Guest Commentary: The conundrum of capitalizing ACOs

Guest post by Mark Lutes

Much of the debate over the Medicare shared savings program and their contracting Accountable Care Organizations (ACOs) has focused on the forms of provider risk sharing, patient attribution methodologies and whether beneficiary consent should be obtained. However, the prospect of providers sharing in material savings is likely to be heavily influenced by the resolution of capitalization issues.

These issues are particularly acute for primary care group practices and networks of primary care physicians--entities that CMS policymakers say they wish to attract as program participants. Primary care physicians will be the linchpins of ACOs, and the methods by which they finance the development of the instruments of care management success should be a central policy question. The comment period for the proposed rule offers physician groups and networks an important opportunity to identify these challenges for CMS, and to propose solutions.

While the statute doesn't directly impose capital requirements, the desire to achieve care management success does. The ingredients for success will include some elements that don't involve capital financing implications (e.g., the knowledge and dedication of the caregivers in establishing care paths), but they'll also include several factors where startup and operational capital is vital.

For instance, many successful care-management programs will incorporate a variety of non-physician professionals to manage care transitions; transition management has been noted as a success factor across the country. Yet, the funding for case managers needs to come from somewhere. Likewise, listening sessions hosted by the Center for Medicare and Medicaid Innovation (CMMI) have identified successful programs that leverage other professionals, such as educators on diabetes and other diseases as well as social workers. Cost-effective quality care for many populations also requires the integration of behavioral health.

There's a growing clinical consensus that application of these resources, in collaborative teams that address high risk and populations with chronic needs, is fundamental to achieving cost and quality goals. Thus, financing the application of these resources is fundamental to ACO success. Yet, little attention has been paid to providing modest-sized physician groups, much less the fledgling networks that the shared savings program is sure to attract, with the operating capital to pay for the care management talents of these professionals.

The same observations could be made with respect to the source of funds for care management information technology and professional staff for financial management, contract network setup and maintenance, compliance, beneficiary relations and other functions that the proposed rule will address.

Many networks, and primary and multi-specialty groups, will align with hospitals to address these capital needs. But some observers have seen the potential benefits of care management innovation by stand-alone physician networks and groups. Those desired ACO applicants might be forced to seek help from "angels" and other investors. However, the price of such commercial arrangements might be loss of control to a physician practice management company.

Surely the CMMI might innovate, relative to seed and operating capital for these networks. One option that warrants further study is offering ACOs an advance funding opportunity for their population stratification and care management activities. It could take the form of unsecured borrowing against otherwise distributable savings. Advanced funding against these anticipated savings would materially enhance the likelihood that substantial savings would be achieved--if, for example, the money was used by the ACO to implement case managers and deploy care management software in outpatient settings.

Physician groups and networks interested in Medicare or Medicaid shared savings participation will want to apprise CMS of their capitalization challenges and offer solutions in their comments to the proposed rule. Loans and other mechanisms should be the subject of rule comments. By doing so, these groups and networks may vastly increase the odds of their ACO meeting the goal of providing "the right care for the right patient in the right setting at the right time, by the right provider, at the right price."

Mark Lutes is a partner in the law firm of Epstein Becker & Green P.C. He is based in Washington, D.C. and can be reached at [email protected].