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Medicare ACOs: The Integration Of Financial And Clinical Integration



April 11th, 2012
by Douglas Hastings

Editor’s note: For more on the first round of Medicare Shared Savings Program participants and payment and delivery system reform, see Steven Lieberman’s post.

Back in 1996, the Federal Trade Commission and Department of Justice, in providing antitrust guidance for multi-provider networks, considered financial integration and clinical integration as separate pathways for such networks to avoid per se violations of the antitrust laws and, instead, to be treated under the rule of reason, allowing for an assessment of their procompetitive vs. anticompetitive effects. With 65 organizations now participating in Medicare shared savings initiatives, including the 27 Medicare Shared Savings Program participants announced yesterday (there are 32 Pioneer Accountable Care Organizations and 6 Physician Group Practice Transition Demonstration organizations), we can see, 16 years later, how clinical and financial integration in fact go hand in hand.  Under these various accountable care arrangements, multi-providers entities contracting with the Centers for Medicare and Medicaid Services as ACOs are required to demonstrate both quality (i.e., delivery reform featuring clinical integration) and cost efficiency (i.e., payment reform featuring financial integration).

Financial integration among providers involves: shared financial data and shared financial risk and reward; mutual dependency on financial outcomes; and aligned financial incentives.  Clinical integration among providers involves: shared clinical data and shared patient relationships; mutual dependency on clinical outcomes; and aligned clinical incentives.  People debate the comparative meaning of the terms clinical integration, coordinated care and accountable care, among others.  While all convey the importance of multi-provider collaboration, “accountable care” to me best integrates the concepts of financial and clinical integration.

A successful provider organization in a value-based environment will need to operate under payment systems that have moved away from fee-for-service to some form of shared financial risk involving a variety of upside and downside risk options.  Indeed, among the Pioneer Model, the MSSP and the PGPTD, there appear to be at least eight different payment models in play, and there are other variations being tried in the private sector.  At the same time, provider organizations are being required to measure and report outcomes and patient satisfaction in accordance with a variety of measures, and to be transparent about it.  Private sector arrangements are adopting these measures as well as others, and new measures are being developed continuously.  All of these emerging payment arrangements will demand, and reward, effective clinical and financial integration among providers across the continuum of care, and punish the failure to do so.

These public and private sector developments address both policy and legal issues.  Evolving standards, including those promulgated on the antitrust, fraud and abuse and exempt tax fronts as part of the ACO Final Rule, provide guidance as to what providers must do together to be deemed “integrated,” both financially and clinically.  The guidance, taken together, suggests that a qualified and effectively operating ACO does gain a degree of legal protection under these regulatory schemes through waivers, safety zones and announced agency protocols.

In the antitrust arena, there remain difficult issues to work through, particularly where the providers in an ACO have a high market share.  But the recognition that legitimate ACO activities will be treated under the rule of reason and the identification of activities that may cause the antitrust agencies concern are helpful.  The regulatory dialogue that has taken place around Medicare ACOs – i.e. how to distinguish “good” collaboration from “bad” – advances the related goals of achieving a more effective and efficient health system in a legally compliant environment.

The fact that the majority of the 27 MSSP ACOs announced yesterday are physician organizations, a fact touted by Jonathan Blum of CMS and by the AMA, is testament to the evolution of thinking since 1996 about physician network joint ventures and the potential application of the rule of reason to ACOs.  As Blum stated in his comments regarding the announcement: “There were some people who feared that the only entities that would participate would be hospital-dominated systems.  That has not happened.”

Only time will tell whether common ownership and employment models will be more effective than network models in ACO development or whether some of each will succeed.  Antitrust enforcement will continue to challenge mergers deemed to be anticompetitive.  There is the potential for new forms of contracting (rather than mergers) among providers, including in some cases high market-share providers, working with payers (public and private) to accomplish accountable care goals through value-based payment arrangements to create antitrust-acceptable pathways — i.e., if payment is based on measurable value (quality over cost), where is the harm?  Indeed, the integration of financial and clinical integration means that successful provider organizations in the future should be able to “do well by doing good.”

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  1. Medicare Buz » Blog Archive » Networking for Better Care
    April 13th, 2012 at 9:09 pm

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