HLT-41-14-00023-P Accountable Care Organizations (ACOs)

10/15/14 N.Y. St. Reg. HLT-41-14-00023-P

NEW YORK STATE REGISTER

VOLUME XXXVI, ISSUE 41

October 15, 2014

RULE MAKING ACTIVITIES

DEPARTMENT OF HEALTH

PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. HLT-41-14-00023-P

Accountable Care Organizations (ACOs)

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following proposed rule:

Proposed Action:

Addition of Part 1003; and amendment of Subpart 98-1 of Title 10 NYCRR.

Statutory authority:

Public Health Law, art. 29-E and section 4403(2)

Subject:

Accountable Care Organizations (ACOs).

Purpose:

To promote ACOs and establish a certification process to regulate the use of ACOs to deliver an array of health care services.

Substance of proposed rule (Full text is posted at the following State website:www.health.ny.gov):

These proposed regulations would: (1) add a new Part 1003 to 10 NYCRR, entitled “Accountable Care Organizations,” to establish standards for the issuance of certificates of authority by the Commissioner of Health (Commissioner) to Accountable Care Organizations (ACOs); and (2) amend Part 98 of 10 NYCRR, entitled “Managed Care Organizations,” to make conforming changes to provisions related to Independent Practice Associations.

Part 1003 (Accountable Care Organizations)

Section 1003.1 (Applicability) provides that Part 1003 applies to persons or entities seeking certification as an ACO. The section further specifies that no application is required for a Medicare-only ACO whose contract with CMS does not permit shared losses to exceed 10 percent. This applies to the ACOs approved by CMS to participate in the Medicare Shared Savings Program. Such a Medicare-only ACO may receive certification through an expedited process and will be subject only to §§ 1003.6 (Legal Structure and Responsibilities), 1003.11 (Payment and Third Party Payers), 1003.12 (Termination), 1003.13 (Reporting) and 1003.14 (Legal Protections) of Part 1003. Similarly, a Medicare-only ACO whose contract with CMS allows shared losses to exceed 10 percent may receive certification through an expedited process and will be subject to the aforementioned provisions as well as § 1003.5 (Medicare-Only ACOs Sharing Losses).

Section 1003.2 (Definitions) sets forth definitions for certain terms. In particular, an “ACO” is defined as “an organization comprised of clinically integrated independent health care providers that work together to provide, manage, and coordinate health care (including primary care) for a defined population; with a mechanism for shared governance; the ability to negotiate, receive, and distribute payments; and to be accountable for the quality, cost, and delivery of health care to the ACO's patients and has been issued a certificate of authority” by the Commissioner.

Section 1003.3 (Certificate of Authority) establishes the criteria that must be satisfied for the Commissioner to approve a certificate of authority. Among other things, the ACO must demonstrate the capability to provide, manage and coordinate health care for a defined population, and its operation must include the participation of clinically integrated health care providers and administrative support organizations that are accountable for the quality, cost and delivery of health care to the individuals it serves.

Section 1003.4 (Application Requirements) provides that a person or entity seeking to obtain a certificate of authority must submit an application on forms prescribed by the Commissioner.

Section 1003.5 (Medicare-Only ACOs Sharing Losses) applies only to a Medicare-only ACO which may have shared losses that exceed ten percent of the benchmark established under its contract with CMS (meaning ACOs that participate in the Pioneer Program). The section allows such Medicare-only ACOs the ability to share losses without having to obtain an insurance license, subject to meeting several stringent financial conditions.

Section 1003.6 (Legal Structure and Responsibilities) sets forth requirements pertaining to the legal structure of an ACO, and provides that an approved ACO must provide, manage and coordinate health care for a defined population; be accountable for quality, cost, and delivery of health care to ACO patients; negotiate, receive and distribute any shared savings or losses; and establish, report and ensure provider compliance with health care criteria including quality performance standards. The section also requires that providers that participate in an ACO provide notification of such to their patients.

Section 1003.7 (Governing Body) requires that the governing body of an ACO have a transparent governing process and be responsible for the oversight and strategic direction of the ACO, holding those responsible for management of the ACO accountable for the ACO’s activities.

