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E-ALERT | Health Care

April 15, 2011

ACCOUNTABLE CARE ORGANIZATION BASICS

The Affordable Care Act establishes the Medicare Shared Savings Program (“Program”), which provides for the development of accountable care organizations (ACOs) in an effort to both reduce costs and improve health outcomes in the Medicare Program. ACOs are groups of physicians, hospitals, long-term care facilities, and other health care providers that work together to serve patients. The Program provides incentives for the formation of ACOs. In turn, ACOs are intended to improve coordination of patient care, increase accountability through quality measurements, and encourage investment in new methods of health care delivery.

On March 31, 2011, several agencies issued publications regarding ACOs. The Centers for Medicare & Medicaid Services (CMS) issued the proposed rule for the Program. The Department of Health and Human Services (HHS) Office of Inspector General (OIG) and CMS issued proposed waivers of federal fraud and abuse laws as applied to ACOs. The U.S. Department of Justice (DOJ) and Federal Trade Commission (FTC) issued a statement of proposed antitrust enforcement policy. Finally, the Internal Revenue Service (IRS) issued a Notice regarding the tax-exempt status of organizations participating in ACOs. All the agencies have invited public comments on their proposals, the earliest due date for which is May 31, 2011.

  • I.

    FORMATION OF AN ACCOUNTABLE CARE ORGANIZATION

  • A.

    Application Requirements

Under the rule proposed by CMS, an ACO is comprised of a group of participants that will provide care to select Medicare beneficiaries. ACO participants may include: ACO professionals (i.e., physicians and hospitals in a group practice arrangement); networks of individual practices of ACO professionals; partnership or joint venture arrangements between hospitals and ACO professionals; hospitals employing ACO professionals; and other Medicare providers and suppliers.

Both existing and newly-formed ACOs must apply to participate in the Program. To qualify for participation, ACOs must serve at least 5,000 Medicare beneficiaries. The ACO must have a governing body comprised of providers, suppliers, and beneficiaries. It must also have an accountability plan that consists of: providing quarterly and annual reports, surveying beneficiaries, analyzing claims and financial/quality data, and performing site visits. It must identify high-risk patients and develop individual care plans for target populations. The ACO must maintain a database of all its participants and a means to screen participants based on conflicts of interest, and any changes in ACO provider participants must be approved by CMS.

B. Risk-Sharing

The rule provides that ACOs must enter into 3-year agreements with CMS. The first of these agreements will begin on January 1, 2012. The agreements may be structured in one of two ways.

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