ABA Health eSource
November 2010 Volume 7 Number 3

Without a Roadmap: What Direction will ACOs Travel?

By Sandra E. Quilty, Baudino Law Group, PLC, Des Moines, IA

AuthorFederal officials representing the Federal Trade Commission (FTC), the Centers for Medicare and Medicaid Services (CMS), and the Health and Human Services (HHS) Office of the Inspector General convened a public workshop 1 to discuss how to form an accountable care organization (ACO) without violating fraud and abuse laws. 2 The workshop, attended by more than 300 health industry representatives, was kicked off by opening remarks from the CMS Administrator, the FTC Chairman, and the HHS Inspector General. The federal officials discussed creation and development of ACOs section 3022 waiver authority 3 , and the creation of new safe harbors and exceptions with regard to fraud and abuse laws.

The overall tenor of the agencies’ opening remarks was a genuine desire for integrated care to thrive and not to stifle or hinder competition given the unique opportunity presented in healthcare reform legislation. “We want to make sure ACOs are not unduly inhibited by existing fraud and abuse laws . . . [they] should not stand in the way of improving quality and reducing costs through ACOs” stated HHS Inspector General Daniel Levinson. The federal officials discussed cooperation among the government agencies and assured a continued collaboration with hospitals and physicians for ACOs.

CMS Administrator Dr. Donald Berwick started the day long workshop by discussing the need for “consistent commitment to cooperation.” He opined that to achieve this level of collaboration, an ACO must be centered on the patient and the patient’s preferences. ACOs have to be comprised of providers who share in the decision making process and are transparent, thereby being willing to be accountable for true patient-centered care. In addition, for optimum operation, the ACO must be “data rich.” This data will enable use of real-time information needed for a clinical decision as a patient moves through the so-called “cooperative.”

Both FTC Chairman Jon Leibowitz and HHS Inspector General Levinson focused their opening remarks on safe harbor creation and advocating for an “expedited review process” for those ACOs that fall outside of the safe-harbor. The federal officials echoed the need for innovation, creativity, and “fresh thinking.” “We need your real-world experience to help us understand what kind of ACOs you're considering, and how you see them operating in the healthcare marketplace,” Leibowitz said.

The panelists consisted of an esteemed group of industry professionals representing the full gamut of healthcare. In fact, several in attendance were named “Top 10 People to Know in the World of ACOs” as noted in a recent publication. 4 Some of the panelists included: Gloria Austin, CEO of Brown & Toland, a San Francisco-based Independent Practice Association; Dr. Lawrence Casalino M.D., Chief of the Division of Outcomes and Effectiveness at Weill-Cornell Medical College; Dr. Lee Sacks, M.D., President of Advocate Physician Partners in Illinois; and Dr. Ceci l Wilson, President of the American Medical Association. Panelists considered levels of integration and circumstances under which permissible price negotiations may occur among the ACO providers without risking potential antitrust implications; and, how best to encourage formation so that competition would improve quality and affordability in any geographic market. Also addressed throughout the day were issues of whether Section 3022 waiver authority should be exercised by CMS and what safeguards, if any, should be implemented. Allowing an ACO a waiver with regard to the fraud and abuse laws may lend itself to an environment where ACOs could experiment more with structure and formation without risking running afoul of well established fraud and abuse laws. Generally, the waiver authority was discussed quite favorably by the panelists and there seemed to be consensus that if waiver authority was utilized then the protection should be applied uniformly. 5

Many seemed to agree that a “level playing field” was ideal if the industry were to move quickly. Some discussed the need for experimentation and flexibility to allow ACOs to flourish. Others raised the need for flexibility with regard to reorganizing and restructuring if the ACO model chosen did not initially prove to be successful. Many panelists raised the notion of accreditation to provide the type of guidance needed in creating an ACO. Regardless of any type of accreditation, an ACO can be certain that it will need to be able to produce data-rich evidence of its quality measures to prove and establish that it is functioning and operating appropriately and as intended by the federal healthcare reform legislation. Should the FTC create any safe harbor or exceptions, it will undoubtedly be a balancing act with regard to the scale needed to meet objectives and any potential market power type issues.

Panelists stressed electronic health records (EHRs), enabling technologies and interoperability as critical pieces in achieving integration required for the ACO. 6 A few of the panelists shared their first- hand experiences on how accessibility to real-time clinical data translates into real clinical value. An administrative system encompassing such enabling technology would foster an infrastructure that allowed for ongoing monitoring. The ability to share, capture and analyze data is an essential element to a healthy and robust ACO. This type of data would allow an ACO to continuously evaluate and monitor its overall culture and internal behaviors. Capturing and analyzing the data internally would also allow the ACO to ensure there is no fragmentation but rather cost and care integration. An ACO would be better positioned to see how best to achieve accountability and true clinical efficiencies by employing this type of data analysis.

