By any measure, passage of the 2010 Affordable Care Act (the “Act”) has stirred enormous debate and controversy with respect to the way in which health care is delivered in this country, and the costs associated with same. As of November 17, 2010, at least twenty State Attorneys General have joined a federal lawsuit challenging the constitutionality of the Act’s mandate that individuals pay for health coverage or suffer penalties assessed at tax time through the Internal Revenue Services. Virginia has filed its own lawsuit, and the new Governor-elect in Kansas Derek Schmidt, has announced that when he takes office Kansas will join a federal lawsuit. Regardless of one’s view of the merits of these suits, the very existence of the suits presents considerable uncertainty over the future of the Act.
Meanwhile, Congress and the Administration seem unable to address in any meaningful fashion the scheduled twenty three percent cut in Medicare payments to physician that would take effect on December 1. This has led, predictably once again, to extreme angst and uncertainty among physicians as to whether it is possible to rely upon Medicare as a reliable income stream. Hence, while the Administration seeks to have more integration and collaboration among providers through the Medicare program, the specter remains that physicians will simply opt out of treating Medicare patients, a catastrophic but potentially very real result that no one advocates. Yet, a permanent fix to this problem remains highly elusive.
To add further uncertainty to the future of health reform, on November 10 the National Commission on Fiscal Responsibility and Reform issued its preliminary proposal. Imbedded in that proposal are a number of far reaching budgetary cuts that would take lace between 2012 and 2020, including cuts of over $50 billion for graduate and indirect medical education, an acceleration of payment reductions to disproportionate share hospitals, and a proposed reduction in spending of almost $40 billion that would take place through the implementation and expansion of accountable care organizations, payment bundling, value based purchasing, and other types of payment reforms.
Thus, while many providers welcome the notion of payment reform, the fiscal reality is that the opportunities that many believe would exist for reimbursement through the provision of quality care may be difficult to capture. Nonetheless, in prepared remarks before the Senate Finance Committee released November 16, 2010, Dr. Donald Berwick, the administrator for the Centers for Medicare and Medicaid Services (“CMS”) again emphasized CMS’ intention to move towards better integration of care, including through Accountable Care Organizations. As Dr. Berwick noted: “We know for sure that integrated care is better care – safer, more likely to get us to the treatments we really need, less likely to confuse us, and overall less costly than the opposite – disintegrated, fragmented care. In his remarks, Dr. Berwick emphasized: “ACOs should not be thought of only as a financing mechanism, but as a care delivery organization.”
By any measure, there are very real challenges in the implementation of ACOs. One large question is whether an ACO should be controlled by integrated hospital systems, or by large and small physician groups that come together, or some combination of both. On November 12, the American Medical Association weighed in on this issue with a policy statement advocating a number of issues important to physicians. These include the AMA’s position that physicians, not other healthcare workers, should be in charge of running ACOs. The second is that the AMA strongly believes that a waiver from existing antitrust laws must be made to permit individual physicians or small groups of physicians to participate in ACOs. As the AMA recognizes, it may be far easier to achieve the necessary level of integration within the existing regulatory rubric if a hospital system has moved towards complete integration, through an employment model that seeks to bring together within one system a large network of primary care and specialized physicians.
To seek to address the very real uncertainty surrounding the ability of disparate provider entities to come together in a risk sharing model that ACOs require in order to achieve clinical integration, quality outcomes, and shared savings through the reduction in cost of care, CMS is required to issue implementing regulations respecting ACOs by the end of 2010. In this respect, one would anticipate that CMS will need to address a host of fundamental legal requirements that the Stark Law imposes on providers in order to permit the distribution of any shared savings to providers who are members of an ACO. These include the general requirements that compensation be set in advance (though not in the indirect compensation exception to Stark), that compensation be commercially reasonable, and that compensation be at fair market value. In this respect, CMS should address the requirement that compensation not vary with the volume or value of referrals for designated health services. It remains to be seen, however, whether CMS will provide tangible, readily discernible rules and regulations addressing these issues to permit providers to participate in ACOs without requiring providers to be uncertain as to whether payment mechanisms by ACOs are fully compliant with existing federal law that was not promulgated to address any issues that ACOs would pose.
Likewise, it remains uncertain how the Administration will act respecting the AMA’s position that waivers from antitrust enforcement, or explicit adoption of new antitrust legislation, should be forthcoming to permit small physician groups to participate in ACOs without fear of violating Section 1 of the Sherman Act. This is a crucial issue for small provider groups, who would need to jointly contract with payors to participate meaningfully in an ACO. In this respect, smaller providers would be concerned about the ability to engage in the level of financial and clinical integration necessary to achieve compliance with the Sherman Act under even a Rule of Reason analysis.
There remains the fundamental question of whether the Administration and Congress can act meaningfully to address these issues, when all concerned would appear to agree that payment reforms and the ability to share in savings achieved through the provision of quality care are desirable policy goals. The inability of Congress to address in any permanent fashion the draconian cuts in Medicare reimbursement for physician services may portend further challenges down the road for ACOs, while meanwhile various States continue to seek to strike down the Act in its entirety.
This article was originally printed in the December 2010 issue of Atlanta Hospital News.
