By now it is well known that the number of physician-owned accountable care organizations (ACOs) exceeds the number of hospital-owned ACOs. But how are these ACOs actually formed? How does an ACO contract with provider participants? What are the requirements for ownership and governance?
Fortunately, the physician and attorney authors of The ABCs of ACOs: A Practical Handbook on Accountable Care Organizations have pooled their collective expertise in a concise guide for those seeking to develop and operate ACOs.
This text catalogues various legal mechanisms utilized by ACOs, including business associate agreements, ACO participant agreements, and specific the requirements for governance composition and structure. Other timely content includes discussions on the relevant fraud and abuse regulations, a thorough analysis of anti-trust law and related guidance provided by the DOJ and FTC, as well as the seven categories of entities that are permitted to form Medicare ACOs.
Perhaps the most interesting sections discuss the development of physician ownership groups for ACOs. The authors estimate at least 50 to 60 physicians are required, with 60% of those being primary care physicians, to meet the minimum number of 5,000 covered lives necessary. The authors explain that CMS actually assigns Medicare beneficiaries to the medical providers that see them most often. So a primary care physician may receive “credit” for 1,800 lives while a surgeon may only receive credit for 140. Therefore, unlike many other types of physician-owned businesses, ACOs inherently shift power to primary care physicians.
Physician-owned ACOs are also required to have at least 75% ownership/control by physicians. This is an important point to note. The authors estimate an investment of at least $1.5 million is necessary just to support an ACO’s information technology needs. The 25% of ACO ownership that is salable to non-physicians allows investment groups and important vendors to become invested in ACOs’ success.
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The ABCs of ACOs: A Practical Handbook on Accountable Care Organizations is published by the American Bar Association and is available for sale from shopABA.org. The authors are Raymund C. King, MD, JD; Rachel V. Rose, JD, MBA; Martin R. Merritt, JD; and John Okray, JD, MBA, LLM.