Accountable Care Organizations (ACOs) are organizations of health care providers who provide care to a group of patients. Created in an attempt to decrease the cost of service delivery and increase efficiency, value and profit, these organizations are new territory for the CPA professional. This presentation was given to the Michigan Association of Certified Public Accountants at their Healthcare Conference on April 23, 2013.

1. ACCOUNTING FOR
ACCOUNTABLE CARE
ORGANIZATIONS
Michael H. James, JD - President & CEO, Genesys
PHO, LLC, Flint
Michael P. James, JD, MBA, CSSGB - Senior
Attorney, Fraser Trebilcock, Detroit & Lansing
Moderator: David S. Nathan, CPA - Executive
Director, Assurance, Ernst & Young, LLP, Detroit

2. The Patient Protection &
Affordable Care Act (ACA)
 Became law in March 2010.
 Supreme Court upholds constitutionality of ACA
June 2012.
 Authorized creation of Medicare Shared Savings
Program (MSSP).

3. Medicare Shared
Savings Program (MSSP)
 MSSP designed to improve beneficiary outcomes
and increase value of care by promoting:
 Accountability for patient population;
 Coordination of care for services;
 Investment in infrastructure; and
 Redesign of care processes.

4. What are ACOs?
 ACOs are the vehicles through which
providers/suppliers participate in the MSSP.
 A legal entity designed to manage and coordinate care
for Medicare fee-for-service beneficiaries under the
MSSP.

5. Fundamental Principles of ACOs
Improve
Care for
Beneficiari
es
Enhance Health
in its
Population
Reduce
Growth of
Beneficiary
Expenditur
es
What are ACOs?

6. ACO Providers
 Providers:
 Hospital;
 Critical Access Hospital ("CAH");
 Skilled Nursing Facility;
 Comprehensive Outpatient Rehabilitation Facility
("CORF");
 Home Health Agency;
 Hospice participating in Medicare;
 Clinic;
 Rehabilitation Agency;
 Public Health Agency (limited); or
 Community Mental Health Center (limited).

7. ACO Suppliers and Professionals
 Suppliers:
 Physician or other practitioner, or an entity other than a
provider, that furnishes health care services under
Medicare.
 ACO Professionals:
 An ACO provider/supplier who is either:
 1) a physician; or
 2) a practitioner (a physician assistant, a nurse
practitioner, or a clinical nurse specialist).

8. ACO Participants
 ACOs are a collaboration of
Participants, Providers, Suppliers and Professionals.
 Participants: Individual or group of ACO
providers/suppliers that alone or together with one
or more other ACO Participants comprises an ACO.

9. ACO Formation and Participation
 There is a distinction between individuals and
entities that are permitted to form an ACO and those
that are merely allowed to participate in an ACO
that has already been created.

10. There are seven groups of ACO Participants eligible to form an
ACO:
 ACO professionals in group practice arrangements;
 Networks of individual practices of ACO professionals;
 Partnerships or joint venture arrangements between hospitals
and ACO professionals;
 Hospitals employing ACO professionals;
 CAHs that bill under Method II;
 Rural Health Clinics ("RHC"); and
 Federally Qualified Health Centers ("FQHC").
Who Can Form an ACO?

11. Other Medicare-enrolled Providers and Suppliers are eligible to
participate in an ACO:
Who Can Participate in an ACO?
• Skilled Nursing
Facilities
• Pharmacies
• CORFs
• Home Health
Agencies
• Nursing Homes
• Medicare-Enrolled
Hospices
• Outpatient Clinics
(limited)
• Rehabilitation Agencies
or Public Health
Agencies
• Long-Term Care
Hospitals
• Community Mental
Health Centers (limited)

12. ACO Legal Structures
 The Structure of an ACO must allow for:
 Receipt and distribution of MSSP payments to
participating providers and suppliers;
 Repayment of shared losses to CMS;
 Mechanisms for compliance with quality care and
performance standards; and
 Fulfillment of the governance, leadership and
management and patient-centeredness criteria of the
MSSP.

13. ACO Legal Structures
 The ACO must be a legal entity formed under
applicable State, Federal or Tribal Law.
 Partnership;
 Corporation;
 Limited Liability Company;
 Foundation; or
 Other Legal Entity.

14. ACO Legal Structures
 Do you form a new entity or can you use an existing
entity for your ACO?

15. Types of ACOs
Integrated Delivery System Model ACO
CMS
Health System ACO
Hospital Physicians
Skilled
Nursing
Facility
Etc.

