75% Participant Board Requirement

Furthering the discussion of Accountable Care Organization (ACO) governance issues, the ACO Proposed Rule requires that 75% of an ACOs governing body must consist of ACO participants. Each ACO participant must choose an appropriate representative from within its organization to represent the participant on the governing body. The Centers for Medicare & Medicaid Services (CMS) believes that the ACO should be operated and controlled by Medicare-enrolled entities that directly provide health care services to beneficiaries. Furthermore, CMS reasons that small groups of providers often lack both the capital and infrastructure necessary to form an ACO and to administer the programmatic requirements of the Shared Savings Program and, thus, would benefit from partnerships with non-Medicare-enrolled entities. For this reason, CMS proposed the requirement that ACO participants must have at least 75 percent control of the ACOs governing body in order to be eligible for participation in the Shared Savings Program. This requirement still leaves 25% of the governing body open for entities not participating in the ACO. As a vehicle to help secure capital or services to form the ACO, small groups of providers may use this 25% governing block as an enticement to help defray implementation expenses, such as updating or implementing EMR technology that will communicate with all ACO participants, by providing the ACO non-participants a stake in the governance of the ACO. Additionally, ACOs will be able to offer ownership and investment opportunities to non-Medicare-enrolled entities as another tool to help raise formation capital. This topic will be further addressed in a subsequent posting. —Christopher L. McLean