determination 
that an arrangement reasonably relates to the purposes of the Shared 
Savings Program. We note that this determination is only one of several 
requirements that an ACO must meet in order for an arrangement to be 
protected by these waivers. We refer the commenters to the guidance in 
the IFC (76 FR 68004), and we are providing additional clarification on 
three safeguards for these waivers: (1) Methods of the ACO governing 
body's authorization; (2) documentation requirements; and (3) 
transparency requirements.
Methods of the ACO Governing Body's Authorization
    As we explained above, the pre-participation and participation 
waivers require the ACO governing body to make a bona fide 
determination that an arrangement is reasonably related to the purposes 
of the Shared Savings Program. We reiterate that a key role of the ACO 
governing body is to evaluate and identify clearly whether arrangements 
are reasonably related to one or more purposes of the Shared Savings 
Program. We do not believe that an ACO governing body can make and 
authorize a bona fide determination that an arrangement is reasonably 
related to the purposes of the Shared Savings Program by ``rubber 
stamping'' its approval of an arrangement. We are not prescribing 
particular methods for this determination. ACO governing bodies have 
available to them a variety of methods for making such a determination, 
provided they meet all of the requirements in this condition of the 
waiver. We believe and expect that members of the ACO governing body 
will employ a thoughtful, deliberative process for making a 
determination that an arrangement is reasonably related to the purposes 
of the Shared Savings Program, and will articulate clearly the basis 
for their determinations and authorizations. As we stated in the IFC, a 
meaningful determination and authorization by the ACO's governing body 
is essential because it serves to ensure ``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.'' 76 FR 68004.
    These waivers do not protect sham governing body determinations for 
arrangements that are not connected to the Shared Savings Program. One 
factor we would consider when evaluating whether the ACO governing 
body's determination is bona fide would be the proximity in time 
between the establishment of the arrangement (and any material 
amendments and modifications to the arrangement) and the ACO governing 
body's corresponding determination and authorization. For example, a 
significant passage of time between the establishment of the 
arrangement and the ACO governing body's determination might indicate 
that the ACO governing body did not make a bona fide determination and 
was acting for other purposes.
    In response to the commenters' request for examples of arrangements 
that cannot be reasonably related to the purposes of the Shared Savings 
Program, we provide several examples in section III.B above of 
arrangements that are not reasonably related to the purposes of the 
Shared Savings Program.
    We reiterate that, in all instances, no waiver protection applies 
until all requirements of the waiver are met.
Documentation Requirements
    As we emphasized in the IFC, the determination and authorization 
must be contemporaneously documented by the ACO governing body. 76 FR 
68003. Among their requirements, the pre-participation and 
participation waivers mandate that the documentation must identify at 
least a description of the arrangement and the date and manner of the 
ACO governing body's authorization of the arrangement; we specified 
that documentation should include the basis for the ACO governing 
body's determination that the arrangement is reasonably related to the 
purposes of the Shared Savings Program. Id. at 68000, 68001. In section 
V of the IFC, we explained that ``documentation must include the basis 
for the determination that the arrangement is reasonably related to the 
purposes of the Shared Savings Program.'' Id. at 68003 (emphasis 
added). In this final rule, we are correcting the waiver text in 
condition 4.b. of the pre-participation and participation waivers by 
replacing ``should'' with ``must'' so that the waivers align with our 
stated intent for this documentation requirement in section V of the 
IFC. We stated that the documentation requirement was mandatory, not 
discretionary, because we believed (and continue to believe) that the 
determination by the ACO governing body is necessary to trigger 
protection of the waiver. Id. at 68004. The ability to ascertain the 
ACO governing body's rationale for its determination, as reflected in 
its documentation, is essential in being able to distinguish between 
arrangements for which the ACO governing body has made a bona fide 
determination that the arrangement is reasonably related to the 
purposes of the Shared Savings Program, and those for which the ACO 
governing body has not made such a determination. Particularly in this 
decision-making capacity, the ACO governing body serves as a gatekeeper 
to ensure only arrangements that are integral to the ACO's mission and 
role in the Shared Savings Program are protected, and that isolated 
arrangements furthering the individual financial or business interests 
of ACO participants or ACO providers/suppliers are not. The existence 
of documentation that corresponds with the actions of the ACO governing 
body is critical to the functionality of this safeguard.
    It is essential that an ACO have sufficient documentation to 
identify clearly the arrangement its governing body is considering, and 
to be able to point to the basis or bases for the decision that an 
arrangement is ``reasonably related'' to the purposes of the Shared 
Savings Program. We stated in the IFC that the documentation should 
allow ``the government or another third party reviewing the 
documentation [to be] able to ascertain the material terms of the 
arrangement, including the information listed in item 4 of the pre-
participation and participation waivers.'' 76 FR 68004. We are more 
concerned with the level of specificity included in the ACO governing 
body's records about the arrangement (and any material amendments and 
modifications to the arrangement), and the corresponding basis or bases 
for the ACO governing body's determination, than the particular format 
of that documentation. For example, while it would be a best practice 
to have a written resolution duly authorized by the ACO governing body 
evidencing the basis or bases for its determination that a particular 
arrangement is reasonably related to the purposes of the Shared Savings 
Program, such a resolution is not required, and the documentation 
requirements of the waivers can be met in other ways. In addition, we 
note that the waivers do not require an agreement signed by the parties 
in order for an arrangement to be protected, although such an agreement 
is a best documentation practice (and is one way to satisfy the writing 
requirement included in relevant exceptions to the physician self-
referral law if a waiver does not apply).
    While we have not specified the form of documentation that will be 
sufficient, as that will vary depending on the circumstances, the 
documentation must clearly evidence the nexus between the

