67992 Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 

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. 

SUMMARY: This interim final rule with 

comment period establishes waivers of 

the application of the Physician SelfReferral Law, the Federal anti-kickback 

statute, and certain civil monetary 

penalties (CMP) law provisions to 

specified arrangements involving 

accountable care organizations (ACOs) 

under section 1899 of the Social 

Security Act (the Act) (the Shared 

Savings Program), including ACOs 

participating in the Advance Payment 

Initiative. Section 1899(f) of the Act, as 

added by the Affordable Care Act, 

authorizes the Secretary to waive certain 

fraud and abuse laws as necessary to 

carry out the provisions of section 1899 

of the Act. 

DATES: Effective date: These regulations 

are effective on November 2, 2011. 

Comment date: To be assured 

consideration, comments must be 

received at one of the addresses 

provided below, no later than 5 p.m. on 

January 3, 2012. Because of the large 

number of public comments we 

normally receive on Federal Register 

documents, we are not able to 

acknowledge or respond to them 

individually. We will consider all 

comments we receive by the date and 

time specified here, and, when we 

proceed with a subsequent document, 

we will respond to the comments in the 

preamble to that document. 

ADDRESSES: In commenting, please refer 

to file code CMS–1439–IFC. Because of 

staff and resource limitations, we cannot 

accept comments by facsimile (FAX) 

transmission. 

You may submit comments in one of 

four ways (please choose only one of the 

ways listed) 

1. Electronically. You may submit 

electronic comments on this regulation 

to http://www.regulations.gov. Follow 

the ‘‘Submit a comment’’ instructions. 

2. By regular mail. You may mail 

written comments to the following 

address only: Centers for Medicare & 

Medicaid Services, Department of 

Health and Human Services, Attention: 

CMS–1439–IFC, P.O. Box 8013, 

Baltimore, MD 21244–8013. 

Please allow sufficient time for mailed 

comments to be received before the 

close of the comment period. 

3. By express or overnight mail. You 

may send written comments to the 

following address only: Centers for 

Medicare & Medicaid Services, 

Department of Health and Human 

Services, Attention: CMS–1439–IFC, 

Mail Stop C4–26–05, 7500 Security 

Boulevard, Baltimore, MD 21244–1813. 

4. By hand or courier. Alternatively, 

you may deliver (by hand or courier) 

your written comments only to the 

following addresses prior to the close of 

the comment period: 

a. For delivery in Washington, DC— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, Room 445–G, Hubert 

H. Humphrey Building, 200 

Independence Avenue, SW., 

Washington, DC 20201. 

(Because access to the interior of the 

Hubert H. Humphrey Building is not 

readily available to persons without 

Federal government identification, 

commenters are encouraged to leave 

their comments in the CMS drop slots 

located in the main lobby of the 

building. A stamp-in clock is available 

for persons wishing to retain a proof of 

filing by stamping in and retaining an 

extra copy of the comments being filed.) 

b. For delivery in Baltimore, MD— 

Centers for Medicare & Medicaid 

Services, Department of Health and 

Human Services, 7500 Security 

Boulevard, Baltimore, MD 21244–1850. 

If you intend to deliver your 

comments to the Baltimore address, call 

telephone number (410) 786–1066 in 

advance to schedule your arrival with 

one of our staff members. 

Comments erroneously mailed to the 

addresses indicated as appropriate for 

hand or courier delivery may be delayed 

and received after the comment period. 

For information on viewing public 

comments, see the beginning of the 

SUPPLEMENTARY INFORMATION section. 

FOR FURTHER INFORMATION CONTACT: 

Neal Shah (410) 786–1167 or Kristin 

Bohl (410) 786–8680, for general 

issues and issues related to the 

Physician Self-Referral Law. 

James A. Cannatti III (202) 619–0335, for 

general issues and issues related to 

the Federal anti-kickback statute or 

civil monetary penalties. 

SUPPLEMENTARY INFORMATION: 

Inspection of Public Comments: All 

comments received before the close of 

the comment period are available for 

viewing by the public, including any 

personally identifiable or confidential 

business information that is included in 

a comment. We post all comments 

received before the close of the 

comment period on the following Web 

site as soon as possible after they have 

been received: http:// 

www.regulations.gov. Follow the search 

instructions on that Web site to view 

public comments. 

Comments received timely will be 

also available for public inspection as 

they are received, generally beginning 

approximately 3 weeks after publication 

of a document, at the headquarters of 

the Centers for Medicare & Medicaid 

Services, 7500 Security Boulevard, 

Baltimore, Maryland 21244, Monday 

through Friday of each week from 

8:30 a.m. to 4 p.m. To schedule an 

appointment to view public comments, 

phone 1–800–743–3951. 

I. Introduction and Overview 

Section I. of this interim final rule 

with comment period (IFC) provides an 

introduction and overview of this rule. 

Section II. of this IFC provides 

background on the Shared Savings 

Program. Section III. of this IFC 

summarizes public comments received 

in response to the Waiver Designs 

Notice and Shared Savings Program 

proposed rule (as those terms are 

defined below). Section IV. of this IFC 

sets out the waivers and applicable 

requirements. Section V. of this IFC 

explains the waivers and solicits 

comments on specific ways we might 

modify the waivers to address fraud and 

abuse or other problems that may arise. 

A. Connection Between Shared Savings 

Program and Fraud and Abuse Waivers 

Elsewhere in this issue of the Federal 

Register, the Centers for Medicare & 

Medicaid Services (CMS) published a 

final rulemaking setting forth the 

requirements for ACOs under the 

Shared Savings Program (hereinafter 

referred to as the ‘‘Shared Savings 

Program final rule’’). Section 1899 of the 

Act (as added by section 3022 of the 

Patient Protection and Affordable Care 

Act (Pub. L. 111–148), as amended by 

the Health Care and Education 

Reconciliation Act of 2010 (Pub. L. 111– 

152) (collectively, the ‘‘Affordable Care 

Act’’) describes the Shared Savings 

Program as a Medicare program to 

promote accountability for a Medicare 

patient population, coordinate items 

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Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 67993 

1For purposes of this IFC, the terms ‘‘ACO,’’ 

‘‘ACO participants,’’ and ‘‘ACO providers/ 

suppliers’’ have the meanings ascribed to them in 

42 CFR 425.20. 

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-forservice beneficiaries and other patients. 

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 SelfReferral 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 SelfReferral 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 ACOrelated 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 antikickback statute for ACO arrangements 

that implicate the Physician SelfReferral Law and meet an existing 

exception; and 

• A ‘‘patient incentive’’ waiver of the 

Beneficiary Inducements CMP and the 

Federal anti-kickback statute for 

medically related incentives offered by 

ACOs under the Shared Savings 

Program to beneficiaries to encourage 

preventive care and compliance with 

treatment regimes. 

These waivers include the two 

waivers proposed in the Waiver Designs 

Notice (the shared savings distributions 

waiver and the compliance with the 

Physician Self-Referral Law waiver), as 

well as three new waivers developed in 

response to public comments seeking 

additional pathways to address a 

broader array of ACO activities needed 

to achieve the purposes of the Shared 

Savings Program. These five waivers 

provide flexibility for ACOs and their 

constituent parts to pursue a wide array 

of activities, including start-up and 

operating activities that further the 

purposes of the Shared Savings 

Program. These waivers incorporate 

conditions that, in combination with 

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67994 Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 

2 42 CFR 411.355 through 411.357; 42 CFR 

1001.952; 42 CFR 1003.110. 

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 antikickback 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, risksharing, and indirect compensation 

arrangements (to the extent an ACO 

arrangement is an indirect financial 

relationship). Potential Federal antikickback statute safe harbors include, 

among others, those for employment, 

personal services and management 

contracts, EHR arrangements, and 

managed care arrangements. 

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 

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Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 67995 

3 75 FR 70165 (2010). 

4 Information about the workshop is available on 

CMS’s Web site at http://www.cms.gov/center/ 

physician.asp. 

5The public comments are available on the FTC’s 

Web site at http://www.ftc.gov/os/comments/aco/ 

index.shtm. 

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 SelfReferral, 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. 

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 SelfReferral 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 SelfReferral 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 

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67996 Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 

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 SelfReferral 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 nonmonetary 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 costshifting 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-forservice 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, 

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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 SelfReferral 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 evidencebased 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 

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6 42 CFR 411.357(w) and 42 CFR 1001.952(y), 

respectively. 

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 nonACO 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 

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of EHRs demonstrated the need to 

extend the waiver to relationships 

intended to reach that standard. 

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 followup 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 SelfReferral 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 preparticipation 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 preparticipation 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. 

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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 startup 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 preparticipation waiver applies as follows: 

• The waiver period would start on— 

++ The date of publication of this IFC 

for target year 2012; or 

++ One year preceding an application 

due date (the ‘‘selected application 

date’’) for a target year of 2013 or later. 

