MSSP ACOs offer hospital systems the ability to clinically integrate and enter commercial markets while avoiding many regulatory issues.

The Regulatory Catch-22
To successfully contract with payers, hospital systems must first be clinically integrated. Yet, according to DOJ and FTC rules, joint contracting must come first, because it is joint contracting that allows providers to legally collaborate and integrate.

MSSP ACOs allow health systems to avoid the issue entirely, because regulators view them as prima facie proof of clinical integration. Even better, competing providers aren’t required to adopt financial carrots or sticks to participate as an MSSP ACO. Instead, MSSP ACOs require a leadership and management structure that includes clinical systems, promotion of evidence-based medicine, and quality and cost data reporting – all hallmarks of clinical integration.

Best of all, CMS allows eligible entities to participate in any one of three tracks ranging from Track 1 with no downside financial risk and up to 50 percent shared savings capped at 10 percent of premium to Track 3 with upside sharing and downside risk up to 75 percent capped at 15 percent of premium.

Additional Regulatory Waivers
ACOs also have access to five regulatory waivers that allow some activities prohibited by Stark and other laws:

  • The Pre-Participation Waiver protecting certain start-up activities in connection with ACOs
  • The Participation Waiver protecting ACO arrangements with participants, providers, and suppliers during their participation in the MSSP
  • The Shared Savings Distribution Waiver protecting distributions from an ACO to its participants, providers, and suppliers
  • The Compliance with the Stark Law Waiver protecting ACO arrangements that comply with the federal Stark Law
  • The Patient Incentive Waiver protecting certain ACO incentives to Medicare beneficiaries

These waivers allow the ACO entity (i.e., the hospital sponsoring the ACO) to totally fund the infrastructure, such as the ambulatory EMR that serves as the common platform; the IT connectivity to aggregate, analyze, and report clinical data among and between different EMRs; and the financial gain-sharing arrangements incentivizing independent providers to align with the hospital and its ACO. The good news for hospitals is … this can all be done as a Track 1 ACO with no downside financial risk.

Entrée to the Commercial Market
In April of this year, CMS reported 404 ACOs operational in the Medicare Shared Savings Program. There are at least as many ACOs holding commercial contracts, and most are MSSP ACOs.

Why the overlap? Commercial payers want to transfer risk to provider organizations with the clinical and administrative infrastructure in place to ensure sound stewardship of patient care at a higher quality and lower cost than the fee-for-service system that’s driving the premium dollar upward. MSSP ACOs allow hospitals to develop the clinical integration infrastructure commercial payers want.

ACOs are a learning laboratory that can help hospitals:

  • Understand their cost structure;
  • Develop a long-term value-based contracting strategy for other patient populations;
  • Have strategic conversations about how to acquire and deploy costly investments such as IT and a care management infrastructure; and
  • Make the transition to clinical integration and population health management

David W. Miller

Founder and Chairman