[[Page 66735]]

arrangement and the purposes of the Shared Savings Program. 
Documentation that lacks an adequate description of the arrangement or 
of the ACO governing body's basis for its determination will not meet 
the requirements of condition 4 of the pre-participation and 
participation waivers in this final rule. Finally, we reiterate that 
the documentation may be in paper or electronic form.
    In this final rule, we are finalizing the document retention 
policies from the IFC. Specifically, the ACO must have an audit trail 
of contemporaneous documentation that identifies core characteristics 
of the arrangement (as listed in the waiver text), maintain such 
documentation for 10 years, and make the documentation available to the 
Secretary, upon request. For the pre-participation waiver, 
documentation of the diligent steps must be retained for at least 10 
years following the date that the ACO submits its application or the 
date the ACO submits its statement of reasons for failing to submit an 
application.
    We decline to adopt the commenters' recommendations to require the 
ACO to make information about the authorization publicly available. We 
believe the combination of the documentation requirements in the final 
waivers, the existing public disclosure requirements for these 
arrangements, and the Secretary's monitoring authorities appropriately 
mitigate the risk of fraud or abuse.
Transparency Requirements
    We are finalizing the IFC requirement for public disclosure--at a 
time and in a place and manner established in guidance issued by the 
Secretary--of arrangements for which waiver protection under the pre-
participation or participation waiver is invoked. As we explained in 
the IFC, the public disclosure must include the description of the 
arrangement, but shall not include the financial or economic terms of 
the arrangement because of potential antitrust implications, among 
other considerations. We reiterate, however, that the financial and 
economic terms of the arrangement must be documented pursuant to the 
documentation requirements described in condition 4.a. of the pre-
participation and participation waivers and must be made available to 
the Secretary upon request. 76 FR 68004.
    Comment: Most of the commenters supported the public disclosure 
criterion, and some commenters wanted to impose additional requirements 
on ACOs. One commenter suggested that we promulgate regulations that 
set out these additional requirements in greater specificity. According 
to several commenters, we should require public posting of the use of 
the waivers on a rolling basis, and one commenter recommended that we 
require parties to publicize a notice of intent to form an ACO. Another 
commenter advocated for disclosure of the use of a waiver to CMS, as 
well as to the public via the media serving the community in which ACO 
participants are located.
    Response: In the IFC, we set out three reasons for developing the 
transparency requirement:

    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. 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.

76 FR 68004 (footnote omitted).
    In the IFC, we stated that, until such time as additional guidance 
was issued, parties seeking to use the ACO pre-participation or 
participation waiver would meet the disclosure requirement by posting 
information identifying the parties to the agreement 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 
was sought, within 60 days of the date of the arrangement. We 
subsequently provided further guidance on the method and content of 
required public disclosures in the Additional Waiver Guidance. Parties 
seeking to use the pre-participation or participation waiver meet the 
disclosure requirements only if they post information in accordance 
with the instructions in the Additional Waiver Guidance, as it may be 
updated by the Secretary from time to time. (Prior to the Additional 
Waiver Guidance, parties could meet the disclosure requirement by 
following the guidance in the IFC cited above.)
    We believe the disclosure process detailed in the Additional Waiver 
Guidance, which was issued after the comment period for the IFC closed, 
addresses the commenters' suggestion that we set out additional 
requirements with greater specificity and that we provide for rolling 
disclosures. The waivers provide that the time, place, and manner of 
the public disclosure shall be set by the Secretary; we do not believe 
separate regulations are necessary. Further, requiring publication of a 
notice of intent to form an ACO for purposes of these waivers would be 
overly burdensome. With respect to one commenters' suggestions 
regarding public disclosure of waivers, including to CMS or local 
media, we believe the public disclosure requirements in the Additional 
Waiver Guidance are sufficient because they provide for public 
transparency regarding arrangements for which waiver protection is 
sought while minimizing the burden on ACOs.
4. Outside Party Arrangements
    The IFC included certain ACO-related arrangements with outside 
providers and suppliers, such as hospitals, specialists, or post-acute 
care facilities, within the scope of the pre-participation and 
participation waivers. An outside party arrangement is an arrangement 
with an individual or entity that does not meet the definition of an 
ACO, an ACO participant, or an ACO provider/supplier, as those terms 
are defined in section IV of this final rule, but has a role in 
coordinating and managing care for ACO patients.
    Comment: Some commenters supported our approach to protect certain 
ACO-related arrangements with outside providers and suppliers. One 
commenter stated that the arrangements protected by the pre-
participation and participation waivers serve a significant role in 
ensuring patient access to care. Other commenters urged CMS and OIG to 
limit the waivers to ACOs, ACO participants, and ACO providers/
suppliers. One commenter advocated requiring arrangements with outside 
parties to be fair market value and commercially reasonable, while 
another commenter believed we should require outside party arrangements 
to be necessary or directly related to the ACO's operations under the 
Shared Savings Program. Finally, a commenter suggested that, if the 
waivers are extended to outside party arrangements, those outside 
parties should be subject to certification requirements and other 
similar safeguards.
    Response: As we observed in the IFC:

    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.


[[Page 66736]]


