Medicare Program; Final Waivers in Connection With the Shared Savings Program, 67992-68010 [2011-27460]

Agencies

• Centers for Medicare & Medicaid Services
• DEPARTMENT OF HEALTH AND HUMAN SERVICES
• Office of Inspector General

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



[[Page 67991]]

Vol. 76

Wednesday,

No. 212

November 2, 2011

Part III





Department of Health and Human Services





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Centers for Medicare & Medicaid Services





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42 CFR Chapter IV





Office of the Inspector General





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42 CFR Chapter V





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

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

[[Page 67992]]


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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Centers for Medicare & Medicaid Services

42 CFR Chapter IV

Office of Inspector General

42 CFR Chapter V

[CMS-1439-IFC]
RIN 0938-AR30


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

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

ACTION: Interim final rule with comment period.

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

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

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

FOR FURTHER INFORMATION CONTACT:

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

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

I. Introduction and Overview

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

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

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

[[Page 67993]]

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

B. Overview of Final Waivers

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

[[Page 67994]]

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

II. Shared Savings Program: Background

A. Section 1899 of the Social Security Act

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

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

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

C. Fraud and Abuse Laws--Background

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

[[Page 67995]]

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

D. Summary of Public Input Opportunities

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

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

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

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

A. Threshold Qualifications for Waiver

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

[[Page 67996]]

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

B. Scope of Proposed Waivers

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

[[Page 67997]]

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

C. Duration of Waivers

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

D. Additional Waiver Design Considerations

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

[[Page 67998]]

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

[[Page 67999]]

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

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

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

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

A. Overview

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

B. The Waivers and Applicable Requirements

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

[[Page 68000]]

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