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Washington Supreme Court Orders Physical Removal of Racially Restrictive Covenant from Public Records Banner Image

Washington Supreme Court Orders Physical Removal of Racially Restrictive Covenant from Public Records

Month: April 2022

Washington Supreme Court Orders Physical Removal of Racially Restrictive Covenant from Public Records

Posted on by Christie Bowness

The Washington Supreme Court recently remanded a declaratory action stemming from a racially restrictive covenant in a deed to comply with RCW 49.60.227, as amended by the Washington legislature during the 2021 legislative session, which permits a court to strike a racially restrictive, legally unenforceable covenant from the public records and eliminate the covenant from the title. See May v. Spokane County, 2022 Wash. LEXIS 199 (Wash. Mar. 31, 2022).  In 1953, the executors of an estate owned lots located in Spokane, Washington. That same year, the executors recorded a declaration of protective covenants for all of the lots, which remained undeveloped. Covenant subsection (c) provided, in pertinent part, that “[n]o race or nationality other than the white race shall use or occupy any building on any lot, except that this covenant shall not prevent occupancy by domestic servants of a different race or nationality employed by an owner or tenant.”

In 2013, a purchaser of the property at issue conveyed the property via statutory warranty deed (the “2013 Deed”). The property was conveyed subject to:

[c]ovenants, conditions, restrictions and/or easements; but deleting any covenant, condition or restriction indicating a preference, limitation or discrimination based on race, color, religion, sex, handicap, family status, or national origin to the extent such covenants, conditions or restrictions violate Title 42, Section 3604(c) of the United States Codes.

Declaring the covenant void in the 2013 Deed did not physically remove it from the public records, however. In 2017, the Plaintiff purchased the property via statutory warranty deed (the “2017 Deed”). The 2017 Deed did not include the language deleting the racially restrictive covenant contained in the 2013 Deed. The 2017 Deed merely stated that “[t]his conveyance [was] subject to covenants, conditions, restrictions and easements, if any, affecting title, which may appear in the public record, including those shown on any recorded plat or survey.” Plaintiff discovered the racially restrictive covenant during the title search of the property. Immediately thereafter, the Plaintiff filed a declaratory action to have the covenant voided under RCW 49.60.224, which voids such covenants, and to have the covenant physically removed from the title to the property and from the public records under the former RCW 49.60.227 (2006).

Both the trial court and the Court of Appeals concluded that RCW 49.60.227 did not allow the physical removal of the covenant from the title but, instead, allowed only for an order voiding the covenant to be filed in the property records.  In doing so, the Court of Appeals noted that “RCW 49.60.227 plainly contemplates that a court order striking a voided provision in a recorded instrument is self-executing; i.e., no action beyond entry of the order is necessary to eliminate the existence of the discriminatory provision.”

In response to the Court of Appeals decision, the Washington legislature amended RCW 49.60.227, clarifying the procedure under which these covenants are struck and eliminated. Specifically, under the amended statute, an owner, occupant, tenant or homeowners’ association board of the property which is subject to an unlawful deed restriction or covenant pursuant to RCW 49.60.224 is entitled to have discriminatory covenants and restrictions that are contrary to public policy struck from their chain of title.  If an owner, occupant, tenant or homeowners’ association board of the property elects to pursue judicial remedy, “[a] complete copy of any document affected shall be made an exhibit to the order and the order shall identify each document by recording number and date of recordation and set forth verbatim the void provisions to be struck from such document. The order shall include a certified copy of each document, upon which the court has physically redacted the void provisions.” RCW 49.60.227(1)(b)(i).  A certified copy of the order must then be provided to county recording officials, who are required to place the corrected document in the public records with a notation that the original document was corrected. RCW 49.60.227(1)(b)(ii)-(iii). County officials are then required to update the indices of each original document referenced in the court order, adding a note the original document is no longer the primary official record. RCW 49.60.227(1)(b)(iv). The county is required to separately maintain the original document. RCW 49.60.227(1)(b)(v).

