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ACOs: Patients Are Flocking to Them—Should You?

Here’s where ACOS are now, where they are going and how to jump on board (if you want to) By Kathryn Hickner-Cruz, JD

If you are a physician, chances are that, at some point during the past few years, after a long (but it is hoped rewarding) day of patients, labs, imaging and other reports, e-mails, telephone calls and prescription refills, you sat in a meeting and talked about the business of medicine and all the “red tape” that goes along with it. Resources seem to be decreasing while expenses and administrative burdens are skyrocketing.

And, chances are that you were asked about potential participation in an accountable care organization (ACO)—and whether you wanted to be in or out. You probably wondered how ACO involvement would really help you achieve your goals of running an efficient medical practice while providing excellent patient care. And you had to decide whether to take the risk of being involved in a venture without much certainty or whether to sit on the sidelines for a little longer and see how the current wave of reform plays out. So what did you do?

As you are likely aware, the notion of ACOs, patient-centered coordinated care that is rewarded for improving quality and efficiency, is not new. The concept of an ACO is believed to have been first outlined in 2006 at a Medicare Payment Advisory Commission meeting. Although there are many definitions (each of which seems to focus more on aspirations rather than tangible elements), ACOs are ultimately groups of health care providers that voluntarily come together to be accountable for the quality and efficiency of services provided to a certain population. In general, when savings are achieved and quality benchmarks are satisfied, ACO participants profit. The hope is that, through ACOs, patients will receive better care, the health of the population will improve and growth in health care expenditures will decrease.

Building upon former Medicare demonstration projects, the Federal Patient Protection and Affordable Care Act (ACA) has embraced the ACO concept and has championed the model as a realistic means to improving our health care system. The impact of ACO initiatives has already been significant: approximately 37 to 43 million patients in the U.S. are thought to receive services directly from an ACO.

ACOs typically participate in shared savings programs established or sponsored by hospitals, commercial payers, Medicaid or Medicare. These shared savings programs sponsored by hospitals, commercial payers and providers are extremely diverse. Medicaid ACOs are (for the most part) in the early stages of development. Accordingly, commentators often focus on Medicare ACOs.

There are three primary types of Medicare shared savings programs in which ACOs participate: Medicare Shared Savings Program (MSSP) ACO Model; the Medicare Pioneer ACO Model; and the Medicare Advance Payment ACO Model. Under all three programs, the shared savings that Medicare ACOs receive are in addition to the fee-for-service compensation that their participants already receive from Medicare.

CMS has accepted over 200 ACOs into the Medicare Shared Savings Program, each of which participates in one of two tracks: one that assumes financial risk and one that does not (at least initially). CMS will announce a new class of MSSP ACOs in the beginning of 2014. The Medicare Pioneer ACO Model and the Medicare Advance Payment ACO Model are being established by the Centers for Medicare and Medicaid Innovation. The Medicare Pioneer ACO Model was designed for those health care providers and suppliers who were already experienced with a high degree of care coordination. Medicare Pioneer ACOs share in greater levels of savings but also assume more risk than those ACOs participating in the MSSP. The Medicare Advance Payment ACO Model was designed to assist MSSP ACOs comprised of physician-owned rural providers who would benefit from additional start-up resources as they develop the infrastructure they need to successfully operate.

Medicare and others hope that the shared savings programs of today will be more successful than the managed care programs of the 1990s since today’s shared savings programs focus not only on efficiency but also on the quality of care provided. It is important to note that Medicare beneficiaries covered by today’s ACOs have the right to receive health care from any Medicare provider (not only the ACO participants) and maintain the full Medicare fee-for-service benefits.

What To Do Next

So, once you understand where ACOs are and where they are going, the question becomes what should you do now?

If you haven’t already joined an ACO but may want to do so, shop for the ACO that offers the best fit for your practice. Each ACO is unique. It’s important to explore available options and weigh the pros and cons. Characteristics worthy of review include, without limitation: payer and hospital affiliations; ownership and non-ownership models; how legal risk is allocated among the participants (for example, indemnification and other liability provisions); whether there is a robust data security and privacy program in place to protect patient information and to quickly and appropriately respond to a privacy or security breach; the organization’s debt and administrative overhead; and the substantive terms of the participation agreements, policies and procedures. Physicians are advised to request a copy of the applicable shared savings program participation application and agreement to learn more about the ACO, its obligations to the program and what it will require of its participants.

Don’t sign an ACO participation agreement until it is reviewed by a health care attorney. If you have already signed an agreement without legal review, ask your attorney to spend an hour confirming your understanding of what the document provides. It is true that most ACO participation agreements lack meaningful specifics—to a great extent, participants are agreeing to a set of policies, procedures and standards that may not even be in place yet and that the ACO has unilateral authority to amend (perhaps without notice). And yes, it is true that an individual physician or physician practice does not have much leverage when negotiating ACO participation agreements anyway. But participants need to understand the terms to which they are agreeing. Further, when the terms of an arrangement are unclear and still under development (as is the case with almost any ACO), flexibility is essential. Each participant should have a reasonable means to exit the ACO in the event the arrangement is not workable. Contractual provisions regarding without cause termination, ownership of records, health information technology and reporting requirements, continuing fees and other financial penalties, buy-outs, non-competition and other restrictions must be reviewed with particular attention.

Confirm that the ACO in which you are participating or may participate is reputable, compliance-oriented and is working closely with an experienced health care attorney from a regulatory perspective. ACOs involve complicated webs of financial and other relationships that need to be reviewed under applicable federal and state anti-kickback, fee-splitting, Stark and self-referral laws, anti-trust, tax- exempt principles and other laws. Just because ACOs are being promoted by the federal government doesn’t mean that they have a free pass to do whatever they want to accomplish their objectives. Some ACOs may already have problematic relationships that expose their participants to unnecessary legal risk. It’s important to start new ACO ventures on the right path.

Whether you are in an ACO, want to be in an ACO or want nothing to do with these organizations, keep your eyes and ears open. Regardless of one’s political perspective, a reasonable way to describe health care reform is “too much information”—especially for physicians who simply want to put their patients first and have a fulfilling career. Physicians and physician practices need to work with their professional organizations, legal advisors and other consultants to sort through the information overload during this period in which health care delivery and reimbursement are undergoing significant change.

Kathryn Hickner-Cruz, JD, is a partner of The Health Law Partners, PC, which specializes in health care transactional matters and compliance with federal and state health care regulations. She can be reached at

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