• The waiver period would end— 

++ For ACOs that submit an 

application by the selected application 

date and enter into a participation 

agreement for the target year, on the 

start date for that agreement; 

++ For ACOs that submit an 

application by the selected application 

date for the target year, but whose 

application is denied, on the date of the 

denial notice, except with respect to any 

arrangement that qualified for the 

waiver before the date of the denial 

notice, in which case the waiver period 

would end on the date that is 6 months 

after the date of the denial notice; and 

++ For ACOs that fail to submit an 

application by the selected application 

due date for the target year, on the 

earlier of the selected application due 

date or the date the ACO submits a 

statement of reasons for failing to 

submit an application, except that an 

ACO that has been unable to submit an 

application, but can demonstrate a 

likelihood of successfully developing an 

ACO that would be eligible to 

participate in the Shared Savings 

Program by the next available 

application due date, may apply for an 

extension of the waiver, pursuant to 

procedures to be established by the 

Secretary in guidance. The 

determination whether to grant a waiver 

will be in the sole discretion of the 

Secretary and will not be reviewable. 

++ An ACO may use the preparticipation waiver (including any 

extensions granted) only one time. 

ACO Participation Waiver. Pursuant 

to section 1899(f) of the Act, section 

1877(a) of the Act (relating to the 

Physician Self-Referral Law), sections 

1128A(b)(1) and (2) of the Act (relating 

to the Gainsharing CMP), and sections 

1128B(b)(1) and (2) of the Act (relating 

to the Federal anti-kickback statute) are 

waived with respect to any arrangement 

of an ACO, one or more of its ACO 

participants or its ACO providers/ 

suppliers, or a combination thereof, 

provided all of the following conditions 

are met: 

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1. The ACO has entered into a 

participation agreement and remains in 

good standing under its participation 

agreement. 

2. The ACO meets the requirements of 

42 CFR 425.106 and 425.108 concerning 

its governance, leadership, and 

management. 

3. The ACO’s governing body has 

made and duly authorized a bona fide 

determination, consistent with the 

governing body members’ duty under 42 

CFR 425.106(b)(3), that the arrangement 

is reasonably related to the purposes of 

the Shared Savings Program. 

4. Both the arrangement and its 

authorization by the governing body are 

documented. The documentation of the 

arrangement must be contemporaneous 

with the establishment of the 

arrangement, and the documentation of 

the authorization must be 

contemporaneous with the 

authorization. All such documentation 

must be retained for at least 10 years 

following completion of the 

arrangement and promptly made 

available to the Secretary upon request. 

The documentation must identify at 

least the following: 

a. A description of the arrangement, 

including all parties to the arrangement; 

date of the arrangement; the purpose of 

the arrangement; the items, services, 

facilities, and/or goods covered by the 

arrangement (including non-medical 

items, services, facilities, or goods); and 

the financial or economic terms of the 

arrangement. 

b. The date and manner of the 

governing body’s authorization of the 

arrangement. The documentation 

should include the basis for the 

determination by the ACO’s governing 

body that the arrangement is reasonably 

related to the purposes of the Shared 

Savings Program. 

5. The description of the arrangement 

is publicly disclosed at a time and in a 

place and manner established in 

guidance issued by the Secretary. Such 

public disclosure shall not include the 

financial or economic terms of the 

arrangement. 

For arrangements that meet all of the 

preceding conditions, the waiver period 

will start on the start date of the 

participation agreement and will end 

6 months following the earlier of the 

expiration of the participation 

agreement, including any renewals 

thereof, or the date on which the ACO 

has voluntarily terminated the 

participation agreement. However, if 

CMS terminates the participation 

agreement, the waiver period will end 

on the date of the termination notice. 

3. Shared Savings Distribution Waiver 

Pursuant to section 1899(f) of the Act, 

section 1877(a) of the Act (relating to 

the Physician Self-Referral Law), 

sections 1128A(b)(1) and (2) of the Act 

(relating to the Gainsharing CMP), and 

sections 1128B(b)(1) and (2) of the Act 

(relating to the Federal anti-kickback 

statute) are waived with respect to 

distributions or use of shared savings 

earned by an ACO, provided all of the 

following conditions are met: 

1. The ACO has entered into a 

participation agreement and remains in 

good standing under its participation 

agreement; 

2. The shared savings are earned by 

the ACO pursuant to the Shared Savings 

Program; 

3. The shared savings are earned by 

the ACO during the term of its 

participation agreement, even if the 

actual distribution or use of the shared 

savings occurs after the expiration of 

that agreement. 

4. The shared savings are— 

a. Distributed to or among the ACO’s 

ACO participants, its ACO providers/ 

suppliers, or individuals and entities 

that were its ACO participants or its 

ACO providers/suppliers during the 

year in which the shared savings were 

earned by the ACO; or 

b. Used for activities that are 

reasonably related to the purposes of the 

Shared Savings Program. 

5. With respect to the waiver of 

sections 1128A(b)(1) and (2) of the Act 

(relating to the Gainsharing CMP), 

payments of shared savings 

distributions made directly or indirectly 

from a hospital to a physician are not 

made knowingly to induce the 

physician to reduce or limit medically 

necessary items or services to patients 

under the direct care of the physician. 

4. Compliance With the Physician SelfReferral Law Waiver 

Pursuant to section 1899(f) of the Act, 

sections 1128A(b)(1) and (2) of the Act 

(relating to the Gainsharing CMP) and 

sections 1128B(b)(1) and (2) of the Act 

(relating to the Federal anti-kickback 

statute) are waived with respect to any 

financial relationship between or among 

the ACO, its ACO participants, and its 

ACO providers/suppliers that implicates 

the Physician Self-Referral Law, 

provided all of the following conditions 

are met: 

1. The ACO has entered into a 

participation agreement and remains in 

good standing under its participation 

agreement. 

2. The financial relationship is 

reasonably related to the purposes of the 

Shared Savings Program. 

3. The financial relationship fully 

complies with an exception at 42 CFR 

411.355 through 411.357. 

For arrangements that meet all of the 

preceding conditions, the waiver period 

will start on the start date of the 

participation agreement and will end on 

the earlier of the expiration of the term 

of the participation agreement, 

including any renewals thereof, or the 

date on which the participation 

agreement has been terminated. 

5. Waiver for Patient Incentives 

Pursuant to section 1899(f) of the Act, 

section 1128A(a)(5) of the Act (relating 

to the beneficiary inducements CMP) 

and sections 1128B(b)(1) and (2) of the 

Act (relating to the Federal antikickback statute) are waived with 

respect to items or services provided by 

an ACO, its ACO participants, or its 

ACO providers/suppliers to 

beneficiaries for free or below fairmarket-value if all four of the following 

conditions are met: 

1. The ACO has entered into a 

participation agreement and remains in 

good standing under its participation 

agreement. 

2. There is a reasonable connection 

between the items or services and the 

medical care of the beneficiary. 

3. The items or services are in-kind. 

4. The items or services— 

a. Are preventive care items or 

services; or 

b. Advance one or more of the 

following clinical goals: 

i. Adherence to a treatment regime. 

ii. Adherence to a drug regime. 

iii. Adherence to a follow-up care 

plan. 

iv. Management of a chronic disease 

or condition. 

For arrangements that meet all of the 

preceding conditions, this waiver period 

will start on the start date of the 

participation agreement and will end on 

the earlier of the expiration of the term 

of the participation agreement, 

including any renewals thereof, or the 

date on which the participation 

agreement has been terminated, 

provided that a beneficiary may keep 

items received before the participation 

agreement expired or terminated, and 

receive the remainder of any service 

initiated before the participation 

agreement expired or terminated. 

V. Provisions of the Interim Final Rule 

With Comment Period: Explanation of 

Waiver Requirements 

This section explains the waivers set 

forth in section IV.B. of this IFC and 

responds to public comments. We are 

providing guidance in this section V. of 

this IFC to help stakeholders interpret 

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the waiver requirements. We remind 

readers that the waivers should be 

interpreted in a reasonable manner. We 

are soliciting comments about our 

approach, whether we should provide 

greater specificity, and, if so, how and 

for which waivers and waiver 

conditions. 

