Accountable Care Organizations: Accountable to Whom?

Our inaugural posting here on Doctor Parking Only focuses on the Accountable Care Organizations (ACOs) created under the controversial Patient Protection and Affordable Care Act enacted last year.  Depending on where you practice, you or your group may already be part of discussions with a hospital, health system or managed care organization to create an ACO.

Policymakers hope that by giving physicians and hospitals an incentive to collaborate on quality improvement and greater efficiency, ACOs will be able to lower the cost of treating Medicare beneficiaries.   For now, the formation of ACOs is voluntary and those providers that cooperate to lower cost and improve outcomes will be able share in any savings realized by Medicare under the new program.   The remainder of 2011 should see quite a bit of activity in forming ACOs as the January 1, 2012 deadline approaches.

What Are ACOs?

The statute says that ACOs can be physicians, physician group practices and hospitals/health systems within a defined geographical area operating under existing integration/employment arrangements or formed for the purpose of participating in the ACO program.

  • To qualify as an ACO, a network of providers must meet the following eligibility requirements:
  • Have a sufficient number of primary care providers to care for a minimum of 5,000 Medicare beneficiaries.
  • Become accountable for the quality, cost and overall care of the defined set of Medicare fee-for-service beneficiaries assigned to it.
  • Enter into an agreement with the Medicare program to participate in the ACO program for at least three years.
  • Have a formal legal structure that would allow the ACO to receive and distribute payments for shared savings to participating providers.
  • Periodically provide Medicare with information on use of evidence based medicine, quality, costs, care coordination and the determination of the shared savings amounts.
  • Have a shared governance structure with leadership and management that includes clinical and administrative systems.
  • Demonstrate that it meets the patient-centered criteria specified by HHS.

How Savings and Payments Amounts Are Determined

For each 12-month period, participating ACOs that meet Medicare quality performance standards will be eligible to receive a yet to be determined percentage of any savings if the actual per Medicare beneficiary expenditures are a sufficient percentage below the amount Medicare traditionally has paid for care to the ACO population.

For now, ACOs will not be penalized if they do not demonstrate savings or meet the other eligibility criteria for participation in the ACO program.

Patient Involvement

According to Medicare, assignment to an ACO will be “invisible” to the beneficiary, and will not affect their guaranteed benefits or choice of doctor. A beneficiary may continue to seek services from the physicians and other providers of their choice, whether or not the physician or provider is a part of an ACO.

ACOs and Federal Fraud & Abuse Laws

As some physicians are all too aware, their financial relationships with hospitals and other providers are closely regulated and monitored by a host of federal agencies from the Department of Health and Human Services (HHS) to the Department of Justice and the Federal Trade Commission.  The reach of federal fraud and abuse laws like the Anti-Kickback Law (AKL), Stark Law, and Civil Money Penalties (CMP) statute often create barriers to precisely the kind of cooperation and collaboration behind the stated goals of establishing an ACO.

The health care reform law specifically grants the Secretary of HHS the authority to grant waivers under the AKL and CMP, but what about arrangements that not strictly comply with federal anti=trust guidelines or do not fall within a current exception to the Stark Law?

Officials at the Federal Trade Commission, CMS and the HHS Office of Inspector General held a town-hall style workshop late last year on these issues and pledged to work with physician groups and other providers to bring greater clarity to a rather murky and perilous regulatory and law enforcement landscape as final rules on ACOs are developed.   Let’s hope so.

Additional Thoughts and Comments on ACOs

A few facts are obvious as the healthcare community moves to implement ACO arrangements.

First, the program is voluntary now, but risk-based payment systems like ACOs and bundled payments are here to stay.  Even if the PPACA is declared unconstitutional when it is ultimately ruled on by the United States Supreme Court, federal health programs and private payors have made it well-known that they want hospitals and physicians to put aside any real or perceived differences to achieve meaningful cost-saving measures while achieving better healthcare outcomes.

Second, existing integrated delivery systems that employ a high degree of cooperation between hospitals and physicians will be the first to reap any benefits of the ACO model.  Hospitals and health systems that have already made significant investments in information technology and employment or other permissible professional services arrangements with primary care and other specialists have the infrastructure in place to participate in the ACO program.

But physicians should also be aggressive in claiming their share of any future payments Medicare makes to the ACO.   The success of ACOs will largely be based on the leadership, hard work and resourcefulness of physicians.  The hospitals and health systems that will likely be the fiscal agents for the ACOs may use their position to keep a larger portion of the payments unless participating physicians are vigilant in their rights.  Existing employment and professional services agreements should be revisited and even amended to address the physician’s rights to share in payments under an ACO program.

Finally, the development of ACOs will continue the market pressures driving hospital and health system merger and consolidation in order to better manage the risk-based payment model.   These mergers, along with continued interest by hospitals and systems in employing physicians directly, means that change is certain and physicians need to be fully informed and up to date if they want to prosper under the new payment incentives.

In coming posts, we will examine specific ACO arrangements and would welcome your comments and insights as you work with hospital management on developing ACOs in your community.


About Bill Cadigan

WILLIAM J. CADIGAN is principal in the Law Office of William J. Cadigan, P.C. located in Chicago, Illinois. Before starting his own firm, Bill Cadigan was a member of the Health Industry Group of the law firm of Akin, Gump, Strauss, Hauer & Feld L.L.P.
This entry was posted in Accountable Care Organizations, PPACA and tagged . Bookmark the permalink.

One Response to Accountable Care Organizations: Accountable to Whom?

  1. Pingback: The Record Number of CMS Regs Currently In The Pipeline | Doctor Parking Only

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