Section 1003.8 (Leadership and Management) provides that an ACO must have a leadership and management structure that supports the delivery of an array of health care services for the purpose of improving quality of care, health outcomes and coordination and accountability of services provided to patients.

Section 1003.9 (Quality Management and Improvement Program) requires ACOs to develop and implement a quality management and improvement program that identifies, evaluates and resolves quality related issues.

Section 1003.10 (Quality Performance Standards and Reporting) provides that the Department of Health (“Department”) shall collect from ACOs data related to quality assurance reporting requirements, which will be developed by the Department in conjunction with the National Committee on Quality Assurance. The ACO will be afforded the opportunity to review the information and correct any errors, and then the information will be posted on the Department’s public website. The section also provides that the ACO must demonstrate quality performance equal to or above statewide and/or national benchmarks.

Section 1003.11 (Payment and Third Party Health Care Payers) sets forth requirements for ACOs that enter into payment arrangements with a third party health care payer. In particular, the section clarifies that unless an ACO is licensed as an insurer under the Insurance Law or certified under Article 44 of the Public Health Law, the ACO is prohibited from engaging in any activity that would constitute the business of insurance under Insurance Law § 1101, except as provided in § 1003.11(b)(1) and (2).

Section 1003.12 (Termination) specifies that the Commissioner may limit, suspend or terminate the certificate of authority of an ACO after written notice and an opportunity for review and/or hearing. The section provides, among other things, that the failure to adhere to established quality measures or comply with corrective action plans related to poor performance on established quality of care standards constitute grounds for termination.

Section 1003.13 (Reporting) requires ACOs to submit data to the Commissioner annually and as otherwise requested. The data requested would include information about ACO participants and enrollees, utilization of services, complaints and grievances, quality metrics and shared savings or losses.

Section 1003.14 (Legal Protections; State Action Immunity) reflects the statutory intent to promote ACOs by excluding them from the application of certain provisions that might otherwise inhibit such arrangements:

• ACOs certified pursuant to Part 1003 shall not be considered to be in violation of Article 22 of the General Business Law relating to contracts or agreement in restraint of trade, if the ACO’s actions qualify for the safety zone, subject to the antitrust analysis set forth in the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program issued by the Federal Trade Commission and U.S. Department of Justice and published in the Federal Register on October 28, 2011. (§ 1003.14(a));

• As part of its application for a certificate of authority under this part, an ACO may request that the State provide state action immunity from federal and state antitrust laws;

• ACOs certified pursuant to Part 1003 shall not be considered to be in violation of Education Law Article 131-A relating to fee splitting when certain criteria are satisfied (§ 1003.14(b));

• Health care providers shall not be considered to be in violation of Title 2-D of Article 2 of the Public Health Law when making referrals to other health care practitioners that are part of their ACO activities (§ 1003.14(c));

• Medicaid providers that enter into arrangements with an ACO, one or more of its ACO participants or its ACO providers/suppliers, or a combination thereof shall not be in violation of Social Services Law (“SSL”) § 366-d (§ 1003.14(d)); and

• The provision of health care services by an ACO shall not be considered the practice of a profession under Education Law Title 8 (§ 1003.14(f)).

Part 98 of NYCRR (Managed Care Organizations)

Section 98-1.2(w) is amended to expand the definition of an IPA to allow certification as an ACO pursuant to PHL Article 29-E and Part 1003 and provide that if so certified, the IPA may contract with third party health care payers.

Section 98-1.5(b)(vii)(f) is amended to provide that an IPA may seek certification as an ACO pursuant to PHL Article 29-E and Part 1003 and, if so certified, must comply with all the requirements of Part 1003, including but not limited to the requirements of § 1003.6(e) and (g). Upon receiving such certification, an IPA acting as an ACO may contract with third party health care payers. § 98-1.5(b)(vii)(f).

Section 98-1.5(b)(vii)(g) is added to provide that an IPA may include any and all necessary powers and purposes as authorized, allowed or required under an approved Delivery System Reform Incentive Payment (“DSRIP”) Program.