A. Reasonably Related to the Purposes 

of the Shared Savings Program 

Several waivers described in section 

IV.B. of this IFC require that 

arrangements be ‘‘reasonably related to 

the purposes of the Shared Savings 

Program.’’ We have defined ‘‘purposes 

of the Shared Savings Program’’ 

consistent with the purposes set forth in 

Section 1899(a) and (b) of the Act. We 

are using the statutory purposes of the 

Shared Savings Program in the waiver 

context because the waiver authority 

speaks to carrying out the Shared 

Savings Program. As used in these 

waivers, the purposes of the Shared 

Savings Program consist of promoting 

accountability for the quality, cost, and 

overall care for a Medicare population 

as described in the Shared Savings 

Program; managing and coordinating 

care for Medicare fee-for-service 

beneficiaries through an ACO; and 

encouraging investment in 

infrastructure and redesigned care 

processes for high quality and efficient 

service delivery for patients, including 

Medicare beneficiaries. As further 

explained in the statute and regulations, 

these purposes can involve, for 

example, promoting evidence-based 

medicine and patient engagement; 

meeting requirements for reporting on 

quality and cost measures; coordinating 

care, such as through the use of 

telehealth, remote patient monitoring, 

and other enabling technologies; 

establishing clinical and administrative 

systems for the ACO; meeting the 

clinical integration requirements of the 

Shared Savings Program; or meeting the 

quality performance standards of the 

Shared Savings Program. Additional 

purposes consistent with the statute and 

regulations include, for example, 

evaluating health needs of the ACO’s 

assigned population; communicating 

clinical knowledge and evidence based 

medicine to beneficiaries; and 

developing standards for beneficiary 

access and communication, including 

beneficiary access to medical records. 

Arrangements with similar purposes 

but that are unrelated to the Shared 

Savings Program are not covered by the 

term ‘‘purposes of the Shared Savings 

Program.’’ Arrangements that involve 

care for non-Medicare patients as well 

as Medicare beneficiaries are eligible for 

the waiver. We interpret the purpose of 

‘‘efficient service delivery’’ in section 

1899 of the Act to include, among other 

things, appropriate reduction of costs to, 

or growth in expenditures of, the 

Medicare program, consistent with 

quality of care, physician medical 

judgment, and patient freedom of 

choice. The definition of ‘‘purposes of 

the Shared Savings Program’’ applies 

uniformly to all waivers in which it 

appears. 

When a waiver requires that the terms 

of the arrangement be ‘‘reasonably 

related to the purposes of the Shared 

Savings Program,’’ the arrangement 

need only be reasonably related to one 

enumerated purpose, although we 

would expect that many arrangements 

would relate to multiple purposes. 

Where a reasonable relationship exists, 

it should not be difficult for parties to 

articulate clearly the nexus between 

their arrangement and the purposes of 

the Shared Savings Program. Consistent 

with our goal to foster flexibility, 

adaptability, and innovation, we are not 

further describing in the waiver text the 

specific arrangements that will be 

considered reasonably related to the 

purposes of the Shared Savings Program 

or providing in the waiver text a list of 

acceptable arrangements. To provide 

additional assurance to ACOs, we have 

provided in this section V of this IFC an 

illustrative, non-exhaustive list of 

arrangements that constitute start-up 

arrangements for purposes of the preparticipation waiver. 

As described previously in this IFC, 

public comments reflected significant 

variation and scope of anticipated ACO 

arrangements. We expect parties to 

apply a reasonable interpretation of the 

waiver terms. We are, however, 

soliciting comments on whether we 

should further define the ‘‘reasonably 

related to purposes of the Shared 

Savings Program’’ standard and, if so, 

how. We note that we are not using the 

proposed language from our Waiver 

Designs Notice requiring arrangements 

to be ‘‘necessary for and directly related 

to ACO purposes.’’ Several public 

commenters expressed concern that this 

language was not clear. We believe the 

language that we are using in the 

waivers is simpler and addresses public 

comments. We note that arrangements 

that are necessary for and directly 

related to the purposes of the Shared 

Savings Program would be among those 

that meet the ‘‘reasonably related’’ 

standard. 

B. Eligibility for Waiver 

In general, four of the five waivers set 

forth in this IFC are available to protect 

arrangements involving an ACO, its 

ACO participants, and/or its ACO 

providers/suppliers, if the ACO has a 

participation agreement and remains in 

good standing under that agreement. We 

are considering whether to require 

expressly that an ACO that is under a 

corrective action plan (CAP) be in 

compliance with the CAP as a condition 

of a waiver. We solicit comments on 

these requirements. 

The fifth waiver, the ACO preparticipation waiver, is available for 

start-up arrangements (as defined in the 

waiver) provided that the ACO is 

making good faith efforts to form an 

ACO and to submit an application to 

participate in the Shared Savings 

Program, and all other conditions of the 

waiver are satisfied. To qualify for the 

pre-participation waiver, the parties to 

the arrangement must include, at a 

minimum, the ACO or at least one 

individual or entity that is eligible to 

form an ACO (as defined in the Shared 

Savings Program final rule). In the 

context of the ACO pre-participation 

waiver, the terms ACO, ACO 

participant, and ACO provider/supplier 

refer to individuals or entities that 

would meet the definitions of those 

terms set forth in the Shared Savings 

Program regulations at 42 CFR 425.20, if 

the ACO had a participation agreement 

(but for the fact that the required list 

under the regulations has not yet been 

submitted to CMS). Individuals or 

entities that are prospective ACO 

participants or ACO providers/suppliers 

should be those that would be on the 

list if it were to be submitted. The preparticipation waiver does not cover 

arrangements involving drug and device 

manufacturers, distributors, DME 

suppliers, or home health suppliers. 

Drug and device manufacturers and 

distributors are not Medicare enrolled 

suppliers and providers; DME and home 

health suppliers have historically posed 

a heightened risk of program abuse. 

C. Pre-Participation and Participation 

Waivers 

1. Scope 

The intent of the pre-participation 

and participation waivers in this IFC is 

to establish pathways to protect bona 

fide ACO investment, start-up, 

operating, and other arrangements that 

carry out the Shared Savings Program, 

subject to certain safeguards. We do not 

believe it is feasible at this time to 

enumerate in the waiver text specific 

protected arrangements given the 

anticipated wide variation in ACO 

composition, size, resources, and ACO 

readiness, as well as the goal of the 

program to foster innovation, 

adaptability, and variation in 

furtherance of quality, efficiency, and 

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economy. We are concerned that, given 

the limitations of foresight in the 

context of a new program, a fixed list 

might be under-inclusive and omit 

arrangements that are necessary for 

bona fide ACO activities. 

The pre-participation waiver covers a 

broad array of start-up arrangements, as 

defined in the waiver text and discussed 

in this section, subject to certain 

conditions. The participation waiver 

covers any arrangement that meets its 

conditions, including start-up 

arrangements. Many commenters 

observed that arrangements necessary to 

develop an ACO may occur both before 

and after the ACO enrolls in the Shared 

Savings Program. 

Consistent with views expressed by 

many commenters, both the preparticipation and participation waivers 

rely, as a threshold matter, on the 

programmatic requirements of the 

Shared Savings Program to safeguard 

Medicare beneficiaries and the Medicare 

program. The design of the waivers is 

premised on our expectation that risks 

of fraud and abuse, such as 

overutilization, inappropriate 

utilization, and underutilization, will be 

mitigated, in the first instance, by the 

Shared Savings Program design, 

including, for example, the eligibility 

requirements, the quality of care and 

accountability provisions, and the 

program integrity provisions. In these 

waivers, we are adding additional 

safeguards in the form of governance 

responsibility, transparency, and a 

documented audit trail. These points are 

explained in more detail later in this 

IFC. We are aiming for an approach that 

will provide ACOs with flexibility, 

certainty, and latitude for beneficial 

innovation and variation in connection 

with the new Shared Savings Program, 

while also protecting Medicare 

beneficiaries and the Medicare program 

from fraud and abuse. 

2. Start-Up Arrangements for the PreParticipation Waiver 

We are limiting the pre-participation 

waiver so that it applies to ‘‘start-up 

arrangements.’’ We define the term startup arrangements to mean any items, 

services, facilities, or goods (including 

non-medical items, services, facilities, 

or goods) used to create or develop an 

ACO that are provided by such ACO, 

ACO participants, or ACO providers or 

suppliers. We also consider the 

provision of a subsidy for these items, 

services, facilities, or goods to be a startup arrangement. Even though the 

definition of start-up arrangements is 

specifically included in the preparticipation waiver, we anticipate that 

many start-up arrangements will also 

take place during the participation 

phase of an ACO’s existence; those 

arrangements can qualify for the 

participation waiver. 

