For many of us still digesting last week’s ACO manifesto, the first question we must answer is what kind of organization should seek to qualify as an ACO?
“In order to implement the statutory requirements that ACOs have a shared governance mechanism and a formal legal structure for receiving and distributing shared payments, we (CMS) believe that it is necessary for each ACO to be constituted as a legal entity appropriately recognized and authorized to conduct its business under applicable State law… Also by proposing that each ACO must be constituted as a legal entity appropriately recognized and authorized under State law, we are not proposing to require existing legal entities appropriately recognized under State law must form a separate new entity for the purpose of participating in the Shared Savings Program. If the existing legal entity meets the eligibility requirements to be an ACO, as described in this proposed rule, it may operate as an ACO….”
Pages 52-53 of CMS’s April 7, 2011 Proposed Rule. Got that?
We are informed by CMS that an existing entity like a hospital that currently employs a significant number of ACO health professionals probably does not need to develop a separate new ACO entity. But how many hospitals will be brave enough to put their assets and reputations on the line for a concept that remain gestational at best? Very few. More importantly, how realistic is it that an existing hospital entity will have the appropriate legal authority under State law to receive and distribute shared savings, repay shared losses and carry on other ACO functions which might be subject to a state’s insurance regulatory authority? Even in those jurisdictions where that’s legally permissible, hospitals including those with highly integrated medical staffs would be well-advised to segregate the uncertainty and risk associated with an ACO start-up by borrowing its existing hospital corporation.
Perhaps a bigger challenge will be satisfying CMS’s “shared governance” requirement. Unless the hospital is already an integrated health system with all of the providers of goods and services necessary to deliver the full spectrum of care, CMS is suggesting that forming a new legal entity is probably required to provide the necessary level of shared decision making. How about that old physician hospital organization (PHO) entity that hasn’t been used since the 1990s? While that certainly can’t be ruled out, how many PHO boards were actually given the authority to execute an ACO’s core functions, i.e., enhancing the quality, cost-effectiveness and patient-centeredness of health care services? Moreover, how many PHOs owned or partnered with an HMO enabling them to develop the financial skills to operate within defined cost targets? See Table of Organizational Characteristics of Physician Group Practice Demonstration that appears in the 2006 Report to Congress.
Although a fair number of ACO precursors, such as clinical institutes, multi-specialty group practices, medical foundations and some co-management arrangements may be able to step up and meet the ACO eligibility requirements, the proposed rules leave most providers with a difficult choice to make. Should one start with something old or borrowed, or simply start anew with a clear mission and adequate resources? In the coming months, there is likely to be many long meetings surrounding this and related issues