On appeal, the Washington Supreme Court remanded to the trial court for relief consistent with the legislature’s 2021 amendments to RCW 49.60.227. The Court noted that “the legislature’s intent is clear and that the amendments provide a remedy that strikes the balance between keeping a historical record of racism in covenants, while also allowing homeowners to remove the repugnant covenants from their chains of title.”  As to the need for the Clerk to maintain the original offending instrument, the Court further elucidated that “[w]e must ensure future generations have access to these documents, although the covenants are morally repugnant, they are a part of a documented history of a disenfranchisement of a people.  It is our history.” Accordingly, the Court remanded the case to the trial court.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

In Split Decision, Tenth Circuit Affirms Dismissal in Overdraft Charge Dispute

Posted on by rd_admin

In a split decision, the United States Court of Appeals for the Tenth Circuit recently affirmed a lower court’s dismissal in a suit in which a customer of a bank challenged the bank’s overdraft charge practices and claimed they constituted usurious loans.  See Walker v. BOKF, Nat’l Ass’n, 2022 U.S. App. LEXIS 9708 (10th Cir. Apr. 8, 2022).  The plaintiff in the action holds a checking account with BOKF, National Association (the “Bank”).  Plaintiff overdrew his checking account by $25.00 and the Bank paid the overdrafted amount.  The Bank then charged him a $34.50 overdraft fee and, after his account balance remained negative for more than five days, $6.50 as an “Extended Overdraft Charge” for each additional business day the account balance was negative.  The Bank made 36 overdraft charges against Plaintiff in total before Plaintiff made a sufficient deposit.  Plaintiff then brought this action, arguing that the extended overdraft fees were interest that exceed the usury limit set forth in the National Bank Act of 1864 (the “NBA”).  See 12 U.S.C. 85.  Under the NBA, banks cannot charge interest rates greater than the rate allowed by the state where the bank is chartered.  Here, the Bank is chartered in Oklahoma, which caps rates at 6%.  The Bank moved to dismiss and the District Court granted the motion, hodling that these overdraft fees were fees for “deposit account services” rather than interest and that they did not violate the NBA.

On appeal, the Court affirmed.  The majority held that the Office of the Comptroller of Currency (the “OCC”) issued Interpretive Letter 1082 in 2001 to address this specific issue.  In the letter, the OCC found that overdraft fees compensate banks for “services directly connected with the maintenance of a deposit account,” and “therefore the bank was not creating a ‘debt’ that it then ‘collected’ by recovering the overdraft and the overdraft fee from the account. Instead, the bank was ‘providing a service to its depositors’ that the accountholder had agreed to pay for.”  Accordingly, the OCC determined that the overdraft fees imposed by a bank constituted charges for non-interest “deposit account services” under 12 C.F.R.§ 7.4002(a), as opposed to interest under § 7.4001(a).  The Court also found that the OCC’s interpretive letter was entitled to Auer deference because § 7.4001(a) is ambiguous, the OCC’s interpretation is reasonable, and  “the character and context of the agency interpretation entitles it to controlling weight.”  Accordingly, the Court affirmed the dismissal.

In dissent, Judge Eid argued that regulation is not ambiguous because the overdraft fees meet the regulatory definition of “interest.”  “When [the Bank] decides to cover a customer’s overdraft, it pays for the item and expects to be paid back. For example, despite [Plaintiff’s] inability to afford the original charge due to insufficient funds, [the Bank] made money available to him by purchasing the item for him. [The Bank] deducted the cost from [Plaintiff’s] account and charged him an overdraft fee, which it also deducted. But the bank expected to be paid back. By covering an overdraft, [the Bank] thus makes a temporary provision of money with the expectation of repayment. In other words, [the Bank] makes a loan.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

Eleventh Circuit Voids Deed, Holds Attorney Acknowledgement Was Insufficient

Posted on by rd_admin

The United States Court of Appeals for the Eleventh Circuit recently overturned a lower court and found that an attorney’s acknowledgement of a deed was not enough to remedy the fact that it lacked the requisite two attestations under Georgia law.  See Pingora Loan Servicing, LLC v. Scarver (In re Lindstrom), 2022 U.S. App. LEXIS 9423 (11th Cir. Apr. 7, 2022).  In the case, the borrower executed a security deed to a lender to secure a loan.  Her sister attested the deed (i.e., she signed a statement that she witnessed the execution) and the closing attorney/notary acknowledged it (i.e., he signed a statement that the borrower had acknowledged signing it, but not that he witnessed the signature itself).  A few years later, the borrower filed for bankruptcy.  The bankruptcy trustee sued the lender, arguing that the deed was invalid under Georgia law because the statute – which was amended only a few weeks before the deed was signed – now required two witnesses to attest the deed instead of one.  The lender tried to salvage the deed under O.C.G.A. § 44-2-18, which allows a defective deed to be remedied if a “subscribing witness” signs an affidavit stating that the deed was validly executed and attested.  The lender argued that the closing attorney was a subscribing witness and that his acknowledgement was sufficient to save the deed under the statute.  The District Court agreed with the lender, and the trustee appealed.