Based on comments received, we 

recognize that ACOs may have a 

difficult time anticipating all necessary 

start-up arrangements that will need 

waiver protection. While we are not 

providing a specific list of ACO start-up 

arrangements in the waiver text, in 

order to provide additional assurance to 

developing ACOs, we offer additional 

guidance in this section. By way of 

example only, we consider the 

provision of the folliowng items, 

services, facilities, and goods to be startup arrangements: 

(1) Infrastructure creation and 

provision; 

(2) Network development and 

management, including the 

configuration of a correct ambulatory 

network and the restructuring of 

existing providers and suppliers to 

provide efficient care; 

(3) Care coordination mechanisms, 

including care coordination processes 

across multiple organizations; 

(4) Clinical management systems; 

(5) Quality improvement mechanisms 

including a mechanism to improve 

patient experience of care; 

(6) Creation of governance and 

management structure; 

(7) Care utilization management, 

including chronic disease management, 

limiting hospital readmissions, creation 

of care protocols, and patient education; 

(8) Creation of incentives for 

performance-based payment systems 

and the transition from fee-for-service 

payment system to one of shared risk of 

losses; 

(9) Hiring of new staff, including: 

a. Care coordinators including nurses, 

technicians, physicians, and/or nonphysician practitioners; 

b. Umbrella organization 

management; 

c. Quality leadership; 

d. Analytical team; 

e. Liaison team; 

f. IT support; 

g. Financial management; 

h. Contracting; 

i. Risk management; 

(10) Information Technology, 

including: 

a. EHR systems; 

b. Electronic health information 

exchanges that allow for electronic data 

exchange across multiple platforms; 

c. Data reporting systems, including 

all payer claims data reporting systems; 

d. Data analytics, including staff and 

systems, such as software tools, to 

perform such analytic functions; 

(11) Consultant and other professional 

support, including: 

a. Market analysis for antitrust review; 

b. Legal services; 

c. Financial and accounting services; 

(12) Organization and staff training 

costs; 

(13) Incentives to attract primary care 

physicians; 

(14) Capital investments including 

loans, capital contributions, grants and 

withholds. 

In order to foster innovation and 

creativity within ACOs, we recognize 

that it is impossible to create an 

exhaustive list of bona fide start-up 

arrangements. We solicit comments on 

our definition of start-up arrangements 

and specifically seek input as to 

whether this definition allows for 

sufficient innovation in the creation and 

development of ACOs. 

3. Additional Safeguards 

The pre-participation waiver and the 

participation waiver require that the 

governing body of the ACO make a bona 

fide determination that the arrangement 

for which waiver protection is sought is 

reasonably related to the purposes of the 

Shared Savings Program (as described 

previously in this IFC) and that the 

governing body duly authorize the 

arrangement. (For the ACO participation 

waiver, the governance, as well as the 

leadership and management of the ACO, 

must additionally be in compliance 

with the applicable rules under the 

Shared Savings Program final rule at 

42 CFR 425.106 and 425.108.) The 

intent of this requirement is to ensure 

that any arrangement for which waiver 

protection is sought falls under the 

auspices of the ACO; is transparent 

within the ACO to ACO participants 

and members of the governing body; 

and is integral to the ACO’s mission and 

plans to effectuate its role in the Shared 

Savings Program. This approach 

interposes the ACO’s governing body as 

an intermediary responsible, in the first 

instance, for ensuring that all protected 

arrangements are in furtherance of ACO 

purposes and are not isolated 

arrangements furthering the individual 

financial or business interests of ACO 

participants or ACO providers/ 

suppliers. 

We are not specifying in the waivers 

how the ACO governing body makes the 

bona fide determination or duly 

authorizes it. The determination and 

authorization must be 

contemporaneously documented. 

Documentation must include the basis 

for the determination that the 

arrangement is reasonably related to the 

purposes of the Shared Savings 

Program. We note that the governing 

body under the Shared Savings Program 

final rule must have a meaningful 

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7For example, currently, the government has 

limited information regarding actual usage of 

existing safe harbors and exceptions. 

conflicts of interest policy for its 

members (42 CFR 425.106(d)). We are 

considering, and soliciting comments 

on, whether we should specify 

particular methods by which governing 

bodies make determinations and 

authorize arrangements to ensure that 

ACOs are making bona fide, meaningful 

determinations and authorizations, such 

that arrangements covered by these 

waivers are truly furthering the interests 

of the ACO as a whole in meeting the 

objectives of the Shared Savings 

Program. We note that the preparticipation and participation waivers 

are intended to cover arrangements, 

among others, in which an ACO might 

receive funding or in-kind items or 

services from ACO participants or ACO 

providers/suppliers and, subject to an 

independent ACO governing body 

determination, redistribute them to 

other ACO participants or ACO 

providers/suppliers. 

An ACO governing body must make a 

bona fide determination that an 

arrangement is reasonably related to the 

purposes of the Shared Savings 

Program. Depending on the waiver, the 

ACO governing body can make this 

determination for a wide range of 

arrangements, including, without 

limitation, start-up arrangements and 

ACO operating activities, as well as 

performance-based compensation 

(‘‘results-based’’ compensation) that is 

dependent upon achieving quality 

thresholds or efficiency measures of the 

Shared Savings Program. Members of 

the ACO governing body would be welladvised to exercise diligence in 

ensuring that arrangements are 

reasonably related to one or more 

purposes of the Shared Savings Program 

and to articulate clearly the bases for 

their determinations and authorizations. 

Arrangements should be scrutinized 

with care to ensure that the reasonable 

relationship between an arrangement 

and the purposes of the Shared Savings 

Program can be clearly identified. Not 

every arrangement will be reasonably 

related to the purposes of the Shared 

Savings Program. For example, we do 

not believe that a per-referral payment 

(such as, expressly paying a specialist 

$500 for every referral generated by the 

specialist or paying a nursing facility 

staff member $100 for every patient 

transported to the ACO’s hospital) 

would be reasonably related to the 

purposes of the Shared Savings 

Program. However, by way of example 

only, arrangements with specialists or 

nursing facility staff members to engage 

in care coordination for ACO 

beneficiaries or implement evidencebased protocols could be reasonably 

related to the purposes of the Shared 

Savings Program even if the 

arrangement were to reflect a likelihood 

that the patient might be referred to or 

within an ACO. (Importantly, parties 

remain obligated to comply with the 

provisions at 42 CFR 425.304(c) that 

prohibit certain required referrals and 

cost-shifting.) 

Next, the ACO pre-participation and 

ACO participation waivers require an 

audit trail of contemporaneous 

documentation that identifies core 

characteristics of the arrangement (as 

listed in the waiver text), is maintained 

for 10 years, and is available to the 

Secretary, upon request. We are not 

specifying in the waivers any particular 

form of documentation, which can be in 

paper or electronic form. Notably, the 

waivers do not require an agreement 

signed by the parties, although such an 

agreement is a best documentation 

practice (and would typically be 

required for compliance with the 

Physician Self-Referral Law if a waiver 

does not apply). The core characteristics 

of the arrangement should be evident 

from the documentation with sufficient 

clarity that the government or another 

third party reviewing the 

documentation would be able to 

ascertain the material terms of the 

arrangement, including the information 

listed in item 4 of the pre-participation 

and participation waivers. Material 

amendments and modifications to the 

arrangement should be similarly 

documented and subject to governing 

body approval and disclosure. The preparticipation waiver also requires 

contemporaneous documentation of the 

diligent steps the parties are taking to 

develop the ACO. Documentation of the 

diligent steps must be retained for at 

least 10 years following that date that 

the ACO submits its application or the 

date the ACO submits its statement of 

reasons for failing to submit an 

application, as described later in this 

IFC. As set forth in more detail in the 

Shared Savings Program final rule, 

ACOs will be monitored, and we will 

make periodic requests for 

documentation of arrangements 

protected by waivers. 

The third main safeguard included in 

these waivers is a transparency 

requirement that requires arrangements 

for which waiver protection is desired 

to be publicly disclosed. The public 

disclosure will include the description 

of the arrangement, but shall not 

include the financial or economic terms 

of the arrangement. Our decision to 

shield financial or economic terms from 

the public transparency requirement is 

premised, among other considerations, 

on potential antitrust implications. (We 

note that, while not subject to the public 

transparency requirement, the financial 

or economic terms of the arrangement 

are among the matters that must be 

documented pursuant to the 

documentation requirements of the 

waivers and made available to the 

Secretary upon request.) 

The goals of this transparency 

requirement are three-fold. First, the 

requirement recognizes that secrecy is 

necessary for most criminal or 

fraudulent conduct, and we are 

declining to protect hidden 

arrangements. Second, the requirement 

makes information about waived 

arrangements more readily available to 

parties involved with the ACO, 

regulators, and the public.7 Third, 

transparency creates an incentive for 

ACOs to exercise due diligence when 

arrangements are being established to 

ensure that they are waiver compliant 

and otherwise consistent with the 

ACO’s mission and the duty each 

member of the governing body owes to 

make decisions in the interests of the 

ACO. We do not expect that the 

disclosure requirements, to be 

determined by the Secretary in 

additional guidance, will be onerous. 

We expect that ACOs will be able to 

use the same disclosure process that 

will apply to disclosure of 

organizational, quality, and performance 

information under the Shared Savings 

Program final rule at 42 CFR 425.308. 

