Home – Accountable Care Organization Program Is Alive And Well Due To Recent Supreme Court Health Care Ruling

Accountable Care Organization Program Is Alive And Well Due To Recent Supreme Court Health Care Ruling

Accountable Care Organization Program Is Alive And Well Due To Recent Supreme Court Health Care Ruling

Regardless of your viewpoint on the issue, it can’t be denied that the recent Supreme Court decision upholding the passage of the Patient Protection and Affordable Care Act (PPACA) was one of the most significant rulings of the past decade. Beyond the more widely publicized provisions such as the individual mandate and Medicaid expansion, the Act also contains a number of lesser-known programs that may be of special interest to General Counsel for insurers, healthcare organizations and larger hospitals.

One of these is the creation of Accountable Care Organizations (ACOs), participating in the Medicare Shared Savings Program (MSSP). This Program was modeled after the physician hospital organizations (PHOs) and other integrated delivery systems that were first created in the 1990s, which were challenged by high start-up costs and the inconvenience and loss of autonomy for the physicians and providers joining the organization. The new ACO program will offer greater incentives for cost savings in the health care organizations.

“ACO-like structures, including some of these larger coordinated care organizations, have been in existence for a few years and others have been in the process of being developed. But without the possibility of sharing in the savings for Medicare patients there were potentially less savings to be divvied up among everybody. If the Affordable Care Act had been thrown out in its entirety, then the federal government’s Medicare-centered ACO initiative would have gone by the wayside,” Eric D. Fader of Edwards Wildman Palmer LLP told the Advisory.

“But now it’s alive and well and the federal government has been announcing new ACO participants,” Fader said.

In April 2012, the Centers for Medicare & Medicaid Services (CMS) announced the first 27 ACOs that will participate in the Program, despite the fact that the future of the Program was uncertain at that time. These 27 ACOs will serve approximately 375,000 Medicare beneficiaries in 18 states. They join 32 organizations that were selected in December as “Pioneer Model ACOs.” CMS said in April that it was reviewing another 150 applications from organizations seeking ACO status. On July 9, 2012, 89 new ACOs were approved.

The ACOs will be measured in 33 qualitative measures with the possibility of sharing in the cost savings provided by Medicare.

“For these organizations, there can be a fairly stiff upfront cost in synergizing operations and moving toward electronic medical records and sharing of personnel in some cases,” said Fader. “But once the upfront expenses are satisfied, it should be possible to reduce the cost of care and create more efficient care going forward."

“In our practice, we have seen a few hospitals that have created ACOs in order to create closer ties to some of the physicians in their immediate geographic area. This is another thing hospitals have been trying to do—trying to acquire physician practices to ensure a steady stream of patients in a legal way. Hospitals are trying to figure out ways to be in charge of the provision of care in a given geographic area, and ACOs are one way to try to do that,” said Fader.

He also said that insurance companies could see the benefits of ACOs. “They don’t have to raise premiums to the individuals but they can profit by reducing unnecessary tests that they would have had to pay for, or reducing the cost of care or hospital readmissions after people are released.”

Fader explained that there are several different models of ACOs, all of which involve the potential sharing of cost savings. However, some of them also involve the potential exposure to a share of the losses if the ACO ends up not saving money in subsequent years as compared to the benchmark year.

As a result, he advises all General Counsel for organizations interested in pursuing ACO participation to become educated on all its components and to “get out in front of any initiative in a local area toward forming an ACO.”

“Specifically, in ACOs, there are exceptions to the HIPAA requirements and prohibitions that permit the sharing of protected health information for health care operations—which is basically another term for care coordination between providers,” said Fader.

“When the ACO model was being designed, its creators were aware that normally you can’t share patient information between providers who are not specifically involved in the care. There are other types of waivers that were also created specifically to encourage the formation of ACOs, one of which was a waiver of the typical anti-trust provisions to allow different providers in the geographic area to share information on their operations without a claim that they’re trying to control the market for the delivery of that service in the relevant geographic area,” he said.


The ACO program has not been without its critics. Last year, a group of seven senators—Tom Coburn, M.D. (R., Okla.); Mike Crapo (R., Idaho); John Cornyn (R., Texas); John Kyl (R., Ariz.); Mike Enzi (R., Wyo.); Pat Roberts (R., Kan.); and Richard Burr (R., N.C.)—wrote a letter to the U.S. Department of Health and Human Services and the Centers for Medicare and Medicaid Services, expressing concerns about the ACO program.

One of their primary concerns was a report by the American Hospital Association, which noted that actual ACO start-up costs would be 10 times higher than the estimated costs in the proposed rule.

“The concerns over the ACO regulation from some of our nation’s most knowledgeable and innovative health-care providers are clear. Incentives and accountability are misaligned. Detailed requirements are complex and return on investment is uncertain,” the senators said.

However, the senators said that the ACO model “holds promise” and that more coordination between providers and beneficiaries is a “worthwhile goal.”