Risks & Benefits of Aco Formation
2011 Risks & Benefits of ACO Formation
PPD513 Legal Issues in Healthcare 11/27/2011
Introduction and Statement of Intent
Section 3022 of the Affordable Care Act requires the Secretary to establish a shared saving program outlining, encouraging and guiding the development of Accountable Care Organizations (ACOs) in Medicare (CMS,HHS, 2011). Shared savings is a key component of Medicare reform and the ACO is a new concept that is being explored as a vehicle to bring shared savings from concept to practice. After the initial rules for ACO formation were proposed, the Department of Health and Human Services (HHS) received over 1,300 comments which they reviewed before issuing the final rule on October 20, 2011 (CMS,HHS, 2011). The intent of this paper is to outline the benefits and risks of forming an ACO, with particular focus on shared savings and shared losses.
Outline of Requirements
The ACO pilot is a national and voluntary program so any and all providers and suppliers are invited to participate as long as they meet the requirements outlined in the final rule. Some of the most significant requirements are listed and explained here (CMS,HHS, 2011). Legal Entity – An ACO must be established as a separate legal entity which is recognized and authorized to conduct business under State, Federal, or tribal law, and must be identified by a TIN. Existing legal entities which qualify to operate as an ACO will be allowed to maintain their current legal structure. However, if they add additional participants to their established ACO structure, a new legal entity must be created. HHS believes this to be important to protect against fraud and abuse and ensure that the ACO is accountable for its responsibilities. Additionally, should an ACO become liable for losses, such a legal structure is essential to collect loss payments from ACO participants (CMS,HHS, 2011).
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Governing Body – Each ACO must establish a governing body to provide oversight and
PPD513 Legal Issues in Healthcare 11/27/2011
Introduction and Statement of Intent
Section 3022 of the Affordable Care Act requires the Secretary to establish a shared saving program outlining, encouraging and guiding the development of Accountable Care Organizations (ACOs) in Medicare (CMS,HHS, 2011). Shared savings is a key component of Medicare reform and the ACO is a new concept that is being explored as a vehicle to bring shared savings from concept to practice. After the initial rules for ACO formation were proposed, the Department of Health and Human Services (HHS) received over 1,300 comments which they reviewed before issuing the final rule on October 20, 2011 (CMS,HHS, 2011). The intent of this paper is to outline the benefits and risks of forming an ACO, with particular focus on shared savings and shared losses.
Outline of Requirements
The ACO pilot is a national and voluntary program so any and all providers and suppliers are invited to participate as long as they meet the requirements outlined in the final rule. Some of the most significant requirements are listed and explained here (CMS,HHS, 2011). Legal Entity – An ACO must be established as a separate legal entity which is recognized and authorized to conduct business under State, Federal, or tribal law, and must be identified by a TIN. Existing legal entities which qualify to operate as an ACO will be allowed to maintain their current legal structure. However, if they add additional participants to their established ACO structure, a new legal entity must be created. HHS believes this to be important to protect against fraud and abuse and ensure that the ACO is accountable for its responsibilities. Additionally, should an ACO become liable for losses, such a legal structure is essential to collect loss payments from ACO participants (CMS,HHS, 2011).
PPD513 Page 2
Governing Body – Each ACO must establish a governing body to provide oversight and
Bibliography: Alderfer, K., & Wilson, B. (2011). Health Reform Resource Center. Retrieved from www.aghealthreform.com: http://aghealthreform.com/2011/04/04/irs-addresses-participation-in-acosby-tax-exempt-heath-care-entities CMS. (2011). Medicare Learning Network. Retrieved from Centers for Medicare and Medicaid Services: www.cms.gov/MLNProducts/downloads/ACO_Providers_factsheet_ICN903693.pdf CMS,HHS. (2011). Medicare Program; Medicare Shared Savings Program: Accountable Care Organizations, Final Rule. CMS. Ernst & Young. (2011). New horizons: the road less traveled. IRS. (2011). Retrieved from www.irs.gov/pub/irs-irbs/irb11-20.pdf Raths, D. (2010). First Look: ACO Rule Seeks Alignment with Meaningful Use. Retrieved from Heatlhcare Informatics: www.healthcareinformatics.com/me2/dirmod.asp?sid=&nm=&type=publishing&mod=publications PPD513 Page 13