Breaking Down Barriers to Creating Safety-Net Accountable Care Organizations: Federal Statutory and Regulatory Issues

EXECUTIVE SUMMARY he implementation of the Patient Protection and Affordable Care Act of 2010 (" PPACA ") is underway. A lively national debate on Medicare and Medicaid reform is also underway. No section of the PPACA straddles both of these events as well as section 3022 of the statute and its proposed implementing regulations, concerning accountable care organizations (" ACOs "). The effort to promote new forms of efficiently-integrated health care delivery and payment speaks to a twofold desire to bend the health care cost curve while obtaining better health care outcomes. ACOs propose to do both. Health care safety-net providers will have much of their world re-invented by the PPACA. Most remarkably, a substantial number of uninsured individuals now served by safety-net providers will become insured. The safety net's commitment to serving the underserved will have to be both revised and refined in light of this. ACOs offer a format in which health care providers and patients both benefit from systemic rewards for providing better, more integrated care and obtaining better health outcomes. ACOs are premised on the belief that providers and patients are aligned in their interests. Nowhere is this more true than in the safety net, where the underserved also should reap the benefit of health care reform's emphasis on higher quality integrated health care. Safety-net providers have not yet been as nimble as commercial insurance-funded providers in re-inventing themselves as integrated health care delivery systems. This is partially because venture capital is not available to these providers to stimulate planning for this transformation. It is also due to confusion over legal and regulatory barriers to safety-net ACO formation. In particular, uncertainty about federal legal and regulatory barriers to safety-net ACO formation has centered on provider compensation constraints, fair competition law and federal tax policy. This policy brief addresses each of these issues and makes specific federal policy recommendations targeted at resolving the confusion surrounding these issues. We make specific recommendations about accommodating the needs and limitations of safety-net providers in the legal and regulatory framework for ACOs. Our strongest recommendation is that federal regulatory entities overseeing ACO rollout streamline the administrative responsibilities associated with complying with existing and modified legal and regulatory barriers. This would help to create breathing room for safety-net providers and other entities interested in forming ACOs. The most efficient way to do this would be to develop comprehensive program guidelines on safety-net …