ACOs using the pre-participation waiver 

will be able to use a similar disclosure 

process. We are soliciting comments on 

additional methods for public 

disclosure that would be minimally 

burdensome, as well as the timing for 

disclosures. In the latter regard, we are 

considering whether to require 

disclosures on a rolling basis or on a 

fixed interval basis. We are also 

interested in comments addressing 

whether, in lieu of additional guidance, 

the disclosure requirements should be 

set out with greater specificity in the 

waiver text. Until such time as 

additional guidance is issued, parties 

seeking to use the ACO preparticipation or participation waivers 

should meet the disclosure requirement 

by posting information identifying the 

parties to the arrangement and the type 

of item, service, good, or facility 

provided under the arrangement on a 

public Web site belonging to the ACO or 

an individual or entity forming the 

ACO, clearly labeled as an arrangement 

for which waiver protection is sought, 

within 60 days of the date of the 

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arrangement. The Web site must include 

the name of the ACO (or, if the name of 

the ACO is not known, the parties 

forming the ACO) and other identifying 

information sufficient to allow 

individuals conducting an electronic 

internet search using a widely available 

search engine to readily locate the Web 

site. 

The current design of these waivers 

applies to arrangements within the ACO 

(that is, between or among the ACO, its 

ACO participants, and/or its ACO 

providers/suppliers), as well as ACOrelated arrangements with outside 

providers and suppliers, such as 

hospitals, specialists, or post-acute care 

facilities that might not be part of the 

ACO but have a role in coordinating and 

managing care for ACO patients. (The 

pre-participation waiver excludes drug 

and device manufacturers, distributors, 

DME suppliers, and home health 

suppliers.) All such arrangements must 

be reasonably related to the purposes of 

the Shared Savings Program. We are 

soliciting comments on whether we 

should modify the waivers to exclude 

outside party arrangements. We are also 

seeking comments on whether we 

should add additional conditions to the 

participation waiver—such as 

conditions requiring commercial 

reasonableness or fair market value or 

prohibiting exclusivity—that would 

apply to ACO relationships with outside 

parties, such as laboratories, equipment 

or supply companies, drug and device 

manufacturers, or distributors or 

purchasing organizations. 

The waiver text sets forth specific 

duration periods for the preparticipation waiver to account for the 

varying circumstances of ACOs that 

submit applications that are accepted, 

submit applications that are rejected, or 

are unable to submit an application. 

These specifications are necessary to 

ensure that the waiver covers only preparticipation arrangements that are 

closely linked to the Shared Savings 

Program. The ACO pre-participation 

waiver covers arrangements undertaken 

by parties acting with good faith intent 

to develop an ACO that will participate 

in the Shared Savings Program starting 

in a particular year (the ‘‘target year’’). 

For ACOs pursuing target year 2012, the 

waiver period starts on the date of 

publication of this IFC. For ACOs 

pursuing later target years, the waiver 

period would begin one year preceding 

an application due date for the target 

year (the ‘‘selected application date’’). 

Application due dates for these years 

will be established in later guidance by 

CMS but, by way of illustration only, if 

an application due date for target year 

2014 were September 1, 2013, the ACO 

pre-participation waiver period would 

begin on September 1, 2012. 

For an ACO that submits an 

application and enters into a 

participation agreement, the preparticipation waiver lasts until the start 

date of the participation agreement, at 

which point waiver protection merges 

seamlessly into the participation waiver, 

and no further governing body approval 

is required for arrangements that had 

been protected by the pre-participation 

waiver. If the application is denied, the 

waiver lasts until the date of the denial 

notice, except that waiver protection 

extends for 6 months after the date of 

the denial notice for arrangements that 

qualified for the waiver before the date 

of the denial notice. However, no newly 

created arrangements would be 

protected during the 6-month period. 

The waiver period will end for ACOs 

that fail to submit an application on the 

final application due date for the target 

year. ACOs that fail to submit an 

application by the final application due 

date must instead submit a statement 

describing the reasons the ACO failed to 

submit a timely application. 

ACOs that do not submit an 

application for the selected application 

date, may apply for an extension of the 

waiver period. The ACO must submit 

documentation of its diligent steps, as 

required under the waiver, and make a 

showing that it is likely to successfully 

develop an ACO that would be eligible 

to participate in the Shared Savings 

Program by the next available 

application due date. The Secretary will 

establish procedures in guidance for the 

extension process. The determination 

whether to grant a waiver will be in the 

sole discretion of the Secretary and will 

not be reviewable. If an extension is 

granted, the next available application 

due date will become the selected 

application date and the new waiver 

period will end in accordance with the 

terms of the pre-participation waiver. 

An ACO may only use the preparticipation waiver one time. If an 

extension is not granted, the ACO may 

no longer rely on the pre-participation 

waiver. 

We are considering whether to further 

limit the pre-participation waiver by, for 

example, requiring that parties submit a 

notice of intent to form an ACO; 

limiting the waiver for target years after 

2013 to ACOs that file applications to 

enroll in the Shared Savings Program; or 

curtailing the availability or scope of the 

pre-participation waiver in future years 

once ACO structures have become better 

established. 

As described previously in this IFC, 

for some circumstances, the preparticipation and participation waivers 

include a 6-month ‘‘tail’’ period 

applicable to protected arrangements in 

existence at the time the waiver expires 

or terminates; this ‘‘tail’’ period 

responds to public comments urging 

that waivers allow for the orderly 

unwinding or restructuring of 

arrangements as necessary to ensure 

continued compliance with the law. The 

‘‘tail’’ periods protect only arrangements 

that were in place and otherwise 

qualified for the waiver at the time the 

waiver expires or terminates. No ‘‘tail’’ 

period applies to ACOs that CMS 

terminates. We considered both shorter 

and longer periods for the ‘‘tail’’ period 

and are soliciting comments on whether 

we should modify the ‘‘tail’’ periods of 

the waivers. 

D. Waiver for Shared Savings 

Distributions 

The intent behind the waiver for 

shared savings distributions is to protect 

arrangements created by the distribution 

of shared savings within an ACO that 

qualifies for the waiver, as well as 

arrangements created by the use of 

shared savings to pay parties outside 

such an ACO if those payments are 

reasonably related to the purposes of the 

Shared Savings Program. This waiver 

permits shared savings to be distributed 

or used within the ACO in any form or 

manner, including ‘‘downstream’’ 

distributions or uses of shared savings 

funds between or among the ACO, its 

ACO participants, and its ACO 

providers/suppliers. This less restrictive 

waiver for shared savings distributions 

within the ACO is premised, in part, on 

recognition that an award of shared 

savings necessarily reflects the 

collective achievement by the ACO and 

its constituent parts of the quality, 

efficiency, and cost reduction goals of 

the Shared Savings Program. These 

goals are consistent with interests 

protected by the fraud and abuse laws. 

This waiver also affords ACOs latitude 

to use shared savings in arrangements 

with outside parties, provided that the 

arrangements are reasonably related to 

the purposes of the Shared Savings 

Program. 

Because the payment of shared 

savings by CMS to an ACO under the 

Shared Savings Program may not occur 

until after expiration of the ACO’s 

3-year agreement, the waiver applies to 

distributions and uses of shared savings 

earned during the term of the 

agreement, even if distributed 

subsequently. Similarly, the waiver 

applies to distributions of shared 

savings to individuals or entities that 

were ACO participants and ACO 

providers/suppliers at the time the 

shared savings were earned, even if they 

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are not part of the ACO at the time of 

the actual distribution. 

This waiver is limited to distributions 

of shared savings; all other 

arrangements would still need to qualify 

for one of the other waivers outlined in 

section IV. of this IFC, fit in an existing 

exception or safe harbor, or otherwise 

comply with the laws. This waiver does 

not protect distributions of shared 

savings to referring physicians outside 

the ACO, unless those referring 

physicians are being compensated 

(using shared savings) for activities that 

are reasonably related to the purposes of 

the Shared Savings Program or were 

ACO participants or ACO providers/ 

suppliers during the year in which the 

shared savings were earned by the ACO. 

Some commenters to the Waiver 

Designs Notice inquired about our 

proposal, which we are adopting here, 

to exclude from the shared savings 

distributions waiver of the Gainsharing 

CMP situations in which a payment is 

made knowingly to reduce or limit 

medically necessary services to patients 

under the physician’s direct care. This 

limitation is consistent with the quality 

and patient care goals of the Shared 

Savings Program and must be 

interpreted in that context. In the 

context of waivers designed to carry out 

the Shared Savings Program, 

distributions of shared savings by an 

ACO, including downstream 

arrangements, that incentivize the 

provision of alternate and appropriate 

medically necessary care consistent 

with the purposes of the Shared Savings 

Program (such as the provision of 

coordinated outpatient care rather than 

inpatient services or the use of 

evidence-based protocols for medically 

necessary care) are protected by this 

waiver. Knowing payments by a 

hospital to induce a physician to reduce 

or limit medically necessary care 

without providing acceptable alternative 

medically necessary care (for example, 

payments to discharge patients without 

regard to appropriate care transitions or 

payments to use a drug or device known 

to be clinically less effective) would not 

qualify for the waiver. We will interpret 

‘‘medical necessity’’ consistent with 

Medicare program rules and accepted 

standards of practice. We also note that 

distributions of shared savings 

payments also may be structured to fit 

in the other waivers. 