76 FR 68005.
    We agree with the commenters who advocated that arrangements with 
outside parties should be protected under these waivers so long as all 
requirements for the applicable waiver are met. We believe that these 
arrangements are important in furthering the quality and patient care 
goals of the Shared Savings Program. We recognize that, for example, 
some individuals and entities furnishing care to beneficiaries in an 
ACO will not be an ACO participant or ACO provider/supplier. ACOs may 
want to enter into arrangements with these outside individuals or 
entities, however, to promote care coordination for their patients or 
to encourage quality improvement.
    While we understand the benefits of arrangements with outside 
parties, we recognize the concerns of those commenters who recommended 
additional safeguards, such as fair market value or commercial 
reasonableness requirements. We have reviewed the comments and 
considered the types of arrangements that may be necessary to meet the 
goals of the Shared Savings Program, the wide variation of arrangements 
ACOs are undertaking to redesign care, and the challenges of funding 
ACO infrastructure and operations. Based on these considerations and 
experience with the Shared Savings Program to date, we are not imposing 
additional conditions on outside party arrangements at this time. 
Similarly, we are not adopting the commenter's suggestion that 
arrangements with outside parties be subject to certification 
requirements or similar safeguards at this time.
5. Duration of the Pre-Participation and Participation Waivers
    For the participation waiver, the waiver period starts on the start 
date of the participation agreement and ends 6 months following the 
earlier of the expiration of the participation agreement (including any 
renewals) or the date on which the ACO has voluntarily terminated the 
participation agreement. If CMS terminates the participation agreement, 
the waiver period will end on the date of the termination notice. 76 FR 
68001.
    As we explained in the IFC, 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. Our intent behind these specific duration 
periods was, and continues to be, to ensure that the pre-participation 
waiver covers only start-up arrangements that are closely linked to the 
Shared Savings Program. 76 FR 68005.
    Under condition 1 of the pre-participation waiver in the IFC, which 
we adopt in this final rule, we specify that the waiver covers only 
arrangements 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''). 
For target year 2013 or later, the waiver period starts one year 
preceding an application due date (the ``selected application date''). 
For example, for ACOs pursuing target year 2016, the application due 
date was August 7, 2015, which means the ACO pre-participation waiver 
period would have begun on August 7, 2014. Application due dates for 
future years will be announced by CMS.
    In the IFC, we provided three scenarios that clarify the end of 
coverage of the pre-participation waiver, which we are finalizing in 
this final rule. First, for an ACO that submits an application that is 
ultimately accepted and enters into a Shared Savings Program 
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. 76 FR 
68005. No further governing body approval is required for arrangements 
that were protected by the pre-participation waiver. Second, for an ACO 
that submits an application that is ultimately denied by CMS (for any 
reason), the pre-participation waiver 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. No newly created 
arrangements established on or after the date of the denial notice 
would be protected during the 6-month period immediately following the 
denial notice. Third, if an ACO fails to submit an application on the 
final application due date for the target year, the pre-participation 
waiver ends on the earlier of the application due date for the target 
year 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 application due date, may apply for an 
extension of the waiver. If an ACO seeks protection for an arrangement 
under the pre-participation waiver but fails to submit a Shared Savings 
Program application by the final application due date, this final rule 
requires that the ACO submit a statement describing the reasons it 
failed to submit a timely application, in a form and manner to be 
determined by the Secretary. Id. The Additional Waiver Guidance,\8\ 
provides instructions on the form and manner of the statement 
explaining why the ACO failed to submit an application.
---------------------------------------------------------------------------

    \8\ The Additional Waiver Guidance, which may be amended from 
time to time, is available on CMS's Web site at: http://www.cms.gov/Medicare/Medicare-Fee-for-ServicePayment/sharedsavingsprogram/Downloads/Additional-MSSP-Waiver-Guidance.pdf, and on OIG's Web site 
at: http://oig.hhs.gov/compliance/accountable-care-organizations/index.asp.
---------------------------------------------------------------------------

    ACOs falling under the third scenario provided above may apply for 
an extension of the waiver period using procedures established by the 
Secretary. We are continuing to require that an ACO seeking an 
extension submit documentation of its diligent steps to develop an ACO 
and show 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. 76 FR 68000. The Additional Waiver 
Guidance lays out in detail the procedures for submitting a request for 
an extension of the pre-participation waiver period. The determination 
whether to grant an extension of the waiver will be at the sole 
discretion of the Secretary and will not be reviewable. As we stated in 
the IFC, 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 use the pre-participation waiver only once. If an 
extension is not granted, the ACO may no longer rely on the pre-
participation waiver. Id. at 68005.
    As we discussed in the IFC and above, under certain 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. We reiterate in this final 
rule that the ``tail'' periods protect only arrangements that were in 
place and otherwise qualified for the waiver at the time the waiver 
expires or terminates.
    Comment: One commenter supported our decision to include a 6-month 
tail period for the pre-participation and participation waivers, but 
requested that we extend this tail period for the participation waiver 
in situations where CMS terminates the ACO. The commenter stated that 
these entities

[[Page 66737]]

should have an ``unwinding period'' to discontinue activities 
previously protected under this waiver.
    Response: We are not adopting the commenter's recommendation to 
apply the 6-month tail period to the participation waiver for an ACO 
that CMS terminates. In such circumstances, the Government has 
determined that an ACO is not acceptable for participation in the 
Shared Savings Program, and we believe that it is appropriate to 
terminate waiver protection as well. As such, consistent with the 
waiver period in the IFC, following the date of the notice of 
termination of the ACO by CMS, no protection under the applicable 
waiver would extend to arrangements involving the ACO, its ACO 
participants, or its ACO providers/suppliers. To the extent the 
arrangements continued following the date of the notice of termination 
of the ACO by CMS, such arrangements would be subject to review for 
compliance with all applicable fraud and abuse laws.

E. Waiver for Shared Savings Distributions

    As we explained in the IFC, the purpose of the waiver for shared 
savings distributions is two-fold. First, the waiver protects 
arrangements created by the distribution of shared savings within an 
ACO that qualify for the waiver. As we noted in the IFC, ``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.'' 76 FR 68005. This statement was and 
continues to be true so long as all waiver conditions are met. We 
recognize 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. Id. We continue to believe that these goals are consistent 
with interests protected by the fraud and abuse laws.
    Second, the waiver protects arrangements that involve the use of 
shared savings to pay parties outside an ACO, provided all applicable 
waiver conditions are met. 76 FR 68005. As discussed above, we believe 
that arrangements with outside parties are important in furthering the 
quality and patient care goals of the Shared Savings Program. We 
underscore, however, that to qualify for protection under this waiver, 
the payments to outside individuals or entities must be used for 
activities that are reasonably related to the purposes of the Shared 
Savings Program. Id. Although not required by the terms of the waiver, 
an ACO would be well advised to maintain documentation that explains 
how payments would be and are being used for activities that are 
reasonably related to the purposes of the Shared Savings Program. We 
discuss the meaning of ``reasonably related to the purposes of the 
Shared Savings Program'' above.
    This waiver is limited to distributions of shared savings generated 
by the ACO through its participation in the Shared Savings Program. As 
we stated in the IFC:

    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 [participation] 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 [or] ACO providers/suppliers at 
the time the shared savings were earned, even if they are not part 
of the ACO at the time of the actual distribution.

