Buried in the voluminous pages of the Affordable Care Act (Obama Care) are 7 pages which layout the parameters of and procedures involved in creating new Health Care Ventures known as Accountable Care Organizations (ACOs). The current structure of the federal Medicare Reimbursement System is based upon a fee-for-service payment structure to providers. In other words, doctors and other health care professionals are generally paid/reimbursed more when they perform more procedures and order more patient testing. There is little incentive to be efficient and work together with other health care professionals. Volume typically equals dollars under the current Medicare reimbursement system. This structure does nothing but drive Medicare costs up and further increases the federal deficit.
The premise of an ACO is to provide financial incentives to groups of collaborative health care providers who meet specific quality benchmarks and perform efficiently as a team. The goal is to increase communication between providers, operate more efficiently, cut down on excessive procedures, and have better outcomes. In other words, providers in the ACO team would receive financial incentives for operating more efficiently and keeping their patients healthy and out of the hospital, thereby reducing claims made through Medicare.
The legal definition of an ACO is a legally structured arrangement between hospitals, primary care, and/or other specialty health care providers, or other facilities which coordinate and deliver efficient care for a defined patient population for a specified period of time. An ACO assumes responsibility for improving healthcare quality and slowing the growth of healthcare costs. There are currently several different types of ACO structures which may be approved by the federal government which differ in the types of incentives offered and the method of reimbursements paid by Medicare.
In general, to form a Medicare ACO and participate in the incentive based financial programs being offered, all of the participants of the ACO must agree to the following:
- Agree to be accountable for the care of specified Medicare beneficiaries;
- Agree to a minimum of three (3) year participation in the ACO program;
- Create a formal legal structure that allows the ACO to receive and distribute bonuses to participating providers;
- Include at least 5,000 beneficiaries;
- Create and institute a specific management structure.
There are numerous mandated reporting and management requirements that have scared off many health care providers who might have otherwise been interested in forming ACOs.
The government began receiving its initial round of applications for status as ACO’s in January of 2012. The first set of ACO’s was launched in the first quarter of 2013. In July of 2013, Medicare announced promising results from the first full year of the ACO program. A group of 32 “pioneer ACO’s” generated savings of nearly $33 million to the Medicare Trust Fund.
If you would like to learn more about the requirements of qualifying as a ACO, or have any other questions regarding the administration or organization of healthcare providers, please contact one of our Health Care Law Practice Group attorneys.
