Last summer Governor Bentley signed legislation authorizing Regional Care Organizations (“RCOs”), which, among other things, encourage collaboration among health care providers. In a nutshell, RCOs will be entities in five regions of Alabama responsible for the care of Medicaid beneficiaries. By 2016, RCOs will receive a capitated payment from the state and are “at-risk” if the costs exceed the capitated payment. One component of this new RCO structure allows private parties to collaborate with each other to reduce costs and improve patient care. To avoid violating anti-trust rules, an entity seeking to collaborate under the new RCO law must obtain a certificate to collaborate and file certain periodic reports with the Alabama Medicaid Agency. Below we describe the reasoning behind the certificate requirement and the process to obtain one.
Cost savings. An overarching goal of the RCO legislation is reducing costs while maintaining high quality care. Recent rule-making by the Alabama Medicaid Agency identifies particular goals of collaboration, including improved care for Medicaid beneficiaries, cost containment, enhanced technology, and maintaining competition.
Sharing Information. Collaboration requires sharing information. Examples include reduced costs through collective negotiation with vendors for volume discounts on supplies and equipment, or implementing new ways of sharing information to reduce duplicate tests/scans of transferred patients. Collective negotiation will require separate entities to have the ability to enter into contracts as a group – possibly as a joint venture, through a Management Services Organization (“MSO”), Independent Practice Association (“IPA”), or Group Purchasing Organization (“GPO”). Sharing information to reduce costs associated with tests and scans will require agreements among entities to ensure appropriate payment, sufficient security, and guidelines regarding the use of and access to information.
Anti-trust rules. When separate entities share information, especially competitors, it is important to navigate anti-trust rules. A group of physician practices that bands together to negotiate lower prices for the benefit of patients could also attempt to squeeze out a competitor or fix prices as a group. Anti-trust rules exist at the federal level and state level to prevent anti-competitive behavior.
State Action Immunity. For the RCO concept to work, the Alabama Legislature foresaw that information sharing by private parties must occur and could violate anti-trust rules. The RCO legislation attempts to utilize state actionimmunity to shield RCO participants from anti-trust laws and permit what would otherwise be anti-competitive (and thus illegal) behavior. To utilize state action immunity, 1) the legislature must affirmatively express a state policy to supplant competition with regulation and 2) the policy must be actively supervised by the state.
State policy. The Alabama Legislature expressed its policy to displace competition with regulation in the RCO statute and affirmatively stated its intent to “provide immunity…through the state action doctrine” for RCO participants.
Active supervision. Under the statute, “collaborator” is defined very broadly as “[a] private health carrier, third party purchaser, provider, health care center, health care facility, state and local governmental entity, or other public payers, corporations, individuals, and consumers who are expecting to collectively cooperate, negotiate, or contract with another collaborator or regional care organizations in the health care system.” The Alabama Medicaid Agency recently published rules regarding collaborators and state supervision. The rules require any “collaborator” to obtain a certificate to collaborate and file periodic reports with the Alabama Medicaid Agency.
What are the next steps to collaborate?
1) Certificate to Collaborate. Entities that seek to collaborate with each other must obtain a certificate to collaborate from the Alabama Medicaid Agency. This needs to occur before beginning any negotiation.
2) Periodic reports. Collaborators must also submit periodic reports to the Alabama Medicaid Agency no later than March 1 and September 1 each year. Failure to file a periodic report or submit other documents requested by the Alabama Medicaid Agency can result in revocation of the certificate to collaborate.
Sign-up process. The process is fairly straightforward. Alabama Medicaid has an on-line portal to sign up as a collaborator, available here: https://rcoportal.medicaid.alabama.gov/. There is even a special helpline for collaborator issues: Phone: (334) 353-4121 Email: RCOcollaborator@medicaid.alabama.gov