To compete in the new marketplace developing as a result of the Patient Protection and Affordable Care Act, an ACO’s infrastructure – governance, leadership and management -- will need to have clarity and transparency to achieve the integration needed for true care coordination. After all, with this new type of model, the physician – especially the primary care physician – is the true steward of accountability. Moreover, an ACO needs to consider performance measures in areas such as clinical processes, cost and quality, and overall patient experience with or without any potential regulatory guidance. As panelist Elizabeth Gilbertson 7 stated, a solid formula for performance metric setting is the total sum of aggregating total cost, total quality and total patient experience. This should ultimately result in a system of care that is genuinely patient centered.

Several panelists discussed the need for regulatory guidance for both providers and payors in establishing performance metrics. Internal operational metrics are necessary, but should be set at an achievable bar and constantly raised to encourage improvement – improvement with regard to performance measures as well as total cost management. From an operational standpoint, performance measures could be continuously refined based on the clinical data to ensure quality metrics are being met and improved on an ongoing basis. Physicians should be engaged in the development process, as they are the true heart and soul of an ACO. As stated by Panelist Dr. Cecil Wilson, President of the American Medical Association, quality performance committees made up of physicians enables buy-in and allows measures to be followed better because they are established by the clinical experts.

In addition to integration, the panelists discussed market power and issues of exclusivity given current consolidation trends the market is experiencing as a result of the ACO. While some discussed the fact that consolidation need not be automatically equated to gaining market power, payors discussed their experiences with market power issues such as price increases in markets where certain providers are dominant. There was a great deal of discussion regarding the need for scale in order to absorb the cost of infrastructure investment, delivering cost effective care efficiently, and spreading risk. While a number of advisory opinions issued by the FTC discuss non-exclusivity in great detail, a plethora of the panelists believed exclusivity to be critical for an ACO to best achieve high level integration and not fragment physician loyalties. One panelist went as far to suggest that without exclusivity it simplyundoes many of the core goals needed and desired for success.

The day-long workshop affirmed for many that while much more guidance is needed, it will take time, patience, collaboration, flexibility, experimentation, and transparency to get the ACO model right. As ACOs are formed, no single ACO model will look alike. “If you have seen one, you have seen one,” stated one of the panelists. While many in the industry may differ on the extent and level of detail of potential regulatory guidance, any exception, safe harbor(s), or exercise of waiver authority will have to be a process closely monitored by all. Regulators are in the earliest stages of determining what factors to consider in employing, if at all, its Section 3022 waiver authority. The same can be said for development and creation of any safe-harbors or exceptions. Regulators will have to consider that current fraud and abuse laws may not be in line with the objectives of the new ACO model and what its success may engender despite the great deal of information and guidance already in existence for clinical integration. Through this workshop and comments already provided by representatives in the industry, regulators will have a better sense of how best to proceed and provide guidance for hospitals and physicians as the new marketplace takes shape.


1 “Workshop Regarding Accountable Care Organizations, and Implications Regarding Antitrust, Physician Self-Referral, Anti-Kickback, and Civil Monetary Penalty (CMP) Laws” Baltimore, Maryland (October 5, 2010)
2 The fraud and abuse laws discussed herein include the Anti-kickback Law, the Stark Law and the Civil Monetary Penalty Law collectively. The Patient Protection and Affordable Care Act put the ACO on the map as the latest clinical integration health care model devised to manage healthcare costs while improving overall quality of care to Medicare patients through the Medicare Shared Savings Program. Patient Protection and Affordable Care Act, §3022, Public Law No. 111-149 (2010).
3 Section 3022 of the Patient Protection and Affordable Care Act provides HHS with the discretion to use broad authority in determining whether to implement waivers for ACOs with regard to the fraud and abuse laws. Potentially, an ACO can be waived from meeting some of the demands currently required by current fraud and abuse laws. This would ideally foster an environment where ACOs could more easily and expeditiously flourish. Some panelists discussed a desire for any waiver to be applied uniformly to enable a level playing field while others advocated for an ad hoc approach.
4 http://www.beckershospitalreview.com/hospital-physician-relationships/10-people-to-know-in-the-world-of-acos.html
5 HHS Inspector General Levinson stressed how they would work closely with the CMS as they determine the process of exercising waiver authority pursuant to Section 3022 of the Affordable Care Act.
6 While all seemed in agreement with regard to health information technology generally, there was discussion that this area is already being driven by other policies and that ACOs should not be the policy driver in achieving fully implemented EHRs.
7 Elizabeth Gilbertson is president of the Hotel Employees and Restaurant Employees International Union ( HEREIU) Welfare Fund in Las Vegas, Nevada.

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