16. Types of ACOs
PHO Model ACO
PHO
ACO
Hospital
Independent
Practice
Assn.
CMS

17. Types of ACOs
Independent Practice Association Model ACO
IPA
ACO
CMS
PhysicianPhysicianPhysicianPhysician

18. Types of ACOs
Group Practice Model ACO
Group
Practice
ACO
CMS
SpecialistsHospital

19. ACO Governance and Governing Body
 An ACO must establish a mechanism for shared
governance.
 An ACO must maintain an identifiable governing
body with appropriate authority.
 ACO Participants must have meaningful
participation in both the composition and control of
the ACO's governing body.

20. ACO Governance and Governing Body
 ACOs are designed to be provider-led
organizations.
 At least 75% of the control of the ACO's governing
body must be held by ACO participants.

21. ACO Governance and Governing Body
 The ACO governing body must include at least one
Medicare beneficiary representative.
 Goal: Ensure that patients' interests are properly
represented as the ACO seeks to improve care for
beneficiaries and enhance health in the population.
 The governing body of a Pioneer ACOs must also
include a Consumer Advocate.

22. ACO Governance and Governing Body
 The type of governing body used by an ACO will
have will depend on its corporate structure.
 Corporation – Board of Directors
 Limited Liability Company – Board of Managers
 Foundation – Board of Trustees

23. Legal Risks to ACOs
 Fiduciary Duties and Ethical Conflicts
 Corporate Practice of Medicine
 Stark Laws, Anti-Kickback Statute and Civil
Monetary Penalties

24. ACO Operations: Leadership / Management
 An ACO's leadership and management structure is
designed to be a dual system:
 Administrative; and
 Clinical.

25. Improve
Care for
Beneficiari
es
Enhance Health
in its
Population
Reduce
Growth of
Beneficiary
Expenditur
es
Administrative v. Clinical Operations

26. ACO Operations: Clinical Systems
 Clinical management and oversight of the ACO
must be managed by a senior-level medical director
who is a physician and one of the ACO's
providers/suppliers.
 Board-certified physician;
 Licensed in a State in which the ACO operates; and
 Physically present on a regular basis at a location
participating in the ACO.

27. ACO Operations: Administrative Systems
 The appointment and removal of the ACO's
operational leader must be under the control of the
ACO's governing body.
 An ACO's operations must be managed by an
executive, officer, manager, general partner, or
similar party.
 Must have the ability to influence or direct clinical
practice to improve efficiency processes and
outcomes.

28. Required Processes &
Patient-Centered Criteria
 An ACO must promote:
 evidence-based medicine;
 patient and caregiver engagement;
 reporting on quality and cost measures; and
 coordinating care.
 An ACO must also have a patient-centric focus that
is promoted by the governing body and integrated
into practice by leadership and management.

29.  CMS prefers that an ACO have a certain number of
assigned Medicare beneficiaries to participate in the
MSSP:
 ACO – 5,000 beneficiaries; and
 Pioneer ACO – 15,000 beneficiaries.
ACO Membership

30.  During the application process, CMS evaluates the
number of beneficiaries historically assigned to the
applicable ACO participants during each of the
three years preceding the proposed effective date of
the ACO contract.
 A beneficiary is assigned to an ACO based on that
beneficiary’s utilization of primary care services by
an ACO physician during an MSSP cycle.
ACO Membership

31. ACO Membership
5% of Members
= 45% of costs
15% of Members
= 35% of costs
80% of Members
= 20% of costs

32. Physician Networks
 Need to have enough ACO Professionals so that
most health care services can be provided through
the network.

33. Utilization Management
 Predictive Modeling for Last 2 Years of Life:
 Medical homes
 Home Calls
 Care Plans
 Navigators
 ER / Hospital
 Hospice
 Multiple Chronic Diseases:
 Medical home
 Care Plans
 Team Care
 Navigator
 ER / Hospital

34. Utilization Management
 Chronic Disease:
 Medical Home
 Care Plans
 Team Care
 ER / Hospital
 All Others:
 Medical
 Contact & Education
 Care Plans
 ER / Hospital

35. Payment Evolution
 Insurance License.
 Claims Processing.
 Alignment of Fee Structures.
 Incentive to Move from Volume to Value.
 Quality Monitoring Systems.

36. Risk Sharing
Culture of Restructuring
More
Patients in
System
Reduce
Capacity of
System

37. Fraser Trebilcock Davis & Dunlap, P.C.
124 W. Allegan Street, Suite 1000
Lansing, Michigan 48933
www.fraserlawfirm.com
Phone: (517) 482-5800
Fax: (517) 482-0887
Fraser Trebilcock Davis & Dunlap, P.C.
One Woodward Avenue, Suite 1550
Detroit, Michigan 48226
www.fraserlawfirm.com
Phone: (313) 237-7300
Fax: (313) 961-1651
Michael P. James, J.D., M.B.A., CSSGB
Phone: (517) 377-0823
(313) 965-9038
Email: mjames@fraserlawfirm.com
www.linkedin.com/in/MichaelJamesLaw