New York State Enacts An Accountable Care Organization Demonstration Program

Health Law Bulletin 

New York State Enacts An Accountable Care Organization Demonstration Program

April 1, 2011 

The Affordable Care Act, the health care reform legislation enacted by Congress in March 2010, requires the Department of Health and Human Services ("HHS") to develop the Medicare shared savings program (the "Shared Savings Program") by January 1, 2012.  Accountable care organizations ("ACOs") are the entities by which health care providers may contract with Medicare as part of the Shared Savings Program.  Specifically, ACOs are provider-based entities designed to take responsibility for meeting the health care needs of a defined population with the goal of simultaneously improving health, patient experience and reducing per capita costs.

New Demonstration Program 

In anticipation of the commencement of the federal Shared Savings Program, the State of New York has just enacted a law to foster the development of ACOs within the state.  The new law authorizes the New York State Department of Health to approve up to seven ACOs between now and December 2015.  Unlike the federal Shared Savings Program, which establishes ACOs on a permanent basis, the New York ACO program is a demonstration program in which the state will evaluate the viability of ACOs over a period of time.  Although this is a demonstration program, the New York State Department of Health will most likely increase the number of ACOs that are allowed to participate and establish ACOs on a permanent basis if the demonstration proves successful.

In furtherance of this new law, the Commissioner of the New York State Department of Health is required to promulgate regulations setting forth in detail the requirements for the establishment of an ACO in New York.  These regulations are expected to be released not long after the federal government has promulgated its own regulations concerning ACOs, which were issued in a Notice of Proposed Rulemaking published on March 31, 2011.

Issues to be Addressed by Regulation

The New York law, however, does hint at the aspects of ACOs that the regulations will seek to govern.  The regulations may address issues such as the governance structure of ACOs; the patient population to be served by ACOs; the adequacy of an ACO's network of participating health care providers; mechanisms by which an ACO will receive and distribute payments to participating health care providers; and mechanisms that promote evidence-based health care, patient engagement, coordination of care and electronic health records.  Furthermore, the new law suggests that New York State may set forth safe harbors that would provide ACOs protection from the state's antitrust, fee-splitting and self-referral laws.

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