One article that should concern physicians in private practice; who are entering into agreements with hospitals to form Medical Homes, or Accountable Care Organizations (ACO); warns against the legal aspects of forming such arrangements.  The article, written by Karen M. Cheung stated that “The industry is waiting with bated breath for the final (ACO) rules to be issued by the Centers for Medicare & Medicaid Services (CMS). What will the final rules look like? Only time will tell, but industry experts predict the CMS draft rules that were rejected by some of the leading healthcare systems will have to drastically change before making their final debut.”

The statutory and regulatory challenges around self-referrals, competition, and taxes could impede ACO development, particularly among safety-net providers, according to the report.

• Anti-self-dealing rules: Under the proposed Medicare Shared Savings Program, organizations and providers are encouraged to provide care across the continuum. However, the existing Stark Law and anti-kickback statutes may prevent providers from giving referrals, which the Office of the Inspector General (OIG) and the Centers for Medicare & Medicaid Services (CMS) addressed with proposed waivers. The report calls on the regulatory agencies to provide more guidance on how to identify when an ACO is self-dealing and exceptions to direct compensation.

• Issues on market power concentration: The coordinated care model could lend itself to a dominant market power, including a concentration of specialists, through mergers and acquisitions. The report recommends that CMS offer incentives or other rewards for specialists who collaborate with safety-nets, arguably those who are not motivated by financial gains.

• Tax code compliance: ACOs must carefully structure their participation because they may or may not be tax exempt even if they identify themselves as such. The Internal Revenue Service hasn't directly addressed tax-status on ACOs yet, which the report calls for.

 The existing laws prohibit self-referral, where a physician refers a patient to a facility in which they have an ownership interest.  The concept behind this regulation is sound, because it is supposed to decrease the amount of abuse of insurance by doctors who perform unnecessary procedures or scans.  But with the PPACA’s aim to consolidate the number of physicians and hospitals in order to decrease the amount of abuse and fraud, physicians and hospitals are being incentivized to consolidate. This puts them both in ethical, and perhaps legal jeopardy.  On the one hand the government wants hospitals and doctors to consolidate in order to save money, but on the other hand the laws prevent them from doing so.

 An interesting note: Last week the Department of Justice (DOJ) of the Federal government announced that they will challenge the merger between AT&T and T-Mobile.  The basis for their action was the claim that the merger would “substantially reduce competition” in the wireless industry.  If that is the opinion of the government on wireless consolidation, then why is the government proposing that doctors and hospitals merge to save money, when the stated goal of the AT&T merger is the same?