On appeal, the Court reversed.  The Court focused on whether someone who signs an

acknowledgement, as opposed to an attestation, is a “subscribing witness” under the statute, which had been enacted in 1850.  Citing cases and law dictionaries from the 18th and 19th centuries and going forward, the Court found that “attestation—signing as a witness to a deed’s execution—is the only way a person can qualify as a ‘subscribing witness.’ As a result, the terms ‘attesting witness’ and ‘subscribing witness’ are synonymous.”  Accordingly, the attorney’s acknowledgement was insufficient under the statute.  The Court also noted a second issue with the lender’s argument.  O.C.G.A. § 44-2-18 applies to deeds “neither attested by nor acknowledged before one of the officers named in Code Section 44-2-15[.]”  Because the deed here was acknowledged before an officer, the remedial statute would not apply:  the “acknowledged deed enters limbo—no longer good enough to be recorded, but too good to be saved.”  The Court noted that this likely was an oversight by the Georgia assembly, and that “it might ‘be well for the general assembly to consider the wisdom of adopting another’ remedial rule for acknowledged deeds.”

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

Illinois Federal Court Denies Motion to Reconsider Claims Against Title Insurer

Posted on by rd_admin

The United States District Court for the Northern District of Illinois recently denied plaintiff James Stewart’s (“Stewart”) motion for reconsideration of the dismissal of his breach of contract and Illinois Consumer Fraud Act (“ICFA”) claims against the defendant title insurance company. See Stewart v. JP Morgan Chase Bank, N.A., 2022 U.S. Dist. LEXIS 17810 (N.D. Ill. Feb. 1, 2022). Stewart brought his claims based on a home mortgage he obtained from Washington Mutual in 2007, at which time he obtained a title policy from Defendant. At the height of the financial crisis, Stewart’s loan was sold to Freddie Mac, then resold to JP Morgan Chase (“Chase”).  Plaintiff refinanced his loan with Chase in 2011.  Plaintiff made mortgage payments until 2016, and Chase filed foreclosure in 2018. To make matters worse for Plaintiff, he learned in 2019 that, in 1974, title to his property had been placed in an express trust, “ultimately making Stewart’s title of the home defective.” In 2019, Plaintiff made a claim to Defendant, who denied the claim because he had not suffered any loss.  Plaintiff then brought this action alleging both that Defendant breached the policy, as well as that the 2011 refinancing with Chase was improper because Chase did not own the loan, and that Defendant was somehow complicit in this improper refinancing.

Plaintiff’s ICFA claim was premised on Defendant’s purported fraud during the refinancing of his loan.  The Court originally dismissed the claim because the statute of limitations for an action under the ICFA is three years, but Plaintiff had not brought his claim until seven years after the alleged fraud. In reconsidering the claim, the Court also addressed the merits of Plaintiff’s ICFA claim, which were not originally considered since the claim was dismissed on SOL grounds. The claim would require a pleading of (1) a deceptive act or practice by the defendant; (2) defendant's intent that the plaintiff rely on the deception; (3) that the deception occurred in the course of trade or commerce; and (4) the consumer fraud proximately caused the plaintiff’s injury. The Court agreed with Defendant’s argument that Plaintiff had not pleaded that Defendant intended reliance on any alleged deception, or that Plaintiff had been injured, and also found that any pleading amendment to plead those elements would be futile, as Plaintiff had already filed four complaints in the matter. As such, the Court denied reconsideration of this claim.

Plaintiff’s breach of contract claim was based on Defendant’s denial of his 2019 title insurance claim. The Court had originally granted Defendant’s motion to dismiss the claim for failure to state a claim, as Plaintiff’s only claimed injury was future speculative damages, which the Court found was not sufficient to plead a plausible breach of contract claim.  Plaintiff’s argument on reconsideration included speculative dollar figures involved in a potential sale of the property, which the Court held was merely “a rehash of argument that court previously considered.”  As such, the Court declined to further reconsider the breach of contract claim.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

NJDEP Adds Clarity to Dirty Dirt Law

Posted on by rd_admin

In January 2020, New Jersey’s “Dirty Dirt” legislation was signed into law. The law requires businesses engaged in soil and fill recycling to register with the New Jersey Department of Environmental Protection (“NJDEP”) and apply for an A-901 license.

