The New York State Department of Health (“NYSDOH”) published proposed regulations (the “Proposed Regulations”) in October that establish standards for the issuance of certificates of authority to Accountable Care Organizations (“ACOs”) in New York. The Proposed Regulations develop a voluntary certification process pursuant to which certified ACOs (which are defined, in part, as organizations “comprised of clinically integrated independent health care providers that work together to provide, manage, and coordinate health care for a defined population”) are in a position to better enhance the performance of health care delivery in New York by giving providers financial incentives to improve the quality of care and to reduce utilization and costs of such care.

In addition to echoing the goals of certain ACO-centered and other quality/cost driven programs developed pursuant to the federal Patient Protection and Affordable Care Act (collectively, the “ACA Programs”) by promulgating regulations that promote the sharing of savings generated as a result of the provision of high-quality and efficient care, the Proposed Regulations contain various other noticeable similarities to the regulations governing the ACA Programs, more specifically the Medicare Shared Savings Program (the “MSSP”). Certain of such similarities are discussed below.

Eligible Participants, Legal Structure, and Governance Requirements

Pursuant to the federal MSSP regulations, a fairly extensive variety of ACO participants or combinations of the same are eligible to form an ACO to participate in the MSSP, including, but not limited to, (i) ACO professionals in a group practice arrangement; (ii) networks of individual practices of ACO professionals; (iii) partnerships or joint venture arrangements between hospitals and ACO professionals; (iv) hospitals employing ACO professionals; (v) certain critical access hospitals; (vi) rural health clinics; and (vii) federally qualified health centers. Similar flexibility is granted to those entities/providers wishing to be certified as an ACO in New York. That is, independent practice associations (“IPAs”), physician groups, health homes (an entity designated by the Commissioner of NYSDOH pursuant to Section 365-1 of the Social Services Law), Medicare-only ACOs as well as hospitals are all eligible to become ACOs in New York.

While flexibility is granted with respect to the types of entities/providers that can form an ACO in New York, the Proposed Regulations do set forth specific requirements pertaining to the legal structure and governance of an ACO. Specifically, the ACO must be a domestic entity formed under the laws of the state of New York. Akin to the governance requirements set forth in the applicable MSSP regulations, the ACO must have a governance and management structure that is reasonably and equitably representative of the ACO’s participants and its beneficiaries. The MSSP regulations dictate that the ACO governing body must include at least one (1) Medicare beneficiary representative served by the ACO. Similarly, the Proposed Regulations dictate that the ACO’s governing body must include at least one (1) Medicaid or Child Health Plus beneficiary. The Proposed Regulations also mirror the MSSP governance requirement that at least seventy-five (75%) control of the ACO’s governing body must be held by ACO participants.

Legal Protections Afforded to ACOs

The certification process set forth in the Proposed Regulations, while voluntary, provides attractive benefits to those entities that become certified, including those benefits that are commiserate with the waivers of certain federal laws (pursuant to the interim final rule issued by the Centers for Medicare & Medicaid Services (“CMS”) and the Office of the Inspector General on November 2, 2011 (the “ACO Waivers Rule”)) that, without such waivers, would otherwise prohibit or impede the development and operation of ACOs wishing to participate in the MSSP. Specifically, pursuant to the Proposed Regulations, an ACO that obtains a certificate of authority from the NYSDOH will be shielded from New York state antitrust, fee-splitting and self-referral laws as well as New York’s corporate practice of medicine prohibition if certain conditions are satisfied.

As with the waivers under the ACO Waivers Rule, the aforementioned protections are self-implementing – there being no separate filing or application procedures. Rather, a certified ACO can take advantage of such protections so long as the ACO (i) ensures that a particular arrangement or contract is reasonably related to the purposes of the ACO; (ii) contemporaneously documents the arrangement or contract; and (iii) publicly discloses the arrangement or contract (provided, however, that the disclosure need not contain the financial or economic terms of the arrangement or contract).

Quality Management and Improvement Program and Performance Reporting

New York certified ACOs will be required to develop and implement a quality management and improvement program designed to identify, evaluate and resolve issues arising in the context of health care administration and delivery. To further measure quality, both the MSSP as well the Proposed Regulations contemplate the submission of data to CMS or the NYSDOH (as applicable) that demonstrates quality performance equal to or above certain statewide and/or national benchmarks.

Medicare-Only ACOs

Finally, the Proposed Regulations give a further nod to the ACA Programs by streamlining the certification process for those ACOs that are participating in an ACA Program (e.g., the MSSP). Specifically, the Proposed Regulations provide for an expedited certification process for such Medicare-Only ACOs and only require such ACOs to be subject to certain of the Proposed Regulations.

Many providers across New York are currently pursuing (or are already participating in) accountable care arrangements pursuant to an ACA Program. It is clear through a review of the Proposed Regulations that New York desires to foster continued growth of accountable care and that it intends to do so by encouraging the development of certified ACOs pursuant to the Proposed Regulations that, as described in this article, are influenced significantly by the regulations specific to the MSSP.

The Proposed Regulations are subject to public comment until December 1, 2014.