Hospitals and physicians are hearing more and more about a new type of entity, accountable care organizations (ACOs), which came out of health care reform legislation. The legislation authorizes the Centers for Medicare & Medicaid Services (CMS) to contract with ACOs to provide care for enrollees under the Medicare Shared Savings Program.

CMS has issued a request for information from physicians and others related to the CMS development of rulemaking for ACOs. Comments will be accepted through December 3, 2010 [click here for more information and instructions on how to comment]. In addition, CMS is seeking input on issues such as policies and standards to ensure solo and small practice providers are able to participate in the Medicare Shared Savings Program and the ACO models; payment models and financing mechanisms; attribution of beneficiaries; and quality assessment standards.

The importance of comments on ACOs cannot be overstated. Since ACOs are the cornerstone of health care reform, interested parties need to be heard. In particular, hospitals and physicians (providers) need to be heard so that the proper balance is struck between conserving scarce public resources while, at the same time, assuring the highest quality of care and reasonable compensation for providers. Providers also need to be vitally concerned with issues relating to outcomes measurement and credentialing within ACOs so that providers are free to provide optimal care to the elderly and acutely ill without being unduly burdened by cost concerns.

ACOs are intended to focus on delivering care to particular classes of patients, with an emphasis on improving health and reducing the overall growth rate of health care expenditures. There are several legal implications associated with the creation of ACOs requiring careful analysis by legal counsel and skilled professionals. Appropriate legal and tax implications must be vetted for an ACO, especially with respect to considering the formation of a not-for-profit versus for-profit entity. Additional considerations might include employment issues. Since physicians with privileges at hospitals often work as independent contractors, and not as employees of the hospital, employment status of ACO workers should be determined prior to formation.

Many physicians and physician groups have limited access to capital or other resources to fund ACOs on their own. We have helped clients address similar issues through the creation of specialized organizational structures like captive insurance companies and risk retention groups, and those options could serve as a model for ACOs.