On March 16, 2022, the NJDEP issued a Compliance Advisory relating to the Dirty Dirt law that:

  • Extends the deadline for soil and fill recycling businesses to register with the NJDEP to July 14, 2022;
  • Extends by 90 days, from April 14, 2022 to July 14, 2022, the time in which these businesses must submit an A-901 license application;
  • Reaffirms that any business engaging in soil and fill recycling services after the July 14, 2022 date without registering and submitting an A-901 license application will be in violation of the Dirty Dirt law; and
  • Sets forth a Certification Program for companies that engage in certain soil and fill recycling activities that require less regulatory oversight.

Businesses that are still uncertain as to whether they must comply with the law should consult with counsel familiar with the new law.

The Dirty Dirt Law

The genesis for the law was the alleged illegal dumping and improper handling of soil and fill material. To address this concern, the law requires companies engaged in soil and fill recycling services to obtain an A-901 license. The A-901 license was initially created to deter bad actors from participating in the solid waste industry, and the application for a license requires officers, directors and key employees of solid waste companies to file personal history disclosure statements, and any company in the chain of ownership is required to file a second level business disclosure statement. Traditionally, the A-901 license was limited to companies that transported, stored or disposed of solid waste. The Dirty Dirt law, however, expands the breadth of A-901 licensure to include entities that engage in the business of soil and fill recycling.

The Need for an Extension of Deadlines under the Dirty Dirt Law

As the NJDEP works on drafting regulations to implement the law, and holds stakeholder meetings to obtain input from the regulated community, there have been many questions about the law’s scope. The Dirty Dirt law specifically covers businesses that are engaged in or intend to engage in “the collection, transportation, processing, brokering, storage, purchase, sale or disposition, or any combination thereof, of soil and fill recyclable materials.” Ambiguities in the law led some companies to determine, incorrectly, that they are not covered and, thus, these companies did not register with the NJDEP by the required October 14, 2021 deadline. The Compliance Advisory was issued to clarify requirements and provide additional time for regulated businesses to register under the law if they had not already done so, and timely file an A-901 license application.

Reduction in Dirty Dirt Law’s Regulatory Burdens

Moreover, to reduce the regulatory burden on businesses that engage in certain soil and fill recycling and companies that handle only de minimis amounts of soil and fill material, the NJDEP created a Certification Program, which is discussed in the Compliance Advisory. This Program reduces requirements for businesses that only handle "Non-Restricted Soil and Fill Recyclable Materials,” which are defined as “non-putrescible, non-water-soluble, non-decomposable, inert aggregate substitute, including rock, soil, broken or crushed brick, block, concrete, glass and/or clay or ceramic products, or any combination thereof, generated from land clearing, excavation, demolition, or redevelopment activities that are excluded from the definition of Solid Waste.” The Program also provides additional regulatory relief for businesses that handle specified low volumes of such Non-Restricted Soil and Fill Recyclable Materials, such as landscapers, contractors, pool companies, electricians, etc. (“de minimis companies”).

Certification for Companies handling Non-Restricted Soil and Fill Recyclable Materials

Although the law specifically excludes certain “clean” material from regulation, the Department has concerns regarding the handling of Non-Restricted Soil and Fill Recyclable Materials, and believes this Material requires additional care and oversight. Therefore, the NJDEP created a Certification Program placing the burden on the recycler to certify that it 1) is familiar with the regulatory qualifications regarding the composition of the Non-Restricted Soil and Fill Recyclable Material (contains no debris and is not contaminated above established standards), 2) has a regulatory quality control/quality assurance program in place with respect to the Material, and 3) agrees to maintain records and cooperate with the Department if the Material is disqualified. Under the Certification Program, a business that is not a de minimis company but exclusively handles Non-Restricted Soil and Fill Recyclable Materials must register with the Department but will not be required to obtain an A-901 license. Instead, the Department will provide a certification to allow such companies to operate. The certification form is available here and must be filed annually on or before July 14.

Requirements for De Minimis Companies

With respect to the de minimis companies, they are not required to register, certify or apply for an A-901 license as long as they possess all other applicable licenses and authorizations necessary to operate. This de minimis exclusion applies to businesses that only handle Non-Restricted Soil and Fill Recyclable Material and 1) generate less than 15 cubic yards of Non-Restricted Soil and Fill Material each business day, 2) use a truck that has a loading capacity of less than 15 cubic yards to transport such Material, 3) maintain a storage yard containing less than 100 cubic yards of such Material, and 4) maintain appropriate records to prove they are a de minimis company that can be made available to the Department upon request.