Finally, we have not included in this 

IFC specific waiver protection for the 

distribution of shared savings earned by 

an ACO enrolled in the Shared Savings 

Program under a comparable program 

sponsored by a commercial health plan. 

We recognize that ACOs participating in 

the Shared Savings Program may also 

receive similar performance-based 

payments from commercial plans and 

that those payments may reflect care 

coordination, quality improvement, and 

cost-effectiveness activities similar to 

those promoted by the Shared Savings 

Program. However, at this time, we are 

not persuaded that a specific waiver for 

such payments is necessary to carry out 

the Shared Savings Program. In 

addition, we lack an adequate basis for 

identifying comparable private payer 

arrangements of ACOs that would be 

subject to the waiver. 

Shared savings or similar 

performance-based payments received 

from a commercial plan do not 

necessarily implicate the fraud and 

abuse laws; however, in some 

circumstances, funds are calculated or 

used in downstream arrangements in 

ways that influence the referring of, or 

ordering for, Medicare or other Federal 

health care program patients. Moreover, 

we are mindful of the concerns 

expressed by commenters that some 

private payer arrangements may be 

sensitive to the volume of business 

generated for downstream providers or 

suppliers and that this characteristic 

may have implications for the 

application of the Physician SelfReferral Law. 

Although we are not providing a 

specific waiver for private payer 

arrangements at this time, we believe 

avenues exist to provide flexibility for 

ACOs participating in commercial 

plans. First, nothing precludes 

arrangements ‘‘downstream’’ of 

commercial plans (for example, 

arrangements between hospitals and 

physician groups) from qualifying for 

the participation waiver described in 

section IV. of this IFC. The participation 

waiver does not turn on the source of 

the funds for the arrangement. Second, 

many commercial shared savings 

arrangements are, or can be, structured 

to fit within the Physician Self-Referral 

Law exception for risk-sharing 

arrangements at 42 CFR 411.357(n) and 

some may be structured to fit in other 

exceptions. Some private payer 

arrangements may also fit in existing 

Federal anti-kickback statute safe 

harbors, such as the managed care safe 

harbors. Finally, as noted previously in 

this IFC, no waiver or other protection 

is needed for private payer 

arrangements that do not implicate the 

fraud and abuse laws. 

We are soliciting comments on our 

approach to shared savings 

arrangements with commercial plans, 

whether our approach is consistent with 

the needs of ACOs participating in the 

Shared Savings Program, and whether a 

specific waiver should apply to shared 

savings derived from commercial plans 

comparable to the Shared Savings 

Program (and, if so, how we should 

define a comparable program with 

sufficient precision). 

E. Compliance With the Physician SelfReferral Law Waiver 

This waiver is intended to ease the 

compliance burden on providers that 

might elect to use existing Physician 

Self-Referral Law exceptions for their 

ACO arrangements and to reassure those 

with existing arrangements that already 

fit in such an exception that they need 

not undertake a separate legal review 

under the Federal anti-kickback statute 

or Gainsharing CMP. This waiver covers 

arrangements that otherwise implicate 

the Physician Self-Referral Law, 

meaning, for example, arrangements 

involving designated health services 

entities, as defined at 42 CFR 411.351, 

and referring physicians, as defined at 

42 CFR 411.351. Arrangements that 

cannot qualify for a Physician SelfReferral Law exception because they are 

not within the ambit of the law, such as 

arrangements between facilities that do 

not involve referring physicians, can 

qualify for the other waivers described 

in this IFC. Ordinarily, compliance with 

an exception to the Physician SelfReferral Law does not operate to 

immunize conduct under the Federal 

anti-kickback statute or Gainsharing 

CMP, and arrangements that comply 

with the Physician Self-Referral Law are 

still subject to scrutiny under the 

Federal anti-kickback statute and 

Gainsharing CMP. Here, however, we 

are deviating from this general rule in 

view of the specific safeguards in the 

Shared Savings Program, the authority 

under section 1899(f) of the Act for the 

Secretary to waive the Federal antikickback statute and Gainsharing CMP 

as necessary to carry out the Shared 

Savings Program, and our desire to 

minimize burdens on entities 

establishing or operating ACOs under 

the Shared Savings Program. 

This waiver is structured to apply 

until the participation agreement, 

including any renewals thereof, expires 

or terminates. We are considering 

whether it might be necessary for this 

particular waiver to continue for some 

period of time, perhaps in the range of 

3 to 12 months, after expiration or 

termination of an ACO’s participation 

agreement. We are soliciting comments 

on this consideration. 

F. Waiver for Patient Incentives 

As described in section III of this IFC, 

several public commenters indicated 

that, in carrying out the quality and cost 

reduction goals of the Shared Savings 

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Program, ACOs would need to engage 

patients in better managing their own 

health care, including obtaining 

preventive care and complying with 

treatment plans for chronic conditions. 

Therefore, in light of this need, this IFC 

promulgates a waiver of the Federal 

anti-kickback statute and Beneficiary 

Inducements CMP to address 

arrangements pursuant to which ACOs, 

ACO participants, and ACO providers/ 

suppliers provide beneficiaries with free 

or below-fair market value items and 

services that advance the goals of 

preventive care, adherence to treatment, 

drug, or follow-up care regimes, or 

management of a chronic disease or 

condition. This waiver will help ACOs 

foster patient engagement in improving 

quality and lowering costs for Medicare 

and beneficiaries by removing any 

perceived obstacles presented by the 

Beneficiary Inducements CMP or 

Federal anti-kickback statute. 

Beneficiary compliance with care 

management programs is critical to the 

success of ACOs, and ACOs should have 

the flexibility to develop incentives to 

that end, with certain safeguards. In the 

interest of promoting broad 

improvement in care coordination and 

quality for all beneficiaries and in light 

of the mechanisms for assigning 

beneficiaries under the Shared Savings 

Program final rule, at this time we are 

not limiting this waiver to beneficiaries 

assigned to the ACO. However, we are 

soliciting comments on whether the 

waiver could and should be limited to 

beneficiaries assigned to the ACO. 

In order to balance the goal of 

beneficiary compliance with care 

management programs against the risk 

that ACOs could use extravagant 

incentives to steer beneficiaries, we are 

requiring that there be a reasonable 

connection between the incentives and 

the medical care of the individual. By 

way of example, the waiver would cover 

blood pressure cuffs for hypertensive 

patients, but not beauty products or 

theatre tickets. The waiver will protect 

incentives that are in-kind items or 

services, but not financial incentives, 

such as waiving or reducing patient cost 

sharing amounts (that is, copayment or 

deductible), which we believe are prone 

to greater abuse. We note that the 

Shared Savings Program at 42 CFR 

425.304(a)(1) itself prohibits ACOs, 

ACO participants, ACO providers/ 

suppliers, and other individuals or 

entities performing functions or services 

related to ACO activities from providing 

gifts or other remuneration to 

beneficiaries as inducements for 

receiving items or services from, or 

remaining in, an ACO or with providers 

in a particular ACO or receiving items 

or services from ACO participants or 

ACO providers/suppliers; clearly then, 

such incentives are not covered by this 

waiver. As further provided in the 

Shared Savings Program final rule, 

42 CFR 425.304(a)(2) permits certain 

incentives that are consistent with the 

requirements of 42 CFR 425.304(a)(1) 

and the terms of this waiver. This 

waiver applies only to the application of 

the Federal anti-kickback statute and 

Gainsharing CMP; nothing in this 

waiver supplants any applicable 

requirement in the Shared Savings 

Program final rule or other Medicare 

payment or coverage rules. We are not 

defining preventive care for purposes of 

this waiver in order to provide some 

flexibility as care models develop in the 

Shared Savings Program and evidencebased care programs are adopted by 

ACOs. However, we are soliciting 

comments on whether we should 

provide a specific definition. 

This waiver does not protect the 

provision of free or below fair market 

value items or services by 

manufacturers or other vendors to 

beneficiaries, the ACO, ACO 

participants, or ACO providers/ 

suppliers. The patient incentives waiver 

would cover ACOs, ACO participants, 

and ACO provider/suppliers that give 

beneficiaries items or services that they 

have received from manufacturers at 

discounted rates. However, the waiver 

would not cover the discount 

arrangement (or any arrangement for 

free items and services) between the 

manufacturer and the ACO, ACO 

participant, or ACO provider/supplier. 