76 FR 68005-68006.
    If the arrangement does not exclusively involve the distribution of 
shared savings generated through participation in the Shared Savings 
Program, the arrangement would need to qualify for another waiver 
outlined in section IV of this final rule, fit in an existing exception 
or safe harbor, or otherwise comply with the laws. 76 FR 68006. This 
waiver does not protect, for example, distributions to physicians, 
providers, or other parties outside the ACO in return for referring 
patients to the ACO. The only shared savings distributions to parties 
outside the ACO that are protected under this waiver would be 
compensation (using shared savings) for activities that are reasonably 
related to the purposes of the Shared Savings Program. Id. Examples of 
arrangements that are not reasonably related to the purposes of the 
Shared Savings Program are addressed above.
    Comment: Two commenters requested that we incorporate additional 
safeguards to prevent stinting of care for Medicare beneficiaries, 
cherry picking only the healthiest patients, or reducing or limiting 
medically necessary items or services. One commenter suggested that CMS 
and OIG incorporate into the final waivers additional safeguards 
previously identified by the agencies, for example, providing assurance 
that physicians can still use the same items and services that were 
available before the establishment of the shared savings arrangements.
    Response: We agree with commenters that it is critical to protect 
patients from cherry picking, stinting on care, and the withholding of 
medically necessary items or services. As explained above, we are no 
longer waiving the Gainsharing CMP. As recently amended, the 
Gainsharing CMP prohibits a hospital from knowingly making payments to 
physicians to reduce or limit medically necessary services. There is no 
need to waive the amended Gainsharing CMP in order to carry out the 
Shared Savings Program and waiving the statute, as amended, would 
potentially eliminate protection from stinting on care. Our approach in 
this final rule preserves the protections contained in the Gainsharing 
CMP and reflects our commitment to the quality and safety of patient 
care. We also note that the program rules contain extensive quality 
requirements and CMS has monitoring authorities under 42 CFR 425.316(b) 
to prevent ACOs from engaging in these prohibited activities. Further, 
shared savings payments are conditioned on meeting certain quality 
metrics, which should reduce the risk of ACOs stinting on care. 
Finally, ACOs annually report on a core set of quality measures that 
spans prevention, chronic disease, care coordination, patient outcomes, 
and patient experience of care. These measures are used by CMS in 
conjunction with other program results and compliance activities to 
monitor for avoidance of at-risk beneficiaries. As a result, we are not 
adopting the commenter's suggestion at this time that we incorporate 
additional safeguards into the waivers, such as ensuring the 
availability of the same range of items and services.
Commercial Plans
    In the IFC, we requested comments on whether we should develop a 
specific waiver to apply to shared savings derived from programs 
comparable to the Shared Savings Program that are sponsored by 
commercial health plans (and, if so, how we should define a comparable 
program with sufficient precision).
    Comment: Several commenters opposed extending the waivers in the 
IFC to arrangements that involve the distribution of shared savings 
earned by an ACO under a comparable program sponsored by a commercial 
plan, noting generally that this may lead to an increase in fraud and 
abuse concerns. One commenter pointed to OIG's longstanding concern 
with parties providing favorable terms in non-Federal health care 
program arrangements in return for Federal health care program 
business. In

[[Page 66738]]

addition, the commenter noted that extending the waiver to ACO-type 
arrangements with commercial plans is not necessary in order to meet 
the purposes of the Shared Savings Program. Similarly, another 
commenter stated that the waivers should not apply to activities by an 
ACO, ACO participants, or ACO providers/suppliers outside of their ACO 
participation agreement, as these activities do not provide a benefit 
to the Medicare program or Medicare beneficiaries.
    Response: We appreciate the comments on this issue. We will 
continue to monitor the development of ACOs and shared savings 
arrangements and may consider addressing shared savings derived from 
commercial plans in future rulemaking.
    As we stated in the IFC:

    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 concerns 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.

76 FR 68006.
    In the IFC, we laid out four examples of ways in which private 
payer arrangements might not need a specific waiver, and we believe 
these examples remain applicable to commercial plan ACO arrangements. 
First, an arrangement ``downstream'' of commercial plans (for example, 
arrangements between hospitals and physician groups) might qualify for 
the participation waiver if there is a sufficient nexus with the Shared 
Savings Program. Unlike the shared savings distribution waiver, the 
participation waiver does not turn on the source of the funds for the 
arrangement. Second, we continue to believe that 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). Third, some private payer arrangements may fit in 
existing Federal anti-kickback statute safe harbors, such as the 
managed care safe harbors. Finally, as noted previously in this final 
rule, no waiver or other protection is needed for arrangements that do 
not implicate the fraud and abuse laws. This statement is equally true 
for private payer arrangements.

