Category: ACO

CMS Proposes Significant Changes to the Medicare ACO Program

Recently, the Centers for Medicare & Medicaid Services (“CMS”) issues a proposed role that would force Medicare accountable care organizations (“ACO”) to begin risk sharing at a faster pace. This is being referred to as the “Pathways to Success” program.

Currently, Medicare ACOs may participate for up to six years without taking on any risk.  These ACOs are eligible for shared savings, but do not bear any responsibility for increased costs.  The large majority of Medicare ACOs currently do not participate in risk sharing.  Further, based upon performance of Medicare ACOs thus far, Medicare spending has increased.  The “Pathways to Success” program aims to change this.

CMS has proposed to reduce the aforementioned six year non-risk track to two years and replacing all tracks with the Basic Track and the Enhanced Track.  Under the Basic Track, an ACO would participate for five years, except ACOs that start in the Basic Track on July 1, 2019 (more on this date below) would participate for five-and-a-half years.  All ACOs that elect the Basic Track would have no risk sharing for the first year (or the first year-and-a-half of ACOs that start in the Basic Track on July 1, 2019).  ACOs could continue with no risk sharing for the second year except that ACOs that have previously participated in the old Track 1 would have to move to risk sharing in the second year.  The amount of risk sharing would gradually increase each year to a maximum of fifty percent in the fifth year.

As for the Enhanced Track, it is essentially based on the existing Track 3.  All Basic ACOs would have to move to the Enhanced Track after five years (or five-and-a-half years for ACOs that start in the Basic Track on July 1, 2019) with the exception of certain low revenue ACOs, which might be permitted to renew a Basic Track agreement for another five years.

To give ACOs additional time to consider whether they want to continue participating in the Medicare ACO program, CMS has proposed that a six month extension for all ACOs whose agreements expire on December 31, 2018 and a special one-time July 1, 2019 start date (as opposed to January 1) with an application period during spring 2019.


Recent District Court Decision Highlights Potential Conflicts Between Goals of the Affordable Care Act and Antitrust Laws

The Affordable Care Act (“ACA”) promotes the formation of Accountable Care Organizations (“ACO”) designed to improve patient outcomes and lower the overall cost of medical care.  However, a recent decision by the United States District Court for the District of Idaho, in Saint Alphonsus Medical Center, et al. v. St. Luke’s Health System, LTD, Docket No. 1:12-CV-00560-BLW, highlights the fact that the goals of the ACA do not override the antitrust concerns regarding the potential anticompetitive effects such organizations may have on the healthcare market.

The Idaho suit was brought by the Federal Trade Commission as well as two of the merged entity’s competitors, who contended the acquisition would have anticompetitive effects.  The merged entity, which was formed by St. Luke’s Health System and a Saltzer Medical Group, argued that the acquisition was primarily intended to improve patient outcomes.

In its decision, the District Court noted that it believed that if left intact the acquisition would have indeed improved patient outcomes.  In fact, the court stated that “St. Luke’s is to be applauded for its efforts to improve the delivery of health care in the Treasure Valley.” Nevertheless, the District Court concluded that the potential for improved patient outcomes was outweighed by the potential anticompetitive effects including the risk that the combined entity would use its dominant market share to (1) negotiate higher reimbursement rates with health plans and (2) charge more for ancillary services at higher hospital-billing rates.  Thus, the District Court found the affiliation to violate Section 7 of the Clayton Act and ordered the acquisition to be unwound.

The decision reminds us that when forming ACOs through vertical and horizontal integration, health care organizations must remain cognizant of the potential effects of such organizations on market competition.  Regardless of the goals of the entities forming such organizations, it will be the potential effects on competition which determines whether the affiliations run afoul of the antitrust laws.