ACOs Expected to Survive, Attorneys Say, Regardless of Supreme Court's PPACA Ruling

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By Michael Bologna  

CHICAGO--With much of the steam behind accountable care organizations (ACOs) being generated by the health care industry, such structures will likely survive and grow, even if the U.S. Supreme Court voids the Patient Protection and Affordable Care Act this week, a panel of health care attorneys said June 26.

Even the federal government's voluntary pilot ACO program under PPACA, offering shared savings to hospitals and physician networks establishing ACOs that cover Medicare beneficiaries, could survive, depending on the scope of the court's ruling, or be reinstituted later, the speakers said. The court's decision on health reform is expected June 28.


“These things have a lot of tread regardless of what the Supreme Court does in the next couple days.”  


--John R. Washlick, Buchanan Ingersoll & Rooney

John R. Washlick, an attorney with Buchanan Ingersoll & Rooney PC, who practices in the Philadelphia area, said ACOs have attracted a lot of attention due to the shared savings opportunities under Medicare. But private payers, providers, and physician networks also are investing in the concept, finding value in more accountable health delivery models. Even if the court were to wipe PPACA clean of ACOs, Washlick said, the industry would continue to gravitate toward these structures.

“A lot of payers are out there now forming ACOs,’’ Washlick told attorneys at the American Health Lawyers Association's annual meeting here. “A lot of networks and ACO-type organizations are being formed because they are going to use the same payment philosophy/shared savings philosophy on the commercial payer side. So these things have a lot of tread regardless of what the Supreme Court does in the next couple days.”

Alternative Structure.

Julie Kass, with the Health Law Group at Ober Kaler, predicted the Centers for Medicare & Medicaid Services would probably develop some alternative structure to bring the ACO/shared savings model back into Medicare if the Supreme Court jettisoned the program. She speculated that the pilot could be folded into activities directed by the Center for Medicare and Medicaid Innovation (CMMI).

“My guess is that they would have to find some new statutory reason for it, or shift everything to CMMI and say 'it's an innovative program now,’’’ Kass said during the same panel discussion.

Washlick said PPACA directed CMS to create a voluntary Medicare pilot ACO program Jan. 1, 2012. The objective was to provide financial incentives through a program of shared savings to promote the delivery of coordinated care across medical specialties to defined populations of Medicare beneficiaries. The three primary goals of the program are to:

• provide better care to individuals;

• provide better total health to populations; and

• control the cost of health care through a process of continuous improvement.


Value Over Volume.

Washlick said ACOs conceptually turn the traditional health care services model upside down. Speaking broadly, he said ACOs represent a migration from fragmented care to coordinated care and integrated care models. ACOs feature value-based payment methodologies over the volume-based payment logic of traditional fee-for-service medicine. The concept also suggests a shift in focus from individuals to the health of small populations of health care consumers. Finally, ACOs suggest a shift from payer-driven managed care to provider-driven accountable care.

Washlick noted that the pilot program regulations, released in October (204 HCDR, 10/21/11), determine the structure and operation of ACOs before an organization can realize a portion of the shared savings. The regulations also limit the program to specific groups within the health field, including:

• physicians and other professionals in group practices;

• physicians and other professionals in networks of practices;

• partnerships or joint venture arrangements between hospitals and physicians and professionals;

• hospitals employing physicians and professionals;

• rural health centers;

• federally qualified health centers; and

• other structures that the government may determine appropriate.


Understanding Risks.

Andrew Ruskin, a health law attorney with Morgan, Lewis & Bockius LLP in Washington, said hospitals, physician networks, and health partnerships need to perform a rigorous evaluation of their organizations before jumping into the ACO game. He said the regulations are complicated and the opportunities for shared savings depend on dozens of issues unique to the organization. Ruskin added that investments in ACOs can be substantial and the rewards can be thin, so an organization must understand the potential risks.

Ruskin offered a checklist of questions organizations must consider before making an ACO investment:

• How stable is the organization's patient population? As ACOs must be formed around a captured group of at least 5,000 patients, organizations with unstable or transient populations are not a good fit.

• Does the organization coordinate well with its physicians and practice groups? Difficult relations with physician groups might interfere with a viable ACO structure.

• Has the organization made significant progress implementing electronic health records?

• Is the organization financially solvent? What level of financial risk can the organization absorb?

• Are other demonstration programs potentially more profitable?


Finally, Ruskin said, organizations need to consider the competitiveness of their local commercial markets. Providers with lots of competitors might think about ACOs as a strategy for gaining leverage on other players. Similarly, if payers in a local market are pushing providers toward ACO structures, a hospital or physician group may have little choice. On the flip-side, Ruskin said health providers that don't have to compete for patients might be wasting their resources.

“A lot of entities are going into this because it is 'do or die,'” Ruskin said. “As John [Washlick] points out, even if health care reform is overturned, it is likely that commercial insurers will demand this anyway.

“So the question is: Is this a good way to prepare?’’ Ruskin said. “So you really have to look at your market.’’

By Michael Bologna