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COVID-19 and Risk-Bearing Accountable Care Organizations

Client Alert

Gibbons Special Alert

April 15, 2020

There can be no question that the coronavirus pandemic is an “extreme and uncontrollable circumstance.” That characterization should significantly reduce the magnitude of shared losses facing the 192 risk-bearing Medicare accountable care organizations (ACOs) cited by Seema Verma, the Centers for Medicare & Medicaid Services (CMS) Administrator, in Health Affairs, January 10, 2020.

Whether those Medicare ACOs assume risk under Track 2, the Enhanced Track, or the Basic Track, federal regulations provide for relief in the event CMS determines that a percentage of the ACO’s assigned beneficiary population is affected by an “extreme and uncontrollable circumstance.” Under the existing regulatory structure, CMS determines the amount by which it reduces the amount of shared losses by multiplying (X) the percentage of total months affected and (Y) the percentage of ACOs’ assigned beneficiaries who reside in the area affected by it. Although the formula and rules were developed in response to natural catastrophes such as hurricanes and wildfires, CMS has expressly determined that the public health emergency (PHE) created by the COVID-19 pandemic “applies to all counties in the country.” More specifically, CMS has declared that “100 percent of assigned beneficiaries for all Shared Savings Program ACOs reside in an affected area and the total months affected by an extreme and uncontrollable circumstance will begin with March and continue through the end of the current PHE.” Therefore, the current regulatory structure, as recently amended, should serve as an important backstop to Medicare ACO losses arising from the pandemic.

But what about commercial ACOs?

Commercial ACO contracts may not have an “extreme and uncontrollable circumstances” (or similar) provision to protect against the surge in medical expense caused by COVID-19 (i.e., surge in charges for emergency department, intensive care and acute care hospital services and surge in related professional charges). First, we urge those entities to immediately examine their stop-loss policies to determine coverage under these circumstances. Second, now is the time to initiate discussions with payors to address carve-outs for COVID-19 related medical expenses.

An estimated 60 percent of all healthcare spending is tied to some form of value based purchasing, and all indications are that this percentage will increase. The coronavirus pandemic has brought to light the necessity of having reasonable financial protections in place to safeguard and stabilize the vision of value based purchasing.

Gibbons is available to assist your business to implement practical strategies and solutions during this rapidly moving and unprecedented pandemic. For more information about current regulatory and sub-regulatory guidance issued by federal and state agencies, and for assistance in exploring contractual solutions for your healthcare business, contact Barry Liss, Co-Leader of the Gibbons Healthcare Team.

To view all client alerts in Gibbons “The Coronavirus Pandemic and Your Business: How We Can Help” Series, click here. Please also be sure to follow Gibbons on LinkedIn for a continuous feed of COVID-19 related updates and other important business, industry, and firm news.