Conclusion
The NJDEP’s most recent Compliance Advisory helps alleviate some of the uncertainty regarding the scope of the Dirty Dirt law, but many businesses may remain unsure as to whether they are subject to it. Therefore, a company that is involved with soil and fill material and is uncertain as to whether the law applies to it should seek legal counsel before the upcoming deadline on July 14, 2022.

For more information, please contact the author Laurie Sands or any attorney in our Environmental Practice Group.

New Jersey Appellate Division Allows Intervention in Tax Sale Foreclosure

Posted on by rd_admin

The New Jersey Appellate Division recently reversed the finding of a lower court, which had denied appellants’ attempt to intervene in a foreclosure matter, remanding the matter for the entry of an order permitting intervention. See Fig Cap Invs. NJ13, LLC v. 405 Bigelow Ln., No. A-2461-20 (App. Div. Mar. 22, 2022). In the case, Plaintiff purchased the tax sale certificate for a property in Vernon, New Jersey in 2017.  In June 2019, Plaintiff filed to foreclose on the property owner’s right to redemption and to obtain title to the property, and received a declaration that the property was abandoned.  On September 16, 2019, Appellants contracted with Defendant, the property owner, to purchase the property for $25,000.  One week later, Plaintiff served Defendant with the Notice of Foreclosure and the order determining the property was abandoned. On October 30, 2019, Appellants and Defendant closed on the sale of the property. Later that day, Plaintiff informed Appellants that Plaintiff would not agree to waive the requirement to file a motion to intervene in the foreclosure prior to redeeming as required by Simon v. Cronecker, 189 N.J. 304 (2007). Appellants moved to intervene in the foreclosure action on November 14, 2019, seeking a court order to compel Plaintiff to accept the redemption of the tax lien. Plaintiff opposed the motion, stating that Appellants had not followed the procedure established under Cronecker and N.J.S.A. 54:5-89.1 because Appellants did not seek permission from the court prior to redeeming the tax lien. The trial court denied Appellants’ motion, finding that Appellants had not followed the Cronecker procedure because they failed to intervene in the foreclosure case prior to redeeming the tax sale certificate. Therefore, the trial court denied Appellants’ motion to intervene. Appellants appealed.

The Appellate Court reversed.  It noted that in Cronecker, the plaintiff had moved to bar redemption a month after the court-ordered redemption date expired, and thereafter, an investor moved to intervene in the foreclosure action. The Cronecker court held that before redeeming the tax certificate, the third-party investor had to intervene in the foreclosure action and show more than nominal consideration had been offered for the property interest. The Appellate Court distinguished the instant case, noting that no redemption expiration date had been ordered, and that no authority supported Plaintiff’s argument that a notice of foreclosure sets a presumptive date for redemption. Instead, the Court noted that N.J.S.A. 54:5-54 allows any interested person to redeem the tax sale certificate at any time before the final date for redemption set by the court, and pointed to the similar factual scenario in Green Knight Cap., LLC v. Calderon, 469 N.J. Super. 390 (App. Div. 2021), in which the Appellate Division concluded that “when an investor has an interest in the property in foreclosure, is prepared to redeem the tax sale certificate, and files a motion to intervene in the foreclosure action before the entry of an order setting the last date for redemption, the investor is permitted to intervene and redeem the tax certificate.” Because the record did not reflect a court order setting a final date for redemption, the Appellate Division concluded that appellants moved to intervene prior to the redemption deadline.

For a copy of the decision, please contact Michael O’Donnell at modonnell@riker.com, Desiree McDonald at dmcdonald@riker.com, or Kevin Hakansson at khakansson@riker.com.

Federal Reforms from Nursing Homes to ACOs

Posted on by rd_admin

For more information about this blog post, please contact Labinot Alexander Berlajolli.

White House Announces Nursing Home Care Reforms

In a fact sheet released on February 28, 2022, the White House announced measures intended to protect seniors by improving safety and quality of care across the nation’s nursing homes. Specifically, the fact sheet announced that Centers for Medicare & Medicaid Services (“CMS”) will be launching four new initiatives to enhance quality of care

