Accountable Care Organizations – “Facts and Fiction”
By: Mathew J. Levy, Michael J. Schoppmann & Stacey Lipitz Marder
Since the passage of the Patient Protection and Affordable Care Act of 2010 (PPACA) brought about the introduction of a previously heretofore unheard of concept known as an “accountable care organizations” (ACOs), there has been a growing conversation in the medical community centered around two primary questions – what are ACO’s and what do they foretell as to the future of medicine? ACOs were introduced as a Medicare savings program, intended to enhance quality, improve beneficiary outcomes and increase the value of care through incentives to healthcare providers. Although PPACA mandates that the federal government establish an ACO-based Medicare shared savings program by January 1, 2012, at this juncture there has been little guidance issued by the federal government with respect to these ACOs and how they will be structured.
In fact, until regulations are issued offering more guidance, it is unlikely that ACOs will truly impact the Medicare fee-for-service system in the near future. Parsing through the rhetoric and alarmism, it is important for physicians to understand that although many new ideas have been proposed with respect to Medicare (ACSO’s only being one of them), at this time, physicians are in no way precluded from continuing to care for Medicare patients even if they are not currently associated with an ACO. As such, physicians should be cautious and take this period of flux to truly understand and evaluate the risks and costs associated with ACOs prior to joining one or providing capitalization to an entity (i.e., an IPA) that may never even qualify to serve as an ACO.
This is not to say that ACOs will not have their place in the future delivery of healthcare in America. Already, many commercial healthplans are collaborating with physician groups and hospitals to form ACOs to improve the quality of care provided to their members and, moreover find innovative ways to decrease medical costs. Medicaid programs across the country are forming ACO demonstration projects for the same purpose. However, until the regulations for Medicare ACOs are published, Medicare fee-for-service will continue.
What is an ACO?
An ACO is a group of providers or a network of groups, which may or may not be affiliated with a hospital, which agrees to be “accountable” for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program (as opposed to an HMO in which the “accountability” rests with the insurer instead of the providers). In the event that the ACO is able to provide care at a lower cost than Medicare did in the prior period, and assuming that the ACO meets the quality standards set by Medicare for the ACO, the savings will be shared with the ACO. Once again, physicians should take note – the specific quality performance standards which an ACO will have to meet have yet to be determined.
What requirements must be met to be an ACO?
As per PPACA, in order to participate as an ACO, the ACO must meet the following requirements: (1) Have a formal legal structure to receive and distribute shared savings; (2) Have a sufficient number of primary care professionals for the number of assigned beneficiaries (to be 5,000 at a minimum); (3) Agree to participate in the program for not less than a 3 year period; (4) Have sufficient information regarding participating ACO health care professionals as the Secretary of the Department of Health and Human Services (HHS) determines necessary to support beneficiary assignment and for the determination of payments for shared savings; (5) Have a leadership and management structure that includes clinical and administrative systems; (6) Have defined processes to (a) promote evidenced-based medicine, (b) report the necessary data to evaluate quality and cost measures (this could incorporate requirements of other programs, such as the Physician Quality Reporting Initiative (PQRI), Electronic Prescribing (eRx), and Electronic Health Records (HER), and (c) coordinate care; and (7) Demonstrate that it meets patient-centeredness criteria, as determined by the Secretary of HHS.
Furthermore, the statute lists the forms of organizations that may become eligible to participate as an ACO which are as follows: (1) Physicians and other professionals in group practices; (2) Physicians and other professionals in networks of practices; (3) Partnerships or joint venture arrangements between hospitals and physicians/professionals; (4) Hospitals employing physicians/professionals; (5) Other forms that the Secretary of HHS may determine appropriate. Therefore, before any physician joins forces with an ACO, it is imperative that he or she evaluates and understands the implications associated with the different models. For instance, in the event a physician joins an ACO in which a hospital employs the involved physicians, the joining physician needs to understand that he/she will be giving up his/her autonomy and will serve the ACO strictly as an employee of the hospital. As a result, physicians contemplating retirement and/or physicians who are no longer interested in the stress of running a practice may see this as a viable option., however, physicians with a more entrepreneurial perspective may well find the hospital ACO too limiting – both financially and professionally.
