Accountable Care Organization: New Risk in ACO Model vs. Prospective Payment System

//Accountable Care Organization: New Risk in ACO Model vs. Prospective Payment System

Accountable Care Organization: New Risk in ACO Model vs. Prospective Payment System

A Prospective Payment System (PPS) is a method of reimbursement where Medicare payments are made based on a predetermined  amount that is fixed.   It has been in use since October 1, 1983. The initial concern under this system was the management of the cost outlier cases, which could have a profound impact on hospital finances. The government, directed by Congress to pay for the Medicare population, chose to assume this risk through a stop loss program for these outlier cases.

CMS strongly believes that to get   meaningful change in efficiency and care for patients, the Accountable Care Organization (ACO) needs to be exposed to some risk of shared losses.   CMS expects cost savings to be realized over time via this provision.  Therefore, under ACO concept this risk will be assumed by the organization delivering care.

Therefore, to protect against this high risk of significant financial loss, the ACO should plan at its inception for methods of payment and/or protection for these cases, such as secondary coverage (insurance). This is especially important, as the majority of these programs will initially be enrolling the Medicare population rather than the lower risk, “working well”, as seen in the successful Kaiser model.

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By | 2017-05-04T04:06:58+00:00 June 1st, 2011|Affordable Care Act|0 Comments

About the Author:

Michael is Managing Partner & CEO of No World Borders, a leading health care management and IT consulting firm. He leads a team that provides Cybersecurity best practices for healthcare clients, ICD-10 Consulting, Meaningful Use of Electronic Health Records. He advises legal teams as an expert witness in HIPAA Privacy and Security, medical coding and billing and usual and customary cost of care, the Affordable Care Act and benefits enrollment, white collar crime, False Claims Act, Anti-Kickback, Stark Law, Insurance Fraud, payor-provider disputes, and consults to venture capital and private equity firms on mHealth, Cloud Computing in Healthcare, and Software as a Service. He advises self-insured employers on cost of care and regulations. Arrigo was recently retained by the U.S. Department of Justice (DOJ) regarding a significant false claims act investigation. He has provided opinions on over $1 billion in health care claims and due diligence on over $4 billion in healthcare mergers and acquisitions. Education: UC Irvine – Economics and Computer Science, University of Southern California – Business, Stanford Medical School – Biomedical Informatics, Harvard Law School – Bioethics.

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