  1. Establish a Minimum Nursing Home Staffing Requirement. CMS intends to propose minimum standards for staffing adequacy that nursing homes must meet. CMS will conduct a new research study to determine the level and type of staffing needed to ensure safe and quality care and will issue proposed rules within one year. Nursing homes will be held accountable if they fail to meet this standard.
  2. Reduce Resident Room Crowding. According to CMS, most residents prefer to have private rooms, but shared rooms with one or more other residents remain the default option. CMS believes that these multi-occupancy rooms increase residents’ risk of contracting infectious diseases, including COVID-19. CMS will explore ways to accelerate phasing out rooms with three or more residents and to promote single-occupancy rooms.
  3. Strengthen the Skilled Nursing Facility (“SNF”) Value-Based Purchasing (“VBP”) Program. The SNF-VBP program awards incentive funding to facilities based on quality performance. CMS has begun to measure and publish staff turnover and weekend staffing levels, metrics which closely align with the quality of care provided in a nursing home. CMS intends to propose new payment changes based on staffing adequacy and the resident experience, as well as how well facilities retain staff.
  4. Reinforce Safeguards Against Unnecessary Medications and Treatments. CMS believes that inappropriate diagnoses and prescribing still occur at too many nursing homes. CMS will launch a new effort to identify problematic diagnoses and refocus efforts to continue to bring down the inappropriate use of antipsychotic medications.

OIG Modifies Advisory Opinion Procedures

87 FR 1367 – The Office of Inspector General ("OIG"), Department of Health and Human Services ("HHS") issued a final rule amending the regulations governing the procedures for the submission of advisory opinion requests to, and the issuance of advisory opinions, by OIG. Specifically, the rule removes the procedural provision at 42 CFR 1008.15(c)(2), which precludes the acceptance of an advisory opinion request and/or issuance of an advisory opinion when the same or substantially the same course of action is under investigation or has been the subject of a proceeding involving HHS or another governmental agency. OIG believes removal of that provision will (a) offer OIG more flexibility in responding to requests for advisory opinions and (b) provide industry stakeholders with greater transparency regarding factors the Government may consider in evaluating compliance with certain federal fraud and abuse laws and distinguishing between similar arrangements.

Revisions to Rural healthcare Program

87 FR 14421 – This proposed rule seeks comment on several revisions to the Commission's Rural healthcare Program ("RHC Program") rules designed to ensure that rural healthcare providers receive funding necessary to access the broadband and telecommunications services necessary to provide vital healthcare services while limiting costly inefficiencies and the potential for waste, fraud, and abuse. The RHC Program provides vital support to assist rural healthcare providers with the costs of broadband and other communications services. Recent years have also seen an explosion in demand for telehealth services, a trend accelerated by the COVID-19 pandemic, that has increased the bandwidth needs of rural healthcare providers. Pursuant to this proposed rule, the Commission also seeks comment on proposed revisions to the RHC Program's funding determination mechanisms and administrative processes in an effort to improve the accuracy and fairness of RHC Program support and increase the efficiency of program administration.

Accountable Care Organization ("ACO") Realizing Equity, Access, and Community Health ("REACH") Model

CMS has redesigned the Global and Professional Direct Contracting ("GPDC") Model with the goal of advancing health equity. The Center for Medicare and Medicaid Innovation Center ("Innovation Center") is releasing a Request for Applications ("RFA") to solicit a cohort of participants for the Accountable Care Organization ("ACO") Realizing Equity, Access, and Community Health ("REACH") Model. The GPDC model will be renamed the ACO REACH model and will aim to accomplish the following goals:

  1. Advance Health Equity to Bring the Benefits of Accountable Care to Underserved Communities. CMS will use an innovative payment approach to better support care delivery and coordination for patients in underserved communities and will require that all model participants develop and implement a robust health equity plan to identify underserved communities and implement initiatives to measurably reduce health disparities within their beneficiary populations.
  2. Promote Provider Leadership and Governance. The ACO REACH Model includes policies to ensure doctors and other healthcare providers continue to play a primary role in accountable care. At least 75 percent control of each ACO's governing body must be held by participating providers or their designated representatives, compared to 25 percent in the GPDC Model. In addition, the ACO REACH Model goes beyond prior ACO initiatives by requiring at least two beneficiary advocates on the governing board (at least one Medicare beneficiary and at least one consumer advocate), both of whom must hold voting rights.
  3. Protect Beneficiaries and the Model with More Participant Vetting, Monitoring, and Transparency. CMS will require additional information on applicants’ ownership, leadership, and governing board to gain better visibility into experience in healthcare delivery, ownership and financial interests, and affiliations to ensure participants’ interests align with CMS’ vision. We will employ increased up-front screening of applicants, robust monitoring of participants, and greater transparency into the model’s progress during implementation, even before final evaluation results, and will share more information on the participants and their work to improve care. The ACO REACH Model will also include stronger protections against inappropriate coding and risk score growth.

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