Is there an ACO or PSN in your future?

Section 3022 of Obamacare mandates the creation of Accountable Care Organizations (ACO’s) and Provider Service Networks (PSN’s). Of course, the discretion as to what these things would look like was left up to the Department of Health and Human Services.

Last week, we got the first of the HHS regulations dealing with both.

First, you need to know that ACO’s exist in the world of Medicare, and PSN’s exist in the world of Medicaid, but, they essentially operate in the same way. 

And second, under the law before Obamacare, it could have been a violation of federal and state law for a group of doctors to join with a laboratory, or a hospital, and agree to refer patients among themselves.

Obamacare changes all of that.  Now, your clinical laboratory, hospital, internist, dermatologist, cardiologist (and other medical disciplines)  can join together into one business, an ACO.

Here is the theory. 

Lots of unnecessary and duplicative tests are performed as you travel from doctor to doctor, and money could be saved if “everyone was on the same page”.  In theory, ACO’s eliminate that.

And, here is how we now know they will operate.

An ACO must agree to remain in existence for 3 years.  And, any ACO will be required to accept 5000 “assigned” beneficiaries.  What an “assigned” beneficiary is still remains unclear, i.e. will the government tell Medicare recipients they must go to a particular ACO, or else, or, can the Medicare recipient volunteer for the program.

But, here is what we do know,

The proposal envisions two ways for providers to be paid. An ACO could choose to receive bonuses in the first two years of a three-year contract if it meets quality measurements set by the government and saves money compared with a government estimate of how much its Medicare patients should cost.  In the third year, the ACO would share in the downside should its patients wind up costing more.

ACOs can also choose an alternative track that puts them at risk for losses at the beginning of a contract, in exchange for higher bonuses should they save money and improve care compared with government benchmarks.   [emphasis supplied]

The “sharing in the losses” aspect of this certainly creates a perceived, if not actual, ethical dilemma for medical providers.  Spending in excess of the “benchmark” puts the provider at risk of losing money.  Many will say that this encourages “failure to treat”.

To me, though, there is perhaps a larger issue.  Any negative outcome will be blamed on lack of treatment, whether real or imagined.  And, Obamacare does nothing about dealing with tort reform.

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The Sound Off Sister was an Assistant United States Attorney for the Southern District of Florida, and special trial attorney for the Department of Justice, Criminal Division; a partner in the Florida law firm of Shutts & Bowen, and an adjunct professor at the University of Miami, School of Law. The Sound Off Sister offers frequent commentary concerning legislation making its way through Congress, including the health reform legislation passed in early 2010.


  1. Dimsdale on April 9, 2011 at 3:07 pm

    "Assigned beneficiary" is the new "undocumented worker" (which was the new illegal alien)….

  2. ali-t on April 10, 2011 at 3:24 am

    Head for the hills… this is a nightmare for doctors and patients.  Doctors will leave medicine in droves.   Why not get that crowd of costly bean counters out from between a doctor and his/her patient and leave them alone!  AliCare is quite simple: allow for true catastrophic insurance to be purchased across state lines, like you can auto insurance.  Let people pay their doctors directly.  Watch costs plummet as people shop around for best value.  Too simple or just no one to control or votes to buy?

  3. RoBrDona on April 10, 2011 at 4:55 am

    The New England Journal of Medicine estimates that ACOs will lose $ for at least 3 years after inception (at a minimum) and in some geographic areas where costs are already low, they can't make money. Among other problems, there is no way to figure out how the ACO is doing as "savings" payments are based on annual figures only and are not cumulative. The AMA has asked the Federal Trade Commission for relief from anti-trust rules to permit small practices to collaborate in an ACO while continuing to be independant (so that they can make money).  The best I can figure is that for a broad section of the medical community it will not be profitable and therefore not sustainable.

  4. kateinmaine on April 10, 2011 at 9:23 am

    mebbe i'm off the reservation here, but this sounds like government sponsored monopolistic fiefdoms, complete with a modern spin on middle ages healthcare AND the golden power of death panel–quite the reality show!

  5. winnie888 on April 12, 2011 at 12:58 am

    What I find laughable is this:

    "quality measurements set by the government".   That's rich.


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