Health Plans Jump Into The Mobile Health (mHealth) Market - How Much Will Providers Have To Pay?

Health care payors (plans, insurers) are emerging quickly as one of the dominant players in the mobile health (mHealth) marketplace.  Apps to exchange information with patients regarding appointment reminders, to coordinated care among various providers for diabetes and other conditions, and to provide patients with personal health records (PHRs) are becoming all the rage.  Payors command a unique place in the healthcare industry; not only do they receive and distribute the healthcare dollars but they maintain deep files of information on the consumers whose care they pay for.  With their reserves of funds, payors are also uniquely positioned to invest in the use of mobile health in the delivery of health care.  They can develop and distribute apps from basic-to-sophisticated, from those that merely provide good diet tips to beneficiaries, to those that collect and transmit critical health data to physicians and other providers.  They can also incentivize beneficiaries to adopt mHealth solutions by, for instance, offering to reduce premiums in exchange for compliant behavior. Further, the employers who pay for health coverage may incentivize, or penalize, employees that do not utilize mHealth tools offered by payors.   

As the mHealth field develops, it will be interesting to see who pays for it.  In the private healthcare market (i.e., separate from Medicare and Medicaid), the costs for many mHealth services may be picked up by the payors, but the payors may also seek to shift the costs to the providers by, for instance, requiring participation in mHealth initiatives under the provider-payor contract and payor policies. Suddenly the hospital or physician will have to use an app to collect data from the patient on his or her heart condition, whether or not the provider currently has the right platform for the app, the correct privacy and security measures in place, etc.  The advent of health insurance exchanges (HIEs), health information organizations (HIOs), provider-maintained electronic health records (EHRs) and accountable care organizations (ACOs) under the Affordable Care Act may also change the marketplace, and how costs are distributed.  If you’re a provider, review you payor-provider contract and start tracking the costs of mHealth and other initiatives imposed by payors, to prepare for a wireless health care future. 


Negative IRS Decision as to Tax Treatment of ACOs

In a Private Letter Ruling (“PLR”), issued July 5, 2011, the Internal Revenue Service (“IRS”) reviewed an application for recognition of exemption from Federal income tax under IRC Section 501(c)(3) and denied tax-exempt standing to a hospital controlled organization formed with its medical staff members to participate in provider networks and contract with commercial payors to provide hospital and medical staff services.

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IRS Releases Fact Sheet for Tax-Exempt Hospitals Participating in ACOs

On October 20, 2011, the federal government released final rules for the formation and operation of accountable care organizations (ACOs) under the Medicare Shared Savings Program (MSSP).  ACOs represent a key component of the Patient Protection and Affordable Care Act, the healthcare reform legislation enacted in 2010.  In connection with the release of the final rules by the Centers for Medicare and Medicaid Services (CMS), the Internal Revenue Service (IRS) issued a new Fact Sheet (FS-2011-11), “Tax-Exempt Organizations Participating in the Medicare Shared Savings Program through Accountable Care Organizations,” that provides additional information for IRC Section 501(c)(3) organizations, such as tax-exempt hospitals, that will be participating in the MSSP through an ACO.

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Final ACO Rule – Some Highlights For Physicians

Two weeks ago, the Centers for Medicare and Medicaid Services (“CMS”) issued the final rule (“Final Rule”) for accountable care organizations (“ACO’s”).  CMS released the Final Rule after receiving more than 1,300 comments to the proposed regulations (“Proposed Rule”) published more than seven (7) months ago.  As compared with the Proposed Rule, the Final Rule contains a number of revisions designed to encourage more physicians to become involved with ACO’s, including the following:

·       Physicians are not required to be meaningful users of electronic medical records (“EMR”) as a condition of participating in an ACO, although EMR is now a quality measure and is weighted higher than others.  Essentially, CMS elected not to add an extra requirement to ACO participation, preferring instead to permit participating physicians to discover and decide for themselves how best to manage patient data and other information in order to provide coordinated care for their patients.

·       Allows prospective assignment of patients to ACO’s on a quarterly basis, rather than using a retrospective method for selecting patients to participate in an ACO, as had been originally proposed.  In the Final Rule, prospective assignment of patients is permitted in order that physicians shall know in advance which patients are in an ACO, thereby enabling physicians and patients to partner together in order to better address health problems, both in terms of objectives and how to achieve them.  In this regard, it should be noted that, according to the Final Rule, only persons enrolled in the Medicare fee-for-service program may be assigned to an ACO.