A copy of the full text of the regulatory proposal is available on the Department of Health website (www.health.ny.gov).

Text of proposed rule and any required statements and analyses may be obtained from:

Katherine Ceroalo, DOH, Bureau of House Counsel, Reg. Affairs Unit, Room 2438, ESP Tower Building, Albany, NY 12237, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Same as above.

Public comment will be received until:

45 days after publication of this notice.

Regulatory Impact Statement

Statutory Authority:

Article 29-E of the Public Health Law (“PHL”) requires the Commissioner to issue regulations pertaining to the certification of Accountable Care Organizations.

Legislative Objectives:

An Accountable Care Organization (“ACO”) is a voluntary organization comprised of clinically integrated independent health care providers that work together to provide, manage, and coordinate health care for a defined population, has a mechanism for shared governance and the ability to negotiate, receive, and distribute payments, and is accountable for the quality, cost, and delivery of health care to the ACO’s patients.

In New York, based upon a recommendation of the Medicaid Redesign Team (“MRT”), the 2011-12 budget (Chapter 59 of the Laws of 2011, Part H, § 66) added new PHL Article 29-E to require the Commissioner of Health (“Commissioner”) to establish a program governing the approval of ACOs. Initially, the law was designed as a demonstration program to test the ability of ACOs to deliver an array of health care services for the purpose of improving the quality, coordination and accountability of services provided to patients. The Commissioner was authorized to issue certificates of authority to up to seven ACOs prior to December 31, 2015.

PHL Article 29-E was subsequently amended (Chapter 461 of the Laws of 2012) to make the program permanent and authorize an unlimited number of certificates prior to December 31, 2016. As amended, PHL Article 29-E reflects the legislative finding that the development of ACOs will “reduce health care costs, promote effective allocation of health care resources, and enhance the quality and accessibility of health care.” PHL § 2999-n.

Current Requirements:

Currently, there are no state regulations specific to ACOs in New York.

Needs and Benefits:

The proposed regulations advance the objectives of PHL Article 29-E by establishing requirements for certificates of authority in conjunction with the statutory requirements, including those pertaining to governance, quality standards and reporting requirements. Among other things, the statute authorizes the Commissioner to issue a certificate of authority to a “Medicare-only ACO” that documents its approval by the federal Centers for Medicare and Medicaid Services (CMS) to operate as an ACO under Medicare, without the need to meet all of the criteria applicable to ACOs receiving other sources of payment. The regulations are consistent with this objective. Specifically, no application is required for a Medicare-only ACO whose contract with CMS does not permit shared losses to exceed 10 percent (for ACOs participating in the federal Medicare Shared Savings Program) (§ 1003.1(b)) or a Medicare-only ACO whose contract with CMS allows shared losses to exceed 10 percent (for ACOs participating in the federal Pioneer Program) (§ 1003.1(c)). These ACOs may request a certificate of authority from the Department through an expedited process which requires submission of documentation establishing CMS approval.

Additionally, as required by PHL Article 29-E, the regulations establish the criteria that must be satisfied for ACOs to obtain and maintain certificates of authority and address matters such as: (1) the governance, leadership and management structure of the ACO; (2) the definition of the population proposed to be served by the ACO; (3) the character, competence and fiscal responsibility and soundness of an ACO and its principals, if deemed appropriate by the Department; (4) the adequacy of the ACO’s network of participating health care providers; (5) mechanisms by which the ACO will provide, manage, and coordinate quality health care for its patients; (6) mechanisms by which the ACO will receive and distribute payments to its participating providers; (7) mechanisms for quality assurance and grievance procedures; (8) mechanisms that promote evidence-based health care, patient engagement, coordination of care and electronic health records; (9) performance standards and measures to assess the quality and utilization of care provided by the ACO; and (10) the protection of patient rights. As required by the statute, to the extent practical, the regulations are consistent with CMS regulations for ACOs under the Medicare program, which were issued in 2011. See 76 FR 67802 (http://www.gpo.gov/fdsys/pkg/FR-2011-11-02/pdf/2011-27461.pdf).

