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Supreme Court Decision Legitimizes Accountable Care Organizations

With its decision upholding the Affordable Care Act, the Supreme Court has authorized the use of Accountable Care Organizations (“ACO”) as one of the principal tools for addressing health care costs and improving care.  When an ACO succeeds in both delivering high-quality care and spending health care dollars more wisely by reducing the rate of growth in the cost of health care, the ACO will share in the savings it achieves for the Medicare program.  The Centers for Medicare and Medicaid Services (“CMS”) announced the selection of 88 ACOs to participate in the first round of the Medicare Shared Savings Program. These ACOs will take responsibility for coordinating care for nearly 1.2 million Medicare beneficiaries in 40 states. Three ACOs have been approved for Kentucky and include Quality Independent Physicians (Louisville), Southern Kentucky Health Care Alliance (Smithsgrove), and Deaconess Care Integration (Serving Indiana and Kentucky). In late July, CMS announced 15 new ACOs to participate in the Advance Payment ACO Model Program including Jackson Purchase Medical Association PSC, which is an ACO that includes 6 physician practices in Paducah and Ballard County Kentucky that covers 6000 Medicare beneficiaries. This brings the total participation in the program to 20.   With the 32 systems approved to participate in the Pioneer ACOs Program in February 2012, CMS announced there are now 153 organizations participating in Medicare Shared Savings initiatives, serving over 2.4 million beneficiaries.

With the Supreme Court’s ruling and a host of regulations now addressing how ACOs must be structured and how they must function, it appears that ACOs are not only here to stay but will grow.  With deadlines rapidly approaching, CMS reports it has received 400 Notices of Intent to file applications to participate in the Shared Savings Program for 2013, documenting that ACO implementation is accelerating across the country.

Interestingly, the growth is not just in large hospital systems. While there were more hospital led ACOs in the first round of Shared Savings participants, almost half of the ACOs approved were led by physicians.  The largest ACO had 2249 physicians participating and the smallest had 15 physicians.  Of the three ACOs approved for Kentucky, Quality Independent Physicians reported 74 physicians and Southern Kentucky Health Care Alliances reported 35 physicians. The Deaconness group, however, includes hospitals, a rural health clinic and 323 physicians and serves Indiana and Kentucky.

Likewise, the Jackson Purchase Medical Associates is an ACO made up of six physician groups. The Advanced Payment Model is intended to help support the infrastructure investments for physician-owned and rural ACOs.  Provider groups can receive payments either as an upfront fixed payment, an upfront payment based on the number of Medicare patients served, or a monthly payment based on the total number of Medicare patients. The advanced payments will be recouped as the ACOs achieve savings. The model is limited to physician-owned organizations, critical access hospitals, and rural providers. The federal government has several programs to support the development of ACOs.  Even with financial and technological obstacles to the integration of care that ACOs are supposed to achieve, clearly physicians and hospitals are building the infrastructure necessary for ACO’s to operate. Physicians, however, are still the cornerstone of the ACO, as they are the gatekeepers and control access to services, whether they are employed by hospitals or practicing in physician owned groups.  If ACOs are to achieve success, use of health information technology, including electronic health records to coordinate care, communicate among network providers, eliminate unnecessary duplication of tests, and collect performance data will be critical.

Lisa English Hinkle

Lisa English Hinkle is a Member of McBrayer, McGinnis, Leslie & Kirkland, PLLC.  Ms. Hinkle concentrates her practice area in health care law and is located in the firm’s Lexington office.  She can be reached at lhinkle@mmlk.com or at (859) 231-8780. 

This article is intended as a summary of federal and state law and does not constitute legal advice.

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