ACO's in Eastern Idaho?

Authoring Attorney: Winston V. Beard
Jun 25, 2010

Underlying healthcare reform are policies that will mostly likely open the door to physicians having a greater role in the delivery of health care. The new Affordable Care Act incentivizes hospitals and physicians to work together to simultaneously improve quality and reduce costs. Measuring quality improvements and cost reductions must be based on sound statistical analysis which will require increased data gathering and a large enough patient base to make the statistical analysis valid. If both objectives- improved quality and reduced costs - are measurably achieved, the providers will share in the cost savings most likely through a higher reimbursement rate. Private insurers will be encouraged to implement similar programs. 

The current acronym for these efforts is ACO or accountable care organizations. The exact nature of these organizations will be subject to local variation, but they will typically include a combination of primary care physicians and a hospital with contracts with specialists and ancillary healthcare providers. These are intended to be physician/hospital driven and not insurer driven as with the current PPOs.  

Current models cited are the Dean Clinic, Geisinger Health System, Mayo Clinic, and Cleveland Clinic. However, the structure could be as simple as an extended hospital medical staff. One of the major concerns in developing an ACO are the limitations imposed by the antitrust laws. 

On May 24, 2010, Christine A. Varney, Assistant Attorney General, Antitrust Division, U.S. Department of Justice gave a major address discussing some of the antitrust division’s approach to healthcare antitrust issues. Here are excerpts of what she said: 

The Health Care Policy Statements and business reviews of the federal antitrust enforcement agencies make clear that antitrust is not an impediment to the formation of innovative, integrated healthcare delivery systems and genuine increases in provider efficiency. There are many ways under the federal antitrust laws for providers to form joint ventures to control costs and improve quality without unduly inhibiting competition. They can financially integrate, or they can clinically integrate, or, indeed they can do both. 

Economic integration that justifies application of the rule of reason to joint price negotiations with payers requires the sharing of some form of financial risk, such as agreement by providers to accept a capitated fee, a predetermined percentage of revenues from the health plan, or sufficient clinical integration to induce the groups members to improve the quality and efficiency of care they provide. While there is no particular formula that can cover all types of legitimate clinical integration, the key is that there must be sufficient clinical integration to motivate the kinds of changes that can achieve real cost containment and other performance benchmarks. For example, indicia of clinical integration may include: adequate infrastructure; an adequate number of meaningful protocols for diagnosis and treatment of diseases; enforceable performance standards; and proof of physician commitment to the program. However where purported efforts to integrate are principally a vehicle for obtaining and exploiting market power or simply a subterfuge for price-fixing, then antitrust is there, as it should be, to protect competition and consumers.

The Affordable Care Act’s development of ACO’s is a good example of how providers might work together to deliver more efficient, high-quality care without inhibiting competition so long as their collaborations are properly constructed. For example, the ACO encourages competing physicians, and possibly other other providers to coordinate care for defined Medicare population through redesigning care protocols, utilizing health IT, invest in infrastructure and meeting quality targets. If the ACO meets quality of care and cost targets, it can share the savings with HHS.  Properly constructed, ACOs have the potential to improve healthcare delivery and drive down costs. Thus, as reform moves forward, the Justice Department will work closely with HHS and providers to offer whatever guidance may be needed to ensure that providers pursue beneficial integrated ACO without running afoul of antitrust laws.

It is clear that the government wants health care providers to establish ACOs. The Justice Department will clear the way for innovative approaches that simultaneously improve quality and reduce costs and have the statistical data to show they are doing that. Physicians in Eastern Idaho have tried some of these approaches before. Times have changed, new incentives are being established, and old road blocks are being moderated. It may be time for the medical community to consider one or more ACOs. Ultimately it is primarily the physicians who have the knowledge and judgement needed to simultaneously improve quality and efficiency.