This waiver applies during the term of 

the ACO’s participation agreement. 

However, to ensure continuity of care 

for beneficiaries if an ACO’s agreement 

terminates or is not renewed, we are 

providing that a beneficiary may keep 

any items received during the term of 

the ACO’s participation agreement 

pursuant to the waiver and may 

continue to receive any service initiated 

during the term of the ACO’s 

participation agreement pursuant to the 

waiver, if the service was in progress 

when the participation agreement 

terminated. Illustrative examples could 

include, but would not be limited to, a 

post-surgical patient receiving free 

home visits to coordinate in-home care 

during the recovery period, a 

hypertensive patient using home 

telehealth monitoring of blood pressure, 

or a beneficiary halfway through a 

normal course of smoking cessation 

treatment. Nothing precludes ACOs, 

ACO participants, or ACO providers/ 

suppliers from offering patient 

incentives to promote their clinical care 

if the incentives fit in an applicable safe 

harbor or exception or do not otherwise 

violate the Federal anti-kickback statute 

and Beneficiary Inducements CMP. For 

example, many such arrangements may 

fit in the exception to the Beneficiary 

Inducements CMP for incentives given 

to individuals to promote the delivery of 

preventive care at section 1128A(i)(6)(D) 

of the Act; 42 CFR 1003.101. 

G. Application of Waivers to Innovation 

Center Demonstrations 

Several commenters inquired about 

the application of these waivers to ACO 

demonstration programs sponsored by 

the Innovation Center, including 

application to the Pioneer ACOs. The 

waivers in this IFC are promulgated 

under section 1899(f) of the Act and, as 

set forth in the statute, are limited to the 

Shared Savings Program. Section 3021 

of the Affordable Care Act includes a 

similar waiver authority that may be 

exercised for Innovation Center 

demonstration programs, including the 

Pioneer ACOs. We will address the 

exercise of that waiver authority in 

guidance relevant to those programs. As 

noted previously in this IFC, the 

waivers in this IFC will apply to ACOs 

participating in the Advance Payment 

Initiative because those ACOs also 

participate in the Shared Savings 

Program. 

H. Additional Policy Considerations and 

Solicitation of Comments 

The waivers adopted in this IFC take 

into account the specific redesigned 

care delivery incentives and processes 

of the Shared Savings Program, as well 

as the obligation of ACOs, ACO 

participants, and ACO providers/ 

suppliers to comply with the Shared 

Savings Program rules, including 

requirements addressing governance, 

management, leadership, transparency, 

data, quality, performance, compliance, 

patient freedom of choice, and others. 

Moreover, the Shared Savings Program 

requires ACOs and their constituent 

parts to demonstrate a meaningful 

commitment to the Shared Savings 

Program. The waivers emanate from the 

expectation that ACOs and their 

constituent parts will act in compliance 

with program rules and in the best 

interests of patients and the Medicare 

program, including the Shared Savings 

Program. The waivers are an attempt to 

promote a high degree of certainty, 

innovation, and variation in the 

development of ACOs to improve 

quality of care, as well as economy and 

efficiency in the Medicare program. 

The government’s enforcement 

experience reflects that, to varying 

degrees, all Federal health care 

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8As described in section III of this IFC, several 

commenters suggested that we establish either 

narrow waivers or none at all; some commenters 

suggested specific additional conditions for waivers 

that we have not adopted, 

programs are susceptible to fraud and 

abuse. These waivers should not be read 

to reflect any diminution of our 

commitment to protect programs and 

beneficiaries from harms associated 

with kickbacks and referral payments, 

including overutilization, increased 

costs, and substandard or poor quality 

care. DHHS will monitor ACOs and the 

Shared Savings Program as a whole for 

fraud or abuse, such as billing for 

medically unnecessary or upcoded 

services, submitting false or fraudulent 

data, or providing worthless or 

substandard care. If these or other 

problematic practices are found, the 

government has a number of tools to 

address the problem. In appropriate 

cases, we will use these tools to protect 

the interests of beneficiaries and the 

Medicare program. 

We intend to closely monitor ACOs 

entering the program in 2012 through 

June 2013. We plan to narrow the 

waivers established in this IFC unless 

the Secretary determines that 

information gathered through 

monitoring or other means suggests that 

such waivers have not had the 

unintended effect of shielding abusive 

arrangements.8 In particular, if we find 

that undesirable effects (for example, 

aberrant patterns of utilization) have 

occurred because of the waivers, we will 

revise this IFC to address those 

problems by narrowing the waivers. 

Modifications to the waivers would 

apply to future ACO applicants beyond 

July 2013 and to ACOs that renew their 

participation agreements. There are 

several options for modifying the 

waivers to address problems that may 

arise. Should we identify specific areas 

of fraud and abuse resulting from 

arrangements covered by the waivers, 

we could modify the waivers to add or 

substitute conditions tailored to address 

specific abusive conduct. We could also 

limit ACO arrangements involving 

referral sources to those that are fair 

market value or commercially 

reasonable or involve services 

performed by the referral source. This 

approach could include exceptions for 

specified arrangements, including, for 

example, a limited amount of start-up 

costs, information technology, medical 

training, care coordination, or goods or 

services provided to referral sources’ 

patients. In addition, we could preclude 

waiver protection for arrangements that 

involve individuals or entities that are 

not part of the ACO or we could include 

a requirement that ACOs submit reports 

to the Secretary regarding their 

arrangements. We solicit comments in 

this rulemaking regarding these narrow 

waivers. We also seek comments on 

additional categories of arrangements 

that would require protection through a 

waiver and how the categories should 

be defined and what limits, if any, 

should be imposed. 

We are establishing waivers under 

section 1899(f) of the Act to foster the 

success of the Shared Savings Program, 

the purposes of which are to promote 

accountability for a Medicare patient 

population, manage and coordinate care 

for Medicare fee-for-service 

beneficiaries, and encourage redesigned 

care processes to improve quality. Our 

goal is to balance effectively the need 

for ACO certainty, innovation, and 

flexibility in the Shared Savings 

Program with protections for 

beneficiaries and the Medicare program. 

It is our expectation that the waivers 

promulgated in this IFC will be used for 

their intended purposes to carry out the 

Shared Savings Program. We will 

closely monitor the program and ACO 

conduct. We plan to narrow the waivers 

in this IFC unless information gathered 

through monitoring or other means 

suggests that the waivers in this IFC are 

adequately protecting the Medicare 

program and beneficiaries from the 

types of harms associated with referral 

payments or payments to reduce or limit 

services. We are soliciting comment on 

the specific narrowed waivers described 

above. 

VI. Procedural Rulemaking Matters 

A. Waiver of Proposed Rulemaking 

Under the Administrative Procedures 

Act (5 U.S.C. 553(b)), an agency may 

waive publication of a notice of 

proposed rulemaking if the agency finds 

good cause that the notice and comment 

procedure is impracticable, 

unnecessary, or contrary to the public 

interest and the agency incorporates 

into the rule a statement of, and the 

reasons for, such a finding. For the 

reasons discussed later in this IFC, we 

find that it would be unnecessary, 

impracticable, and contrary to the 

public interest to delay the issuance of 

the waivers granted in this IFC until 

after a public notice and comment 

process is completed. 

In section 1899(a)(1) of the Act, 

Congress expressly required the 

Secretary to establish the Shared 

Savings Program no later than January 1, 

2012. As noted earlier in this document, 

Congress authorized the Secretary to 

waive the requirements of sections 

1128A and 1128B and title XVIII of the 

Act as may be necessary to carry out the 

Shared Savings Program. The Physician 

Self-Referral Law, the Federal antikickback statute, the Gainsharing CMP, 

and the Beneficiary Inducements CMP, 

discussed elsewhere in this IFC, are 

important tools to protect patients and 

the Federal health care programs from 

fraud, improper referral payments, 

unnecessary utilization, 

underutilization, and other harms. 

We recognize, however, that these 

laws may prohibit or significantly 

restrict certain arrangements necessary 

for the formation of ACOs under the 

Shared Savings Program. Moreover, the 

significant financial consequences of 

noncompliance with these laws (and the 

potential False Claims Act liability) will 

likely have a chilling effect on the 

willingness of health care providers to 

participate in the Shared Savings 

Program at its inception if these 

provisions are not waived. Delaying the 

issuance of final waivers would 

effectively delay the program’s 

establishment well beyond the statutory 

deadline and delay the savings that the 

program is expected to achieve at a time 

when reducing the Federal budget is a 

critical priority. For this reason, it is 

impracticable and contrary to the public 

interest to issue the waivers of these 

laws only after additional months of 

notice and comment rulemaking. In 

addition, the failure to simultaneously 

issue the Shared Savings Program final 

rule and the waivers promulgated in 

this IFC would impede development of 

the innovative integrated-care models 

envisioned by the Shared Savings 

Program and deny Medicare 

beneficiaries the opportunity to benefit 

from a new approach to the delivery of 

health care that is designed to result in 

better care for individuals, and better 

health for populations, as well as lower 

growth in expenditures. Neither result is 

in the public interest. 