F. Compliance With the Physician Self-Referral Law Waiver

    This waiver, as finalized here, waives the Federal anti-kickback 
statute for arrangements that qualify under an existing physician self-
referral law exception. As we explained in the IFC, we seek to avoid 
requiring parties to ``undertake a separate legal review under the 
Federal anti-kickback statute'' for these arrangements. 76 FR 68006.
    Comment: Most commenters who provided comments on this waiver 
strongly supported it. A supporting commenter approved of our decision 
not to require parties to undertake a separate legal review if an 
arrangement qualifies for an exception under the physician self-
referral law. Another commenter supported this waiver because, in the 
commenter's view, it is narrowly tailored. One commenter stated that 
the waiver creates a high risk of abusive relationships, and urged us 
to eliminate the waiver or, in the alternative, subject ACOs, ACO 
participants, and ACO providers/suppliers to auditing and monitoring 
when they use the waiver.
    Response: We reiterate our position, first stated in the IFC, that 
the purposes of this waiver being granted to those arrangements that 
qualify under an existing physician self-referral law exception are to 
``ease the compliance burden on providers'' and to minimize the 
obligations on entities establishing or operating ACOs under the Shared 
Savings Program. 76 FR 68006. We appreciate the commenter that 
supported this waiver. We continue to believe that this waiver offers 
an efficient means for providers to protect bona fide arrangements 
without having to conduct an exhaustive legal review, while also 
presenting a low risk of raising fraud and abuse concerns under the 
Federal anti-kickback statute. Apart from removing the waiver for the 
Gainsharing CMP, we are not making any changes to the waiver in this 
final rule.
    As we explained in the IFC, this waiver covers arrangements that 
otherwise implicate the physician self-referral law, meaning 
arrangements involving entities that furnish designated health services 
and referring physicians. See 42 CFR 411.351. Some arrangements need 
not (and, thus, do not) qualify for an exception to the physician self-
referral law simply because they are not within the ambit of that law. 
76 FR 68006. In the IFC, we gave the example, which we adopt here, of 
arrangements between facilities that do not involve referring 
physicians and noted that these arrangements might qualify for the 
other waivers.
    Arrangements covered by this waiver remain subject to scrutiny--
including monitoring, auditing, or other means--for compliance with the 
physician self-referral law. Importantly, we remind stakeholders that 
compliance with an exception to the physician self-referral law does 
not ordinarily operate to immunize conduct under the Federal anti-
kickback statute, and arrangements that comply with the physician self-
referral law are still subject to scrutiny under the Federal anti-
kickback statute. 76 FR 68006. As we made clear in the IFC, we are 
departing from this general rule because we believe there are specific 
safeguards in the Shared Savings Program that minimize some typical 
fraud and abuse concerns and we desire to reduce the burden on ACOs. 
Further, section 1899(f) of the Act grants the Secretary the authority 
to waive the Federal anti-kickback statute, as necessary, to carry out 
the Shared Savings Program. We believe that exercising our discretion 
to waive the Federal anti-kickback statute for those arrangements that 
comply with an existing exception to the physician self-referral law 
will continue to facilitate the development of arrangements that 
present a low risk of fraud and abuse through continuing compliance 
with the requirements of the applicable physician self-referral law 
exception.
    This waiver applies until the participation agreement, including 
any renewals thereof, expires or terminates. 76 FR 68006. In the IFC, 
we solicited comments on whether it might be necessary for this waiver 
to continue for some period of time, such as 3 to 12 months, after 
expiration or termination of an ACO's participation agreement.
    Comment: Certain commenters recommended that we establish a 6-month 
tail period of protection for arrangements after expiration or 
termination of an ACO's participation agreement. One commenter stated 
that this tail period should align with the period established for 
other waivers. Other commenters urged us not to extend protection to 
arrangements protected under the compliance with the physician self-
referral law waiver after expiration or termination of the ACO's 
participation agreement, or to provide a shorter window of protection, 
such as three months.
    Response: We appreciate the comments received. We are finalizing 
our decision not to provide a tail period for the compliance with the 
physician self-referral law waiver. We are aware of no information 
suggesting that, in the

[[Page 66739]]

circumstances of an arrangement that is compliant with the physician 
self-referral law, a waiver of the Federal anti-kickback statute 
following termination or expiration of an ACO's participation agreement 
would be necessary or appropriate. We believe it is more appropriate to 
subject such arrangements to case-by-case review under the Federal 
anti-kickback statute.

G. Waiver for Patient Incentives

    Like the IFC, this final rule includes 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.
    One example of an appropriate incentive that could be protected 
under this waiver is a blood pressure cuff for a hypertensive patient 
participating in an ACO's chronic disease management program. Depending 
on the facts and circumstances, such an arrangement potentially 
implicates the Federal anti-kickback statute and the Beneficiary 
Inducements CMP, and, again depending on the facts and circumstances, 
no safe harbor or exception may be available. The waiver would not 
cover inducements in the form of items such as beauty products or 
theatre tickets not reasonably related to a beneficiary's medical care. 
We are finalizing the patient incentives waiver as set forth in the 
IFC.
    Comment: Many commenters supported the waiver for patient 
incentives, stating that it encourages preventive care and compliance 
with treatment regimes through patient engagement, which are key to 
successful patient outcomes. However, several commenters opposed the 
scope of the waiver, suggesting that it is too broad and will encourage 
behaviors that the commenters viewed as fraudulent and abusive, such as 
the provision of free gym memberships, personal training sessions, 
massages, or skin creams. One commenter advocated that ACOs should have 
the same flexibility to offer inducements that is permitted under 
current law, which the commenter believes will allow health care 
professionals not in an ACO to be on a level playing field with those 
in ACOs. Finally, some commenters urged us to limit the waiver to 
incentives provided to beneficiaries assigned to an ACO, while others 
encouraged us to apply the waiver more broadly.
    Response: We continue to believe this waiver helps ACOs foster 
patient engagement in improving quality and lowering costs for the 
Medicare program and its beneficiaries by removing any perceived 
obstacles presented by the Beneficiary Inducements CMP or Federal anti-
kickback statute while at the same time protecting beneficiaries from 
abusive arrangements. 76 FR 68007. Because beneficiary compliance with 
care management programs is critical to the success of ACOs, we believe 
ACOs should have more flexibility than what may be allowed under 
current law to develop incentives to that end, so long as the 
safeguards in this waiver are in place (e.g., a reasonable connection 
between the items or services and the medical care of the beneficiary). 
Id. We note that incentives of the type described by the commenter (gym 
memberships, personal training services, massages, and skin creams) 
should be carefully scrutinized by the ACO on a case-by-case basis for 
compliance with waiver conditions.
    As we indicated in the IFC, we are interested in promoting broad 
improvement in care coordination and quality for all beneficiaries, and 
therefore are not limiting the waiver to incentives provided to 
beneficiaries assigned to an ACO. We are mindful of the commenters' 
concerns that this waiver could encourage fraudulent and abusive 
behavior, and we will continue to monitor ACOs to ensure that the 
waiver does not lead to fraudulent and abusive arrangements that may 
harm beneficiaries or the Medicare program. As such, we are finalizing 
the patient incentives waiver without modification.
Reasonable Connection Between Incentives and Medical Care
    Comment: One commenter supported the standard in the IFC that 
requires a ``reasonable connection'' between the items or services 
provided to a beneficiary and his or her medical care, while another 
commenter requested we more specifically define this term and limit its 
applicability to items and services for preventive care only.
    Response: When we established the patient incentives waiver in the 
IFC, we required that there be a reasonable connection between the 
incentives and the medical care of the individual ``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 . . . .'' 76 FR 68007. We believe that the ``reasonable 
connection'' standard is appropriate, and we do not agree with the 
commenter who suggested we limit its applicability. The patient 
incentives waiver protects in-kind items or services, but does not 
cover financial incentives, such as waiving or reducing patient cost 
sharing amounts (e.g., copayment or deductible). 76 FR 68007. In 
addition, we note that 42 CFR 425.304(a)(1) 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/suppliers in a particular ACO. The same 
prohibition applies to gifts or other remuneration to beneficiaries as 
inducements for receiving items or services from ACO participants or 
ACO providers/suppliers. To be clear, such incentives are not covered 
by this waiver. Further, 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 the 
Beneficiary Inducements CMP; nothing in this waiver supplants or amends 
any requirement in the Shared Savings Program final rule or other 
Medicare payment or coverage rules. 76 FR 68007.
Preventive Care
    We solicited comments on whether we should define the term 
``preventive care'' for purposes of this waiver. 76 FR 68007.
    Comment: Some commenters requested that the agencies refrain from 
defining the term ``preventive care,'' because a clarification of this 
term could unnecessarily narrow the scope of the waiver. Several other 
commenters expressed concern that leaving this term undefined would 
lead to increased risks of fraud and abuse because it would allow ACOs, 
ACO participants, and ACO providers/suppliers to contend that any 
activity qualifies as ``preventive care.'' One commenter advocated that 
we define the term consistent with other statutory provisions.
    Response: We did not define preventive care in the IFC ``in order 
to provide some flexibility as care models develop in the Shared 
Savings Program and evidence-based care programs are adopted by ACOs.'' 
76 FR 68007. We are mindful of the evolving nature of clinical practice 
guidelines and recommendations for practices that are categorized as 
``preventive care.'' Accordingly, we are finalizing the policy not to 
define preventive care in order to maintain this flexibility for ACOs 
that are seeking to develop bona

