Dive Brief:
- A recent Internal Revenue Service (IRS) ruling has introduced a major concern for accountable care organizations, which now serve more than 28 million people, The New York Times reported.
- The ruling rejected an ACO's request for tax-exempt status because it coordinates care for members with commercial insurance and provides benefits for some phyisicians in its network, thereby negating any charitable activities. The ACO, which was not identified, was created by a nonprofit healthcare system.
- The decision does not apply to ACOs created for the single purpose of participating in Medicare, but could apply to other ACOs that serve privately insured patients or a combination of private and Medicare patients.
Dive Insight:
Opponents to the ruling argued it runs contrary to the ACA's efforts toward incentivizing coordinated, lower-cost healthcare and the IRS had not yet caught up to the new healthcare paradigm.
The decision “appears to be a serious obstacle for nonprofit hospitals striving to coordinate care for their communities," Melinda R. Hatton, senior vice president and general counsel of the American Hospital Association, told The New York Times.
She wrote in a letter to the IRS the federal government needs to clarify that hospitals will be able to participate in ACOs without “incurring the catastrophic loss of their tax-exempt status.”
While the IRS agreed the ACO in question was pursuing the "triple aim" of improving quality, costs and community health, it said, “The presence of a single substantial nonexempt purpose destroys the exemption, regardless of the number or importance of the exempt purposes.”