Topics:

Health Care Providers, Insurers: Accountable Care Organizations Bring Legal Worries

Oct 05, 2010

Doctors and hospitals eager to pursue a new model of health care being promoted by the Obama administration are raising concerns that they could run afoul of antitrust and anti-fraud laws, while insurers are warning that the new arrangements could lead to higher prices for medical care. 

The differences will be hashed out Tuesday, when hundreds of health care representatives attend a meeting with federal officials in Baltimore. The session is being conducted by the Federal Trade Commission, the Centers for Medicare and Medicaid Services and the Office of the Inspector General of the Health and Human Services Department.

A key part of the health overhaul law encourages the development of “accountable care organizations” that would allow doctors to team up with each other and hospitals in new ways to provide medical services. Health care providers want to make sure their ACOs won’t be accused of stifling competition or trying to fix prices when they bargain with insurance companies. Insurers, meanwhile, are expressing concern that providers could use the leverage of ACOs to demand higher prices. 

Whether ACOs – which are just a concept for now – can be made to work could determine whether the health care law ultimately succeeds in lowering costs and improving care for consumers.  As envisioned by the law, the organizations would be paid to cover the cost of care for Medicare beneficiaries in a given area and receive financial rewards if they met quality and cost-saving targets.

The federal health program for the elderly and disabled is due to start trying out ACOs in 2012, and some providers are scrambling to figure out how to apply the idea to privately insured patients as well. The antitrust rules mostly concern the  private insurance market; in Medicare, the government sets the payment rates.

Today, most hospitals and doctors work independently of each other, which experts say tends to drive up costs and hurt quality.  “ACOs could transform the way care is delivered and financed and we want the government agencies to take a fresh look at how anti-trust and anti-fraud laws apply,” said Chet Speed, vice president of policy at the American Medical Group Association,  which represents large physician groups. “This open dialogue could be the first step to overcoming these legal obstacles.”

The new ACOs could mimic, for example, the tightly integrated Mayo Clinic, though other variations will likely be tried as well.

In the lead-up to the meeting the hospitals and doctor groups asked regulators  for clear, “user-friendly” guidance to make sure they don’t violate federal laws in forming ACOs. Speed said his members don’t want to spend $1 million to form an ACO without knowing ahead of time whether it will be deemed legal. Hospitals also want HHS to spell out how doctor-hospital ACOs can get waivers on anti-kickback and other fraud and abuse rules.

But America’s Health Insurance Plans, the insurers' trade group, warned government officials against being too accommodating. It said in a recent letter  that ACOs won’t help consumers "if they are mere vehicles for price fixing or aggregating market power, and the antitrust agencies must continue their efforts in this area, using enforcement, guidance, and other tools."

Cory Capps, an economist at Bates White Economic Consulting, said, “We could end up in the worst world,” one in which the delivery of care isn’t made more efficient but providers accumulate “greater pricing power.”

Dr. Elliott Fisher, a Dartmouth Medical School researcher credited with coining the term “accountable care organizations,” said the dispute captures a central contradiction in health care policy today: While many argue that closer relationships among doctors and hospitals are essential to improving care and holding down costs, others worry that will lead to consolidation and higher prices for medical care.

Susan DeSanti, director of policy planning at the FTC, said that the agency is working with CMS on the issues, and that guidance on ACOs will be issued to reduce uncertainty. “The antitrust laws are actually consistent with the goals of ACOs,” she said. “The antitrust laws encourage collaborations when they are going to produce good things for consumers, like improved health care, and the only caveat is that the creation of market power shouldn't go along with that. But antitrust is not a barrier here.”

A few healthcare systems around the country already are embracing the notion of ACOs, and developing them for their private insurance busines. In February, two competing hospitals in Omaha -- the Nebraska Medical Center and Methodist Health System -- announced they would form the Accountable Care Alliance in an effort to reduce duplication of services, limit unnecessary tests and increase communication between doctors and hospitals. Rita Potter, who is on the board of the alliance, says officials realize there’s a risk in going ahead so soon, but concluded that “we just couldn't wait." For now, the alliance is playing it safe by not jointly negotiating rates with insurers.

In Louisville, Norton Healthcare, a large hospital system, and the health insurer Humana are working to create an ACO that will provide care to 21,000 employees of both companies. If the ACO reduces spending by a certain amount and meets quality targets -- such as making sure patients get antibiotics in a timely way– the hospital system will share in the insurer’s cost savings.

Humana Medical Director Dr. Tom James said the insurer wants to show that “health plans have a role with ACOs,” adding that it’s important that ACOs be seen as more than cost-cutters. “If not done right, it could give the whole movement a bad name,” he said. “We learned that with HMOs in the 1990s.”

We want to hear from you: Contact Kaiser Health News