[[Page 66740]]

fide patient engagement programs to maintain effective treatment 
regimes. That said, we advise parties seeking to use the waiver to 
exercise caution in ensuring that activities for which they desire 
waiver protection are reasonably considered preventive care.
Pharmaceutical Manufacturers
    Comment: A commenter opposed the exclusion of pharmaceutical 
manufacturers from protection under the patient incentives waiver, 
highlighting that these entities are particularly well situated to 
develop effective programs to educate and support patients.
    Response: The patient incentives waiver applies to incentives 
furnished by an ACO, its ACO participants, or its ACO providers/
suppliers. Pharmaceutical manufacturers do not meet the definitions of 
these terms under the Shared Savings Program regulations at 42 CFR 
425.20. We are not extending protection under this waiver to incentives 
provided by any other parties, including pharmaceutical manufacturers. 
We reiterate in this final rule our position in the IFC that no waiver 
protection is offered for ``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'' 
or ``the discount arrangement (or any arrangement for free items and 
services) between the manufacturer and the ACO, ACO participant, or ACO 
provider/supplier.'' 76 FR 68007. Based on CMS's program experience to 
date, we continue to believe that such waivers are not necessary to 
carry out the Shared Savings Program. However, the patient incentives 
waiver would cover ACOs, ACO participants, and ACO providers/suppliers 
that give beneficiaries items or services that they have received from 
manufacturers at discounted rates.
Duration of the Waiver
    We explained in the IFC that the waiver applies until the earlier 
of the expiration or termination of the ACO's participation agreement. 
We recognized that to ensure continuity of care for beneficiaries if an 
ACO's participation agreement terminates or is not renewed, we needed 
to allow a beneficiary to keep any items received during the term of 
the ACO's participation agreement pursuant to the waiver, and to 
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. 76 FR 68007. In 
the IFC, we gave three representative examples of situations in which 
it would be appropriate for a beneficiary to continue to receive a 
service: (1) A post-surgical patient receiving free home visits to 
coordinate in-home care during the recovery period; (2) a hypertensive 
patient using home telehealth monitoring of blood pressure; and (3) a 
beneficiary halfway through a normal course of smoking cessation 
treatment. We are maintaining this interpretation of the waiver in this 
final rule. Specifically, the waiver will protect any items or services 
received by a beneficiary during the term of the ACO's participation 
agreement pursuant to the waiver, and will allow a beneficiary to keep 
any items provided and continue to receive any service initiated during 
the term of the ACO's participation agreement pursuant to the waiver, 
if the item was received before, or the service was in progress when, 
the participation agreement terminated. We did not receive any comments 
regarding the duration of the patient incentives waiver.
    As we made clear previously in the IFC, nothing precludes ACOs, ACO 
participants, or ACO providers/suppliers from offering a patient an 
incentive to promote his or her clinical care if the incentive fits in 
an applicable safe harbor or exception or does 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. See Section 1128A(i)(6)(D) of 
the Act; 42 CFR 1003.101.
General Information
    In our experience interacting with stakeholders, we have received 
questions regarding whether local transportation arrangements can 
qualify as an in-kind item or service under the patient incentives 
waiver. We did not receive public comments on this issue, but we are 
taking this opportunity to clarify that nothing would preclude local 
transportation from being an in-kind item or service under the patient 
incentives waiver set forth in the IFC and this final rule. 
Accordingly, transportation provided by an ACO, ACO provider/supplier, 
or ACO participant to a beneficiary may be protected like other in-kind 
items and services, provided that all waiver conditions are met. We 
note that, under the terms of the waiver, transportation provided to a 
patient for purposes of getting to a medical appointment or to pick up 
prescriptions could be protected, but transportation to attend 
entertainment or recreational events, or to run errands unrelated to 
the medical care of the beneficiary, would not be protected. Moreover, 
because the waiver protects only in-kind incentives, patients may not 
be given cash reimbursement for transportation costs (e.g., bus or taxi 
fare or reimbursement for gasoline). Patients may be given prepaid 
vouchers redeemable solely for transportation services pursuant to a 
contractual arrangement between the ACO, the ACO participant, or the 
ACO provider/supplier and the transportation provider.

H. Additional Policy Considerations

    We are finalizing the waivers in this final rule under section 
1899(f) of the Act to foster the success of the Shared Savings Program, 
the purpose of which is 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. As we 
stated in the IFC:

    The waivers adopted in [the 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.