We also believe it is unnecessary to 

offer what would essentially be a second 

opportunity to comment on these 

waivers and thereby delay finalizing 

waivers that will permit arrangements 

that are essential to the implementation 

success of the Shared Savings Program. 

On April 7, 2011, we published the 

Waiver Designs Notice. That notice 

solicited public comment regarding 

possible waivers of the application of 

the Physician Self-Referral Law, the 

Federal anti-kickback statute, and 

certain civil monetary penalties law 

provisions to specified arrangements 

involving ACOs under the Shared 

Savings Program. This IFC responds to 

public comments received on that 

notice. Moreover, the public will 

nonetheless receive an opportunity to 

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Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 68009 

comment on the specific policy choices 

made in this rule because we are 

publishing it as an IFC. In accordance 

with section 1871(a)(3) of the Act, we 

are obligated to consider comments and 

publish a final rule addressing those 

comments within 3 years. 

Finally, we note that in the absence of 

final program rules, it would have been 

impracticable, if not impossible, to issue 

a comprehensive notice of proposed 

rulemaking on fraud and abuse waivers 

that would adequately support the 

Shared Savings Program. As we stated 

in the Waiver Designs Notice, the 

requirements of the final program rules 

regarding the structure and operations 

of ACOs under the Shared Savings 

Program would affect the scope of the 

waivers. For this reason, we indicated in 

the Waiver Designs Notice that, in 

drafting the final waivers, we would 

consider comments received on the 

Shared Savings Program proposed rule 

and the terms of the final rule. We have, 

in fact, done so in creating the waivers 

set forth in this IFC. Simply put, the 

proposal of definitive waivers was not 

possible until now. 

For the reasons noted previously in 

this IFC, we believe that it would be 

impracticable and contrary to the public 

interest to delay the issuance of final 

waivers until after the receipt and 

analysis of additional public comments. 

Therefore, we find good cause to waive 

prior notice and comment procedure 

and to issue this final rule on an interim 

basis. We are providing a 60-day public 

comment period. 

B. Waiver of Delayed Effective Date 

Section 1871(e)(1) of the Act generally 

requires that a final rule become 

effective at least 30 days after the 

issuance or publication of the rule. This 

requirement for a 30-day delayed 

effective date can be waived, however, 

if the Secretary finds that waiver of the 

30-day period is necessary to comply 

with statutory requirements or that the 

requirement for a delayed effective date 

is contrary to the public interest. 

As indicated previously in this IFC, 

section 1899 of the Act expressly 

requires the Secretary to establish the 

Shared Savings Program no later than 

January 1, 2012. Prospective ACOs that 

wish to participate in the Medicare 

Shared Savings Program in 2012 must 

submit an application and enter into a 

participation agreement with CMS that 

commences on April 1, 2012 or July 1, 

2012. We expect that the application 

deadline for participation agreements 

with an April 1, 2012 start date will be 

no later than January 1, 2012. Based on 

the comments submitted in response to 

the Waiver Designs Notice, we believe 

that a significant number of ACO 

applicants for the Shared Savings 

Program would forego applying to 

participate in the Shared Savings 

Program until final waivers have 

become effective and sufficient time has 

elapsed to allow the applicants to use 

the waivers in a manner that would 

support their applications and the 

purposes of the program. We believe 

that a 30-day delay in the effective date 

for the final waivers could jeopardize an 

ACO’s ability to submit timely an 

application for a participation 

agreement commencing in 2012. For 

this reason, we find that waiver of the 

requirement for a delayed effective date 

is necessary to comply with a statutory 

requirement. 

We also find that a delayed effective 

date would be contrary to the public 

interest. The success of the Shared 

Savings Program depends in no small 

part on allowing prospective ACOs 

sufficient time to prepare for application 

to the program and to build the 

innovative, cost effective, integrated 

healthcare delivery models envisioned 

by the Shared Savings Program. 

Delaying the effective date of this rule 

would be contrary to the public interest 

because it would effectively delay the 

timely implementation of the Shared 

Savings Program, thereby denying the 

public the benefits of a new approach to 

health care delivery that is designed to 

result in better care for individuals, and 

better health for populations, as well as 

lower growth in expenditures. 

In addition, we find that it is not in 

the public interest to delay the effective 

date of a rule that does not impose a 

burden upon anyone. This IFC waives 

the aforementioned authorities, 

provided certain conditions are met. In 

short, the rule rescinds, rather than 

adds, restrictions with which 

prospective ACOs, their prospective 

ACO participants, and their prospective 

ACO providers/suppliers must comply. 

Accordingly, a delay in the effective 

date of this IFC is unnecessary and 

contrary to the public interest. 

VII. Collection of Information 

Requirements 

While this IFC does include 

information collection and record 

keeping requirements, section 3022 of 

the Affordable Care Act provides that 

Chapter 35 of title 44, United States 

Code, shall not apply to the Shared 

Savings Program. Consequently, the 

information collection requirements 

contained in this IFC need not be 

reviewed by the Office of Management 

and Budget. 

VIII. Regulatory Impact Statement 

We have examined the impact of this 

rule as required by Executive Order 

12866 on Regulatory Planning and 

Review (September 30, 1993), Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (February 2, 

2011), the Regulatory Flexibility Act 

(RFA) (September 19, 1980, Pub. L. 96– 

354), section 1102(b) of the Social 

Security Act, section 202 of the 

Unfunded Mandates Reform Act of 1995 

(March 22, 1995; Pub. L. 104–4), 

Executive Order 13132 on Federalism 

(August 4, 1999) and the Congressional 

Review Act (5 U.S.C. 804(2)). 

Executive Orders 12866 and 13563 

direct agencies to assess all costs and 

benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). A regulatory impact analysis 

(RIA) must be prepared for major rules 

with economically significant effects 

($100 million or more in any 1 year). 

This rule does not reach the economic 

threshold and thus is not considered a 

major rule. 

The RFA requires agencies to analyze 

options for regulatory relief of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. Most 

hospitals and most other providers and 

suppliers are small entities, either by 

nonprofit status or by having revenues 

of $7.0 million to $34.5 million in any 

1 year. Individuals and States are not 

included in the definition of a small 

entity. We are not preparing an analysis 

for the RFA because we have 

determined, and the Secretary certifies, 

that this IFC will not have a significant 

economic impact on a substantial 

number of small entities. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. This analysis must conform to 

the provisions of section 604 of the 

RFA. For purposes of section 1102(b) of 

the Act, we define a small rural hospital 

as a hospital that is located outside of 

a Metropolitan Statistical Area for 

Medicare payment regulations and has 

fewer than 100 beds. We are not 

preparing an analysis for section 1102(b) 

of the Act because we have determined, 

and the Secretary certifies, that this IFC 

will not have a significant impact on the 

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68010 Federal Register / Vol. 76, No. 212 / Wednesday, November 2, 2011 / Rules and Regulations 

operations of a substantial number of 

small rural hospitals. 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 also 

requires that agencies assess anticipated 

costs and benefits before issuing any 

rule whose mandates require spending 

in any 1 year of $100 million in 1995 

dollars, updated annually for inflation. 

In 2011, that threshold is approximately 

$136 million. This rule will have no 

consequential effect on State, local, or 

tribal governments or on the private 

sector. 

Executive Order 13132 establishes 

certain requirements that an agency 

must meet when it promulgates a 

proposed rule (and subsequent final 

rule) that imposes substantial direct 

requirement costs on State and local 

governments, preempts State law, or 

otherwise has Federalism implications. 

Since this regulation does not impose 

any costs on State or local governments, 

the requirements of Executive Order 

13132 are not applicable. 

In accordance with the provisions of 

Executive Order 12866, this regulation 

was reviewed by the Office of 

Management and Budget. 

For the reasons set forth in this 

preamble, the Centers for Medicare & 

Medicaid Services and the Office of the 

Inspector General are implementing this 

interim final rule under the authority of 

section 1899 of the Act. 

Authority: Section 1899(f) of the Act. 

Dated: October 6, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Dated: October 19, 2011. 

Daniel R. Levinson, 

Inspector General, Department of Health and 

Human Services. 

Approved: October 19, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–27460 Filed 10–20–11; 11:15 am] 

BILLING CODE 4120–01–P; 4152–01–P 

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