The Brave New World of ACO Contracting

A first look at the issues facing EMS provider agencies

 

There’s still much confusion on the subject of Accountable Care Organizations (ACOs), especially with regard to aligning or “contracting.” This month’s article answers a couple of fundamental questions regarding ACO contracting. Watch for more insights in the coming months.

 

Overview of ACO contracting
ACO contracting is similar to other types of rate payment contracting EMS providers currently have with Medicare and other third-party insurers–but with a couple of significant twists.
Under the current Medicare contracting system, healthcare providers, including EMS providers, contract directly with various payer entities (i.e., Medicare, Medicaid and private insurance carriers), submit bills directly to the payer entities, and are paid on a fee-for-service basis for services rendered to payer beneficiaries.

 

For example, if an EMS provider wants to be able to bill Medicare, it must sign an agreement that says it agrees to accept the scheduled rate established by Medicare; aside from billing the beneficiary for the applicable co-pay, it agrees not to bill for any difference between that rate and the EMS provider’s normal rate. This is pretty straightforward, but also one-sided, because the EMS provider has no opportunity to negotiate how much they will be paid under the fee schedule; it either accepts the scheduled rate or it doesn’t get paid.

 

Under the new ACO system, healthcare providers will no longer submit bills directly to payer entities. Instead, all the healthcare providers involved in the totality of the medical incident (i.e., the EMS provider, the emergency department physician, the primary care physician and the specialists) will submit bills to the ACO, which will in turn submit a bundled invoice to the applicable payer entity(s).

 

The ACO will then receive one flat-rate payment, which will be divided among the healthcare providers according to the terms of the contract each provider has with the ACO. The downside of this new system, however, is that if a healthcare provider does not have a contract with the applicable ACO, it won’t get paid.

 

On the positive side, ACO contracting will allow an EMS provider to negotiate its own reimbursement rates directly with the ACO. However, payments will be tied to various benchmarks designed to measure quality and value of care, as well as a number of other things.
Therefore, the better job the EMS provider does at explaining itself and demonstrating how it can and will add value to the ACO and its beneficiaries, the better chance the EMS provider will have of successfully negotiating higher reimbursement rates for services.

 

This, of course, requires the EMS provider to be an active participant at the negotiating table; otherwise, it risks having to accept an arbitrary pre-determined rate set by an ACO, which quite possibly has little or no understanding of how the EMS provider functions and why it can (and does) add value to the ACO’s beneficiaries.

 

Aligning with multiple ACOs
The idea of contracting with an ACO invariably leads to the question, “What if there is more than one ACO in my service area? Can we contract with more than one?” The simple answer is, yes.
The Patient Protection and Affordable Care Act (PPACA) has no restrictions on healthcare providers contracting with multiple ACOs. So, by all means, if more than one ACO forms in your area, you should most definitely contract with all of them.

 

The idea of an ACO is that beneficiaries (i.e., patients) will be cared for collectively across the continuum of care (i.e., preventive, acute, post-acute, rehabilitation, etc.) by healthcare providers who belong to formalized groups known as ACOs. When a patient is treated by an ACO, all of the care provided to that patient will be channeled through the ACO for case management, collaboration across provider platforms, continuum of care and payment functions.

 

Therefore, all payments related to the care provided to that patient will pass through the ACO. Thus the need for contracting in advance to ensure reasonable payment for services rendered. In cases where a patient is not from the local area, payment for services will still be made through the local ACO that treated them.

 

Of course, there will probably continue to be some instances where patients are not ACO beneficiaries, in which case some payments will presumably continue through more traditional channels (e.g., insurance providers and private pay).

 

However, most insurance companies are getting on board with the ACO concept, Medicare and Medicaid ACOs are being established and approved in large numbers, and the PPACA’s Individual Mandate requires all people to have insurance coverage by the end of next year (or pay a penalty).

 

For all intents and purposes, then, the only payments for services that will not fall under ACO coverage will essentially be those people who have elected to pay the penalty and thus are private pay.

 

Municipal contracting with ACOs
All of this ACO contracting business may be fine for private, “third service” EMS providers, but what about the public providers–specifically, county, municipal, and fire department-based EMS? Is it even possible for municipalities (or such government agencies as fire departments) to contract with ACOs given the strict procedures that governments must follow before they can enter into contracts, such as requiring bids from perspective contractors? Once again, the answer is “yes.”

 

Government entities are required to engage in a “request for proposal” or “competitive bidding” process in cases where government funds are being spent, a contractor is being hired to perform a service to the government, and/or a limited number of contractors will be selected.

 

ACO contracting does not meet these criteria. As noted above, there is no prohibition on contracting with multiple ACOs, and in fact, EMS providers are encouraged to contract with as many as possible in their service area to ensure maximum reimbursement. Furthermore, the county, municipality and/or fire department is not spending funds; it is receiving money. And, finally, it’s the government entity which is performing the service, not the ACO.

 

If a county, municipal or fire-based EMS service currently bills Medicare/Medicaid and private insurers, contracts for reimbursement are already in place. ACO contracting is essentially the same “animal,” except that the contracts will not be directly between EMS providers and the insurance carriers anymore; the contracts will be with the ACOs, and reimbursement will come from the ACO, not from the insurance carriers and Medicare/Medicaid.

 

As always, this article only scratches the surface. Be sure to consult with an attorney to review your organization’s specific needs and obtain appropriate advice on these and related issues.

 

This column is not intended as legal advice or legal counsel in the confines of an attorney-client relationship. Consult an attorney for specific legal advice concerning your situation.

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