Further, the regulations include provisions consistent with the legislative objective of promoting the development of ACOs. Article 29-E states that the provision of health care services by an ACO shall not be considered the practice of a profession under Title 8 of the Education Law, and identifies several “safe harbors” that exempt ACOs from the application of existing statutes pertaining to the restraint of trade, fee splitting and referrals. In particular, PHL Article 29-E expressly sets forth the State’s intent to supplant competition with active state supervision in order to provide state action immunity under state and federal antitrust laws, where necessary to accomplish the statutory purposes. The regulations establish a process for such active state supervision, and further permit an ACO to proceed under the analysis set forth in the Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program, issued by the Federal Trade Commission (FTC) and the Department of Justice (DOJ). See 76 FR 67-26 (October 28, 2011) (http://www.gpo.gov/fdsys/pkg/FR-2011-10-28/pdf/2011-27944.pdf).

As contemplated by Article 29-E, the proposed regulations also include provisions pertaining to payment methodologies with third party payers. In general, if an entity bears insurance risk, it is “doing the business of insurance” and must either become licensed under the Insurance Law or, in the event of a managed care organization (“MCO”), certified under PHL Article 44, or it must meet the criteria for an exemption from licensure. Requiring licensure or certification ensures that the entity meets financial requirements such as maintaining adequate reserves to pay claims and complies with various consumer protections. DFS Regulation 164, found within Part 101 of Title 11 of the NYCRR, permits insurers and MCOs to transfer risk to a provider organization that is not licensed or certified so long as the provider organization meets certain financial requirements and consumer protections and the ultimate risk is borne by the insurer or MCO.

In keeping with these general principles, the proposed regulations provide that an ACO may not enter into any arrangement that involves risk sharing or otherwise constitutes the business of insurance, except in specific circumstances. The ACO may be or become certified as a MCO pursuant to PHL Article 44, authorized to write accident and health insurance as an insurer pursuant to the Insurance Law, or licensed as a corporation pursuant to Insurance Law Article 43. Alternatively, the ACO may contract with an entity that is certified, authorized or licensed under such statutory provisions.

The proposed regulations also permit an Independent Practice Association (“IPA”) to apply for and receive a certificate of authority as an ACO. IPAs, which are permitted to enter into arrangements with payers under Regulation 164, contract with providers of medical or medically related services or other IPAs and then contract with one or more MCOs and/or workers’ compensation preferred provider organizations to make the services of such providers available to the MCOs’ enrollees and/or to injured workers participating in a workers’ compensation preferred provider arrangement. In addition, the regulations are amended to permit IPAs to participate as Performing Provider Systems under New York’s Delivery System Reform Incentive Payment (DSRIP) Program.

Finally, the proposed regulations also provide that a Medicare-only ACO permitted to share losses greater than 10 percent pursuant to its contract with CMS can do so without having to become a licensed insurer under the Insurance Law, provided that several stringent financial conditions are satisfied. DFS will amend Regulation 164 to include ACOs within the types of providers that may enter into such arrangements.

As required by Article 29-E, in developing these regulations, the Commissioner consulted with the Superintendent of Financial Services, the Attorney General and State Education Department, health care providers, third-party health care payers, patient advocates, and other appropriate parties.

COSTS:

Costs to Private Regulated Parties:

ACOs are not required to obtain certificates of authority. Therefore, the proposed regulations do not create any mandatory burdens or costs to regulated parties. Applicants may incur administrative costs associated with applying for or maintaining a certificate of authority, such as preparing the application or complying with periodic reporting requirements. However, both the ACA and Article 29-E anticipated that the utilization of ACOs will produce a substantial reduction in health care costs. For example, CMS reports that in 2012 the Medicare program realized $87 million in gross spending savings with direct Medicare savings of $33 million. CMS also reports that 70,000 potential hospital inpatient admissions were avoided and all ACOs reported they successfully met quality benchmarks.

