Clinical integration is not only good healthcare; it's good public policy. That is why hospitals all over the U.S. are committed to exploring new ways to better coordinate patient care. The government has taken the first steps in creating a coordinated care structure for Medicare in its proposed regulations on accountable care organizations.

Many hospitals are already actively working on ways to better coordinate care, and the rule reflects the direction in which the field is moving. In the weeks ahead, we will evaluate this proposed federal program, which attempts to foster further progress in clinical integration. This is a large and complicated proposal, and it will take some time for all stakeholders to fully evaluate whether it presents a model that will work for them.

There are some bright spots in the proposal. The government deserves credit for coordinating a strategy for ACOs that involves four federal agencies. We are pleased with the flexibility implied in providing two payment models intended to ease the transition into the program for providers with less experience in shared risk arrangements. And we are gratified by the government's recognition of the immense legal hurdles hospitals must overcome to participate in an ACO as evidenced by the joint policy statement issued at the same time by the antitrust division of the U.S. Justice Department and the Federal Trade Commission. But we are worried about the ability of providers in the lower-risk track being able to achieve any shared savings to help cover the startup costs for an ACO.

ACOs will also be able to receive data on potential beneficiaries on a monthly basis. This is significant because it is the first time hospitals would be able to get data across the full continuum of patient care for their Medicare beneficiaries, giving them an important overview of all the care patients receive.

While we recognize that shared savings is the operating principle behind ACOs, the proposed regulations, coupled with legal barriers the joint policy statement did little to resolve, may stack the deck too heavily against providers for this to be a safe bet for many hospitals and physicians.

President Barack Obama and Kathleen Sebelius Photo credit: AP photo

First, providers will have to make significant upfront financial investments—on average about $1.8 million by CMS estimates that we feel are low—to engage in a program that may, or may not, clear the legal hurdles and qualify to share savings. The CMS has raised the bar for achieving shared savings compared with the physician group practice demonstrations on which it is modeled.

We had hoped we would see clear guidance that would help prospective ACOs navigate around the legal hurdles. However, as we interpret the proposal, the more partners are involved in an ACO, the greater the risk of running afoul of fraud, abuse and antitrust laws.

Another area of concern for hospitals is that they will not know who the ACO patients are upfront. In order to effectively manage ACO patients, hospitals need to know upfront, rather than a year later. We are sympathetic to the standard that patients that are part of an ACO should be treated just like any other patient, but need to consider whether this is an ideal approach.

At a time when healthcare providers and government agencies are striving toward greater transparency, the proposal effectively calls for providers to ask patients to engage in a guessing game and sign papers authorizing the use of their health information—or maybe not. In fact, the regulations place the entire burden of informing potential beneficiaries about the program onto the ACO. Providers need clarification about whether this approach could affect medical relationships. The provider will not know whether a given patient has been assigned to the ACO, so if that patient chooses not to be a part of an ACO, will he or she have to find another provider?

Our understanding is that each ACO must sign a three-year agreement and pay significant penalties if it chooses to drop out of the program early. There are a large number of quality measures, and most of them will be new to hospitals, putting another costly burden in place.

In short, the proposed regulations for ACOs are a step in the right direction, but our early reading is that they fall short of knocking down the barriers to clinical integration for Medicare patients and withhold the tools to effectively coordinate care. At the same time, we are confident the Obama administration is serious about ACOs and will work throughout the comment period and beyond to put together a workable program.

For hospitals, the focus is, and will remain, on “accountable care”—whatever delivery model is used. The true test of any model will be if it truly allows hospitals, physicians and providers to work together in a way that better coordinates care and benefits patients—without losing their shirts.

Richard Umbdenstock is president and CEO of the American Hospital Association.