76 FR 68007.
    The waivers in this final rule emanate from our continued 
expectation that ``ACOs and their constituent parts will [continue to] 
act in compliance with program rules and in the best interests of 
patients and the Medicare program, including the Shared Savings 
Program.'' 76 FR 68007. Further, it is our expectation that the waivers 
promulgated in this final rule have been and will continue to be used 
for their intended purposes to carry out the Shared Savings Program. 
Id. at 68008. As we have made clear in the IFC and this final rule, the 
waivers are designed to promote a high degree of certainty, innovation, 
and variation in the continuing development and operation of ACOs to 
improve quality of care, as

[[Page 66741]]

well as economy and efficiency in the Medicare program.
    We recognize that, to varying degrees, all Federal health care 
programs are susceptible to fraud and abuse. 76 FR 68007-68008. To be 
clear, the waivers in this final rule ``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.'' Id. at 68008. As we made clear in the IFC, we will continue to 
monitor ACOs and the Shared Savings Program for fraud and abuse, 
including but not limited to: (1) Billing for medically unnecessary or 
upcoded services; (2) stinting on medically necessary services; (3) 
submitting false or fraudulent data; or (4) providing worthless or 
substandard care. If these or other problematic practices are found, we 
have a number of tools to address the problem and, where necessary, we 
will use these tools to protect the interests of beneficiaries and the 
Medicare program. CMS and OIG are monitoring the Shared Savings Program 
and will continue to do so. To date, information available to us 
suggests that the waivers are adequately protecting beneficiaries and 
Federal health care programs while enabling care coordination 
arrangements under the Shared Savings Program. In this final rule, we 
are not narrowing the waivers. We will continue to monitor the 
development of ACOs and shared savings arrangements and may consider 
additional rulemaking if warranted.
    Comment: Some commenters supported the statement in the IFC that we 
would narrow the waivers. One commenter requested that CMS, OIG, and 
other agencies vigilantly monitor ACOs to ensure compliance with all 
waiver provisions and the objectives of the Shared Savings Program. 
Some commenters requested that we narrow the waivers if monitoring 
reveals any undesirable result or makes clear that the waivers are 
shielding fraudulent or abusive arrangements. One commenter requested 
that CMS and OIG narrow the waivers to prevent specific abusive 
conduct, such as arrangements with physician-owned distributorships.
    Other commenters strongly opposed any narrowing of the waivers by 
the agencies, advocating that the waivers in the IFC appropriately 
recognize the benefits of shared savings arrangements while minimizing 
fraud and abuse risks. Many of these commenters expressed concern that 
CMS and OIG called into question the permanency of these waivers by 
suggesting the waivers could be narrowed, and argued that narrowing the 
waivers would not align with the agencies' goals to provide 
flexibility, certainty, and latitude to ACOs, and to allow for 
innovation in the Shared Savings Program. Many of the commenters who 
opposed narrowing the waivers urged that any material change to the 
waivers in the IFC would require formal notice-and-comment rulemaking. 
If the agencies elect to pursue this notice-and-comment rulemaking, one 
commenter requested that the narrowed waivers apply only to 
arrangements that become effective after any final rulemaking.
    Response: In the IFC, we stated that ``[w]e plan to narrow the 
waivers . . . unless information gathered through monitoring or other 
means suggests that the waivers . . . are adequately protecting the 
Medicare program and beneficiaries from the types of harms associated 
with referral payments or payments to reduce or limit services.'' 76 FR 
68008. As we explained above and in the IFC, we will continue to gather 
information through monitoring and other means to assess whether the 
waivers are having unintended effects, such as shielding abusive 
arrangements.
    It remains our priority to ensure that waivers necessary to carry 
out the Shared Savings Program protect the Medicare program and 
beneficiaries from the harms caused by fraudulent or abusive conduct. 
Should we identify specific areas of fraud or abuse resulting from 
arrangements covered by the waivers, or if we determine that the risks 
of fraud and abuse associated with waiving our laws for certain 
arrangements outweigh the benefits associated with the Shared Savings 
Program, we may propose to revise these waivers or take other 
appropriate action to address our concerns. We will continue to monitor 
whether certain arrangements that may be protected under the waivers 
raise concerns, such as overutilization, increased costs to Federal 
health care programs and beneficiaries, and substandard or poor quality 
of care. Any needed modifications of the waivers in this final rule 
would be implemented through notice-and-comment rulemaking.
    Although we are not narrowing the waivers in this final rule, we 
underscore that the waivers have never been intended to, and will not, 
cover arrangements unless all criteria for the applicable waiver are 
met. By way of example only, an ACO that fails to have its governing 
body properly make and authorize a bona fide determination that an 
arrangement is reasonably related to the purposes of the Shared Savings 
Program, which is required for the pre-participation and participation 
waivers, would not have the protection of the waiver unless and until 
the ACO meets the requirements in this final rule. The waiver protects 
an arrangement only when all criteria have been met; there is no 
retroactive protection. The arrangement described above would be 
subject to ordinary review for compliance with fraud and abuse laws up 
until the point of having documentation of the authorization by the 
ACO's governing body, provided that all other waiver conditions are 
also met.
    Comment: Several commenters suggested that our waivers conflict 
with existing state laws that would prohibit certain entities from 
participating in ACOs. These commenters asked us to modify the waivers 
to preempt conflicting state laws and promote participation in ACOs.
    Response: We do not have the authority to preempt state law.
    Comment: One commenter requested that we codify the waivers issued 
in this final rule in the Code of Federal Regulations in order to 
ensure prospective participants of their permanency and provide a 
degree of certainty for ACOs developing innovative arrangements.
    Response: We intend the waivers in this final rule, as with the 
waivers in the IFC, to have binding legal effect notwithstanding the 
absence of codified regulation text. We note that binding waivers are 
generally not promulgated through rulemaking (e.g., waivers of Medicare 
and Medicaid program requirements promulgated pursuant to section 
402(b), 1115, and 1115A of the Act). Although these fraud and abuse 
waivers have been promulgated through rulemaking, we are not codifying 
them in the Code of Federal Regulations (CFR). First, waivers published 
in the Federal Register are typically not codified in the CFR. The 
Office of the Federal Register recognizes that waivers of agency rules 
that are generally applicable need not have regulatory text or amend 
the CFR. Second, we believe that the waivers are more easily accessible 
to the public when published in a single Federal Register document made 
available online through the Government Printing Office, OIG, and CMS 
Web sites. Because these waivers cover multiple legal authorities 
administered by two different agencies, they might be codified in 
several different places in the CFR. For ease of reference, the entire 
set of waivers and applicable requirements are set forth in section IV 
of this final rule, and we will continue to make the waivers available 
on the CMS and OIG Web sites.