Costs to Local Government:

The proposed regulations do not impose any costs on local government, except to the extent that a local government operates a provider that participates in an ACO that chooses to seek a certificate of authority. In such cases, the analysis set forth above regarding costs to private regulated parties applies.

Costs to the Department of Health:

Certifying and monitoring ACOs may result in minimal additional costs to the Department, which will be managed within existing resources.

Costs to Other State Agencies:

The proposed regulations will not result in any costs to other state agencies.

Local Government Mandates:

The proposed regulations do not impose any new programs, services, duties or responsibilities upon any county, city, town, village, school district, fire district or other special district.

Paperwork:

Under the proposed regulations, paperwork is required for the submission of ACO applications and for annual data submissions by the ACOs. The regulations attempt to minimize administrative burdens by providing that various items need be submitted only upon request. In addition, the electronic submission of applications and reports will minimize or eliminate costs for printing and mailing.

Duplication:

There are no relevant State regulations which duplicate, overlap or conflict with the proposed regulations.

Alternatives:

There are no alternatives to the proposed regulations. Article 29-E requires the Department to issue regulations to implement the statute for the purpose of establishing a program for the certification of ACOs.

Federal Standards:

The proposed regulations do not duplicate or conflict with any federal regulations. They comply with the Article 29-E requirement that the regulations be consistent, to the extent practical, with the federal Medicare regulations governing ACOs.

Compliance Schedule:

The regulations will be effective upon publication of a Notice of Adoption in the New York State Register.

Regulatory Flexibility Analysis

Effect of Rule:

The proposed regulations are not expected to have an adverse impact on local governments or small businesses. Under the rule, health care providers and other entities that may participate in an ACO include entities licensed or certified under PHL Articles 28 or 36 or Articles 16, 31 or 32 of the Mental Hygiene Law, a health care practitioner licensed or certified under Title 8 of the Education Law or a combination of such practitioners, and other entities that provide technical assistance, information systems and services to health care providers and patients participating in the ACO. This may include providers operated by local governments or entities that qualify as small businesses.

However, pursuit of a certificate of authority is optional. Moreover, both the federal ACA and PHL Article 29-E anticipate that ACOs have the potential to reduce unnecessary utilization of health care services among patients served by ACOs, leading to overall savings in the health care system. For example, CMS reported that in 2012 the Medicare program realized $87 million in gross spending savings with direct Medicare savings of $33 million. CMS also has reported that 70,000 potential hospital inpatient admissions were avoided and all ACOs reported they successfully met quality benchmarks.

Compliance Requirements:

To obtain a certificate of authority under the proposed regulations, a prospective ACO must submit an application that demonstrates its ability to satisfy certain standards pertaining to legal structure, governance, leadership, management, quality management and improvement, quality performance standards, payment and shared savings, third party payer contracts and reporting.

Cure Period:

Chapter 524 of the Laws of 2011 requires agencies to include a “cure period” or other opportunity for ameliorative action to prevent the imposition of penalties on a party subject to enforcement when developing a regulation or explain in the Regulatory Flexibility Analysis why one is not included. As these proposed regulations do not create a new penalty or sanction, no cure period is necessary.

Professional Services:

Pursuit of a certificate of authority is optional. Some ACOs that elect to pursue a certificate of authority may decide to retain professional services, such as accounting services, to help carry out the functions required under the proposed regulations, while others may find it sufficient to utilize existing staff for such purposes.

Compliance Costs:

Pursuit of a certificate of authority is optional but, as anticipated by Article 29-E, ACOs are expected to result in savings which should ultimately exceed any costs required to comply with the standards outlined in the proposed regulations.

Economic and Technological Feasibility:

This proposal is economically and technically feasible. In particular, pursuit of a certificate of authority is optional. Some ACOs that elect to pursue a certificate of authority may find it necessary to retain additional personnel or professional services to help carry out the functions required under the rule, while others may find it sufficient to utilize existing staff for such purposes.