·       Eliminates participant risk in the first of the two (2) ACO shared-savings’ models.  The Proposed Rule had required that, after the first two (2) years, an ACO choosing the one-sided model (i.e., shared savings among participants without any sharing of losses) would transition into the two-sided model (i.e., shared savings and losses) during the third year.  However, the Final Rule provides for shared savings among the participants in the one-sided model during the entire initial agreement period with no sharing of losses in the third year.  The two-sided model, where participants share savings and losses for the entire initial agreement period (the first “year” of the initial agreement for ACO’s starting in 2012 will be to 18 to 21 months) continues to include risk- or loss-sharing for participants, but also offers them larger potential rewards than they would have received under the Proposed Rule.

·       Reduces from 65 to 33 the number of quality measures ACO-participating physicians must report.  The Proposed Rule required providers to report on 65 quality measures in five (5) categories so as to enable CMS to assess the quality of care furnished by ACO’s.  In response to the comments it received – the majority of which favored utilizing fewer quality measures in order to reduce reporting burdens and attain more focused and meaningful improvements to the Medicare program – CMS reduced to 33 in four (4) categories the required number of quality measures subject to reporting.  These categories are as follows:  (i) patient/caregiver experience; (ii) care coordination/patient safety; (iii) preventive health; and (iv) at-risk population that includes subcategories of reporting requirements regarding the following disease states:  diabetes, hypertension, ischemic vascular disease, and coronary artery disease.

·       Ensures that all ACO’s shall receive a share of any first-dollar savings generated to Medicare once a minimum amount of savings is achieved, known as the Minimum Savings Rate (“MSR”).  The MSR is on a sliding scale, ranging from 3.9% for ACO’s with 5,000-5,999 beneficiaries to 2% for ACO’s with 60,000 or more beneficiaries.

Finally, it should be noted that the Department of Justice and the Federal Trade Commission have issued a joint “Final Statement of Antitrust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program.”  This Final Statement addresses the application and enforcement of antitrust laws for ACO’s and supplements the Final Rule.  While the Justice Department and FTC promise to monitor the impact of ACO’s in order to protect competitive markets, they shall not require a regulatory antitrust review of ACO’s as had been originally mandated.  


Support for ACOs Continues to Erode; ACO Alternatives Picking Up Steam

Like many of those reading this blog, I receive numerous e-mails each day containing summaries of health care-related news articles culled from sources across the country.  Since the Centers for Medicare and Medicaid Services (CMS) released its proposed accountable care organization (ACO) regulations in March 2011, these daily e-mails have been filled with criticisms of the regulations and announcements by organizations that have determined the proposed ACO model to be unworkable.[Read More]

Medicare Shared Savings Program----Beware of Greeks Bearing Gifts

Beware of Greeks bearing gifts.   Not an original thought and yet it so aptly applies to the proposed regulations CMS has issued recently concerning the Medicare Shared Savings Demonstration Program.

Why?  Any program which included the words "shared savings" should immediately be viewed as a euphemism for lower payments for providers.  This approach is a throw back to the 70's and 80's where HMO's told primary care doctors that they would share the savings from speciality risk pools.  If primary doctors did not refer to specialists, they would share the remainder in the risk pool.  Actually, I know of no primary care doctors  who benefitted from these shared savings.

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CMS Releases Long-Awaited Proposed Rule on Accountable Care Organizations

On March 31, 2011, the Centers for Medicare & Medicaid Services (CMS) and Health and Human Services (HHS) unveiled the long-awaited federal rule on accountable care organizations. This proposed rule would implement section 3022 of the Affordable Care Act, which allows service providers and suppliers to continue receiving traditional Medicare fee-for-service payments under Parts A and B, and to be eligible for additional payments based on meeting specified quality and savings requirements.

To view the proposed rule, please visit the Office of the Federal Register website.


A Summary of Medicare Shared Savings Program and ACO Proposed Regulations

On March 30, 2011, the Centers for Medicare and Medicaid issued the long-awaited, proposed regulations for the Medicare Shared Savings Program, including details of the requirements for qualifying as an accountable care organization (ACO), such as:

  • Eligible legal entities
  • Criteria for shared governance
  • Assignment of beneficiaries to ACOs
  • Different types of risk contracts
  • Benchmarks and calculations of savings
  • Shared savings, antitrust issues and policies, Medicare anti-kickback, and other regulatory requirements as applied to ACOs

The full text of the summary is available as a Duane Morris Alert.


Duane Morris Health Law

Reporting legal developments in the healthcare industry and the latest on the implementation of
the Healthcare Reform Act impacting providers, employers and physicians.

« October 2014
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The opinions expressed on this blog are those of the author and are not to be construed as legal advice.