[[Page 66742]]

Moreover, publication in a single uncodified document ensures that the 
waivers, if modified, remain consistent over time and across relevant 
laws.
    Finally, we are making a technical correction to the waiver text 
from section IV of the IFC by replacing ``Physician Self-Referral Law'' 
with ``physician self-referral law.''

IV. Provisions of the Final Rule: 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.
    As used in the pre-participation waiver, home health supplier means 
a provider, supplier, or other entity that is primarily engaged in 
furnishing ``home health services,'' as that term is defined in section 
1861(m) of the Act.
    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 
arrangements for 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.

1. 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) 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 must 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 the 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

[[Page 66743]]

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 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.

2. ACO Participation Waiver

    Pursuant to section 1899(f) of the Act, section 1877(a) of the Act 
(relating to the physician self-referral law) 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:
    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 must 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) 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.

4. Compliance With the Physician Self-Referral Law Waiver

    Pursuant to section 1899(f) of the Act, 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.

[[Page 66744]]

V. 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.
    We find that a delayed effective date for this final rule would be 
contrary to the public interest. The waivers published in the IFC have 
been in place for approximately four years, and we understand that 
there may be arrangements in place or under development for which an 
ACO may be seeking to use these waivers. Delaying the effective date of 
this final rule would be contrary to the public interest because it 
would cause a lapse in the waivers between the expiration date of the 
IFC and the effective date of this final rule, and ACOs have relied, 
and continue to rely, on these waivers to develop and maintain 
arrangements that further the quality, economy, and efficiency goals of 
the Shared Savings Program.

VI. Collection of Information Requirements

    While this final rule does include information collection 
requirements as defined in the Paperwork Reduction Act of 1995 (44 
U.S.C. Chapter 35 et seq., 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 final rule need not be 
reviewed by OMB.

VII. 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 
(January 18, 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).
    We believe that this final rule does not reach the economic 
threshold for being considered economically significant and, thus, is 
not considered a major rule. This final rule would allow ACOs, ACO 
participants, and ACO providers/suppliers to enter into certain 
beneficial arrangements. These waivers of certain fraud and abuse laws 
are critical to providing stakeholders with flexibility necessary for 
innovative care redesign. ACOs, ACO participants, and ACO providers/
suppliers would be allowed to seek to comply with one or more of the 
five waivers so that they would have assurance that participating in 
certain arrangements would not subject them to liability under the 
physician self-referral law, Federal anti-kickback statute, or the 
Beneficiary Inducements CMP.
    CMS reports that there are over 400 ACOs currently participating in 
the Shared Savings Program. CMS anticipates that the majority of ACOs 
will renew their participation and the number of ACOs will continue to 
grow as new organizations apply every year. From the comments received 
on the IFC, we understand the waivers have numerous important benefits 
to the operation and success of the Shared Savings Program. Namely, 
they remove legal and regulatory barriers that can impede care 
coordination in furtherance of the Shared Savings Program, and they 
reduce burden on ACOs, ACO participants, and ACO providers/suppliers.
    Although these waivers are critical, we cannot quantify the number 
of arrangements among participants and others, making assessing the 
costs and benefits of these waivers difficult. First, ACOs, ACO 
participants, and ACO providers/suppliers are not required to apply to 
CMS or OIG for an individualized waiver, which impedes an accurate 
calculation of the number of ACOs, ACO participants, and ACO providers/
suppliers that use these waivers. In addition, the Department does not 
routinely collect data regarding the number of arrangements that may 
qualify for waiver protection. For this reason, we cannot calculate the 
number of arrangements that are entered into or will be entered into by 
those ACOs, ACO participants, and ACO providers/suppliers that use 
these waivers. Further, we did not receive comments from stakeholders 
regarding the costs associated with using these waivers. Although there 
could be some burden associated with the conduct covered by these 
waivers, such as record keeping and other documentation needs, we 
believe the time, effort, and financial resources necessary to 
implement and comply with the conditions of the waivers would typically 
be incurred by ACOs, ACO participants, and ACO providers/suppliers 
during the normal course of participation in the Shared Savings 
Program. Moreover, compliance with many of the conditions of the 
waivers can be achieved by activities ACOs, ACO participants, and ACO 
providers/suppliers undertake to comply with the Shared Savings Program 
rules. We therefore believe any incidental costs that may be 
attributable solely to the waivers would be minimal. Finally, waivers 
may be used in a variety of contexts for a wide range of arrangements, 
so we cannot accurately predict the economic impact of any individual 
waiver or the use of the waivers as a whole. For the above reasons, we 
cannot monetize the costs of using these waivers.
    For all these reasons, we believe that the aggregate economic 
impact of the waivers would be minimal and we do not expect an effect 
on the economy or on Federal or State expenditures greater than $100 
million.
    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 
$7.5 million to $38.5 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 final rule 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)

[[Page 66745]]

of the Act because we have determined, and the Secretary certifies, 
that this final rule will not have a significant impact on the 
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 2015, that 
threshold is approximately $144 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 OMB.
    For the reasons set forth in this preamble, the Centers for 
Medicare & Medicaid Services and the Office of the Inspector General 
are implementing this final rule under the authority of section 1899 of 
the Act.

    Authority:  Section 1899(f) of the Act.

    Dated: October 7, 2015.
Andrew M. Slavitt,
Acting Administrator, Centers for Medicare & Medicaid Services.
    Dated: October 7, 2015.
Daniel R. Levinson,
Inspector General, Department of Health and Human Services.
    Approved: October 22, 2015.
Sylvia Burwell,
Secretary, Department of Health and Human Services.
[FR Doc. 2015-27599 Filed 10-28-15; 8:45 am]
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