State Actions to Promote and Restrain Commercial Accountable Care Organizations

State Actions to Promote and Restrain Commercial Accountable Care Organizations, MILBANK MEMORIAL FUND REPORT (October 2015) (with Anne S. Hollingshead, Brent Fulton, Joshua Rushakoff, and Richard Scheffler)

47 Pages Posted: 8 Jul 2020

See all articles by Jaime S. King

Jaime S. King

Faculty of Law, The University of Auckland

Ann Hollingshead

affiliation not provided to SSRN

Brent Fulton

affiliation not provided to SSRN

Richard M Scheffler

University of California, Berkeley

Date Written: October 1, 2015

Abstract

Since 2010, interest in the Accountable Care Organization (ACO) model has grown considerably. ACOs have developed and proliferated in part as the result of intentional government policy, both from the Centers for Medicare and Medicaid Services and the Affordable Care Act. In turn, this has stimulated growth in the commercial sector.

According to Leavitt Partners, there are now over 300 payers with commercial ACO contracts, which cover more than 12 million lives nationwide. California alone now has 67 commercial ACOs, which cover over one million lives statewide. Commercial ACOs have the potential to improve healthcare quality and patient outcomes while achieving cost savings. However, they may also present risks—including those related to solvency and anticompetitive pricing—to providers, patients, and payers.

Aiming to inform states’ roles in this fast-growing market, Part 1 of this report investigates how state governments may promote the responsible development of commercial ACOs. We first describe actions taken by state governments to realize varying policy goals. These goals are:

1. Support and Encourage Integrated Care
2. Support Alternative Payment Methodologies
3. Support Strong Networks of Primary Care
4. Protect the Public from Anticompetitive Behavior
5. Ensure Providers Responsibly Assume Risk
6. Develop and Support Comprehensive Databases
7. Encourage Public Reporting of Cost and Quality Performance Data

We then use a case study approach to present a variety of policy tools that state regulators and antitrust enforcers are using to achieve these goals. We focus on four states with significant development in this area: Rhode Island, New York, Massachusetts, and Texas. Dividing these tools into those that aim to regulate providers and those that aim to regulate payers, we identify:

Tools that regulate providers
1. Risk Certificates
2. Certificates of Authority or Licensing
3. Antitrust Enforcement
4. Antitrust Exemptions
5. Restrictions on the Range of Permissible Contracts
6. Support and Funding

Tools that regulate payers
7. Cost Caps and Benchmarks
8. Population-Based Contracting Targets
9. Primary Care and Primary Care Medical Homes Targets
10. Targets for Alternative Payments

We map these tools onto the policy goals identified earlier by state. A summary of this analysis appears in Table A, "State Actions to Promote and Restrain Commercial Accountable Care Organizations" (see report).

In Part 2 of this report, we consider whether California, a large state that has witnessed a remarkable proliferation of ACOs, should take additional actions to promote or restrain these organizations. In particular, drawing from lessons learned in Part 1, we compare California’s actions in this area to those taken by the four case study states. To a policy-oriented audience, we provide guidance on three potential actions: certificates of authority, antitrust enforcement and exemptions, and risk certificates. While this section focuses on California, the implications of our analysis go beyond California, given the proliferation of ACOs across the United States.

Throughout this report, we discuss potential tradeoffs inherent in these policy goals. For example, financial and clinical integration may promote better quality or cost-effective healthcare, but also may present risks of anticompetitive behavior. States must consider and balance these goals when pursuing state action around ACOs. We conclude with a discussion of these tradeoffs and in the context of the state tools included in this report.

Keywords: accountable care organizations, state regulation, health policy,

JEL Classification: I:1, I:100, I:11, I:18,

Suggested Citation

King, Jaime S. and Hollingshead, Ann and Fulton, Brent and Scheffler, Richard M, State Actions to Promote and Restrain Commercial Accountable Care Organizations (October 1, 2015). State Actions to Promote and Restrain Commercial Accountable Care Organizations, MILBANK MEMORIAL FUND REPORT (October 2015) (with Anne S. Hollingshead, Brent Fulton, Joshua Rushakoff, and Richard Scheffler), Available at SSRN: https://ssrn.com/abstract=3421708

Jaime S. King (Contact Author)

Faculty of Law, The University of Auckland ( email )

Private Bag 92019
Auckland Mail Centre
Auckland, 1142
New Zealand

Ann Hollingshead

affiliation not provided to SSRN

Brent Fulton

affiliation not provided to SSRN

No Address Available

Richard M Scheffler

University of California, Berkeley ( email )

310 Barrows Hall
Berkeley, CA 94720
United States

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