Meaningful participation in governance

By Richard Cowart

CMS has reignited interest in ACOs by issuing regulations that considered industry comments and reduced the burdens and costs of participating in the Medicare Shared Savings Program.  The regulatory changes were significant and included revised risk tracks, prospective beneficiary assignment, new threshold for shared savings and other changes. The scope of this column does not permit a comprehensive review of the changes. However, a threshold and fundamental change involves the area of ACO governance.

Any good business attorney will advise clients to be grounded in the cornerstones of ownership, capital structure and governance.  An organization’s governance structure determines an organization’s responsibilities and accountability. Let’s briefly review the regulatory changes in the Final Rules that impact ACO governance.

Meaningful Participation. Although CMS retained many of the proposed guidelines on how an ACO should compose its governing body, the final regulations do provide greater overall flexibility. Notably, CMS eliminated the requirement that each ACO participant must have “proportional control” of the governing body. Instead, CMS requires ACOs to provide ACO participants with “meaningful participation” in the composition and control of the governing body. Although commentators to the proposed regulations advocated that CMS mandate certain specialists or skill sets be present on the ACO governing body, CMS refrained from taking such a matrix approach and rejected any mandates regarding physician representation on the governing body.

Beneficiary Representation. In the final regulations, CMS did maintain two key requirements.  First, ACO participants in the aggregate should hold at least 75 percent control of the governing body, and second, at least one Medicare beneficiary receiving services from the ACO should be included on the governing body. Interestingly, CMS also indicated a vehicle by which ACOs can participate in the Shared Savings Program without complying with either of these requirements. Specifically, an ACO that seeks to avoid the 75 percent control and/or beneficiary representation requirement may seek a waiver by explaining on its application why it seeks to differ from these standards and describe how ACO participants would be involved in the ACO’s governance or provide meaningful participation in the ACO’s governance without actually holding seats on the governing board.

Waiver Guidance. The added flexibility of the final regulations will generally allow ACOs to compose their boards in a manner to best suit their particular needs. Nonetheless, it remains unclear exactly how CMS will exercise its discretion to waive the 75 percent control and/or beneficiary representation requirements. Although many commentators requested guidance on the use of advisory boards and board committees, CMS did not provide any insight as to whether such mechanisms would be sufficient to justify a waiver. Further, it remains unclear whether a waiver would be sustainable based upon the inclusion of a patient advocate, non-profit association or community representative representing the views of patients.

            Good governance is the bedrock of any successful business organization. The regulations have moved from a standard of proportional control to one of meaningful participation. It will now be up to the legal craftsmen to satisfy CMS that the new standard is being met.