Moreover, primary care physicians should pay particular attention to contracts that could bind them to an ACO. Although the regulations for ACOs are not yet published, it is anticipated that patients will be attributed or assigned to an ACO through the primary care physician. Hence, a primary care physician can only belong to one ACO. Unlike Medicare Advantage plans wherein individual patients elect to join a specific Medicare Advantage plan, once a primary care physician joins an ACO it is anticipated that CMS will more his/her patients to that ACO.
What are the legal implications associated with ACOs?
As noted above, the Department of Health and Human Services (HHS) has yet to issue any regulations governing ACO’s, which has left medicine with minimal guidance as to the specifics to govern the creation, formation and maintenance of ACOs. In October 2010 a public workshop was held to solicit comments from major stakeholders. Amongst the commenters were the American Medical Association (AMA), Federal Trade Commission (FTC), and American Health Lawyers Associations (AHLA), in addition to several other leading organizations from the medical and cross-related communities.
Regardless of the eventual specifics, the current statue foretells that any design of ACO organizations will certainly implicate several critical state and federal rules and regulations, including, but not limited to, federal antitrust laws, fraud and abuse states (stark and anti-kickback), etc. Interestingly, to facilitate the establishment of ACOs, PPACA grants the Secretary of HHS the right to waive certain provisions of the fraud and abuse laws. However, since HHS has yet to promulgate these regulations, it is unclear whether the provisions of the fraud and abuse laws will indeed be waived or to what degree. As such, physicians should be extremely cautious with respect to joining an ACO as an improperly created entity could well expose the physician to potential anti-trust and/or fraud and abuse scrutiny.
What are the practical implications involved with joining an ACO?
Although many physicians are rushing to join quasi-ACOs as the result of scare tactics and starkly bad advice, the medical community needs to act with great caution as there are not only significant legal risks but also unprecedented anticipated costs associated with the formation of an ACO. Specifically, even the barest of structures will carry significant capitalization costs, requiring new technologies, sophisticated legal and consulting expertise and advance funding for staff and overhead. Many ACOs are asking the physicians to fund these expenses. When asked to invest, the physician should conduct due diligence to the same level that any investment banker would, with the first step being a business plan with complete financial projections for five years, marketing strategy, contracting strategy, management team, governance structure and market analysis. The business plan should serve as the basis of the due diligence process.
Furthermore, in order to meet the statutory requirements for a “compliant” ACO, physicians will have to truly integrate their practices, both clinically and financially. For many physicians this may be a daunting task and not an attractive option. For other entrepreneurial physicians, this may be an opportunity to innovate and effect how healthcare is delivered. In both instances, compliance is critical since any degree of non-compliance will quickly be revealed in either financial failure or investigative prosecution.
Conclusions:
In conclusion, ACOs offer physicians a model to collaborate and innovate and improve the quality of medicine in America, and share in the financial savings from those efforts. The ACO is intended to be a physician model, as all four of the approved legal entities require physicians, and only two of the four include a hospital. However, just like Physician Hospital Organizations (PHOs) of the past, the model is only as good as the leaders and those in control of governance and decision-making. It is critical that physicians take their time, investigate and conduct proper due diligence before joining an ACO. There is no urgency with respect to joining an ACO at this time, especially since not even the regulations have been published. Now is the time for physicians to examine who they would like to integrate and collaborate with, and to approach and discuss these issues with colleagues. There will be many ACO options and physicians need to understand how each option will effect their day to day practice of medicine, as well as the legal and financial consequences.
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Kern Augustine Conroy & Schoppmann, P.C., Attorneys to Health Professionals, www.drlaw.com has offices in New York, New Jersey, Pennsylvania and Illinois. The firm’s practice is solely devoted to the representation of health care professionals. Any of the authors may be contacted at 1-800-445-0954 or via email- kacs@drlaw.com