New Report: Overcoming Legal Barriers to Accountable Care Organizations (ACOs)

ACOs are critical component of national health care reform law

Berkeley, CA -- August 25, 2011 -- Roll-out of the new national health care law is underway, but a new report warns of legal and regulatory barriers that could derail one of its critical components. Published by the Health, Economic & Family Security Program at Berkeley Law's Warren Institute on Law and Social Policy, the report finds that some existing federal laws and regulations could slow or even prevent the formation of accountable care organizations (ACOs) serving the neediest Americans. ACOs form the foundation of health care delivery under the 2010 Affordable Care Act and are designed to take better care of patients by emphasizing quality over quantity.

The report, Breaking Down Barriers to Creating Safety-Net Accountable Care Organizations, reviews some of the toughest challenges to ACOs and suggests ways the federal government could streamline their implementation. According to the report, the most vulnerable ACOs are safety-net providers such as community health centers and clinics that care for the neediest populations.

ACOs are not new, but the federal government's widespread promotion of them is groundbreaking. Unlike HMOs, ACOs are run by doctors. "Accountable care" essentially means a doctor's compensation is based on how patients actually fare, rather than how many times the patient has had surgery or an MRI. ACOs earn financial rewards for delivering results-or penalties for falling short-and must meet tough quality measures.

"The federal government's investment in accountable care organizations is a positive step to improving the quality of health care," said Ann O'Leary, director of the Warren Institute's health and economic security program. "But we must ensure that safety-net providers have the resources and the assistance to form ACOs so that our country's lowest-income patients can also benefit."

To make ACOs work, providers must be on the alert for existing legal and regulatory obstacles enacted before passage of the new health care law. For example, older laws governing physician compensation might prevent the newer kinds of partnerships that ACOs require. c also need to be careful that new alliances don't jeopardize their tax status.

Report co-author Ann Marie Marciarille says safety-net accountable care organizations will struggle unless regulators ease certain restrictions. "Nonprofit community clinics serving low-income Americans tend to be under-resourced, from outdated IT systems to low cash reserves," she said. "They don't have the venture capital so readily available to commercial insurers to plan ahead for implementation of the new rules and regulations."

The report finds that America's neediest populations-seniors, the poor, the underserved-have the most to gain from ACO participation. Its model of effective case management and evidence-based medicine is designed to reduce hospital readmissions and offer better care of chronic conditions like diabetes and asthma.

The report recommends that federal regulators streamline implementation of ACOs by publishing comprehensive guidelines that cut across agency lines. Additional recommendations include:

  • implement incentives and rewards for specialists who cooperate with safety-net providers;
  • create special fair competition safety zones for ACOs in rural areas;
  • provide guidance on the tax status of safety-net ACOs.

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Berkeley Law's Chief Justice Earl Warren Institute on Law and Social Policy is a multidisciplinary, collaborative venture to produce research, research-based policy proposals, and curricular innovation on the most challenging issues facing California and the Nation.