Minimizing Adverse Impact:

The proposed regulations are consistent with PHL Article 29-E and its directive to closely follow the federal CMS ACO regulations. Where possible, efforts were made to streamline the administrative processes created by the rule. For example, the regulations require that reports, organizational charts, and other documentation must be made available to the Department “upon request,” rather than requiring that they be routinely submitted with all ACO applications. In addition, all documents are to be submitted and processed electronically.

Small Business and Local Government Participation:

The enactment of PHL Article 29-E, which requires the Department to adopt regulations establishing a process for issuing certificates of authority to ACOs, placed entities including local governments and small businesses on notice that such regulations would be forthcoming. Development of the proposed regulations included input from a variety of organizations representing health care providers and other stakeholders.

Rural Area Flexibility Analysis

Types and Numbers of Rural Areas:

Rural areas are defined as counties with a population less than 200,000 and, for counties with a population greater than 200,000, includes towns with population densities of 150 persons or less per square mile. The following 44 counties have a population less than 200,000:

Allegany	Hamilton	Schenectady
Cattaraugus	Herkimer	Schoharie
Cayuga	Jefferson	Schuyler
Chautauqua	Lewis	Seneca
Chemung	Livingston	Steuben
Chenango	Madison	Sullivan
Clinton	Montgomery	Tioga
Columbia	Ontario	Tompkins
Cortland	Orleans	Ulster
Delaware	Oswego	Warren
Essex	Otsego	Washington
Franklin	Putnam	Wayne
Fulton	Rensselaer	Wyoming
Genesee	St. Lawrence	Yates
Greene	Saratoga

The following 9 counties have certain townships with population densities of 150 persons or less per square mile:

Albany	Erie	Oneida
Broome	Monroe	Onondaga
Dutchess	Niagara	Orange

There are 47 general hospitals, approximately 90 diagnostic and treatment centers, 159 nursing homes, and 92 certified home health agencies in rural areas. There are also other providers such as physician practices, behavioral health providers and organizations in rural areas that provide technical assistance that may opt to organize or otherwise participate in an ACO. These entities and organizations will not be affected differently than those in non-rural areas.

Reporting, Recordkeeping, Other Compliance Requirements and Professional Services:

Pursuit of a certificate of authority is optional. The proposed regulations require an ACO or a prospective ACO to submit information to the Department as part of an initial application for a certificate of authority and requires an ACO that has been issued a certificate of authority to report information to the Department and maintain certain documentation in order to maintain its certificate of authority. Some ACOs that elect to pursue a certificate of authority may decide to retain professional services, such as accounting services, to help carry out the functions required under the proposed regulations, while others may find it sufficient to utilize existing staff for such purposes. The proposed regulations do not impose any obligations that are different for ACOs in rural areas than those in other areas.

Costs:

While an ACO may incur some administrative costs associated with the formation of the ACO, the federal ACA and PHL Article 29-E anticipate that ACOs have the potential to reduce unnecessary utilization of health care services among patients served by ACOs, leading to overall savings in the health care system. As an example, CMS reported that in 2012 the Medicare program realized $87 million in gross spending savings with direct Medicare savings of $33 million. CMS also has report that 70,000 potential hospital inpatient admissions were avoided and all ACOs reported they successfully met quality benchmarks.

Minimizing Adverse Impact:

The proposed regulations are consistent with PHL Article 29-E and its directive to closely follow the federal CMS ACO regulations. Where possible, efforts were made to streamline the administrative processes created by the rule. For example, the regulations require that reports, organizational charts, and other documentation must be made available to the Department “upon request,” rather than requiring that they be routinely submitted with all ACO applications. In addition, all documents are to be submitted and processed electronically.

Rural Area Participation:

The enactment of PHL Article 29-E, which requires the Department to adopt regulations establishing a process for issuing certificates of authority to ACOs, placed entities including prospective ACOs on notice that such regulations would be forthcoming. Development of these regulations included input from a variety of organizations representing health care providers and other stakeholders, including those located in rural areas.

Job Impact Statement

Nature of Impact:

No job impact statement is required pursuant to section 201-a(2)(a) of the State Administrative Procedure Act. No adverse impact on jobs and employment opportunities is expected as a result of these proposed regulations.