Timothy E.J. Folk

The Patient Protection and Affordable Care Act encourages the development of Accountable Care Organizations (ACOs) to help stem the tide of rising Medicare costs. Whether you’re a long-term care leader who has already made the decision to align your organization with an ACO or are still in the process of weighing the decision, one thing everyone can agree on is this operating model will entail a significant amount of change in several key areas for participating long-term care providers.   

Evaluate Risk Exposures

While this new operating model seeks to achieve significant cost savings, adopting it can expose long-term care providers to a considerable amount of legal and financial risk that may not be contemplated in their current risk management and insurance program, including:

  • Privacy/HIPAA Risk: Providers will rely more on technology, data sharing and communication with other providers to improve and better coordinate patient care. Although risk associated with cyber and Health Insurance Portability and Accountability Act (HIPAA) existed before, it will be accentuated under the ACO model.
  • Regulatory/Compliance Risk: Providers may increase their population of Medicare patients and thus increase their exposure to the Federal program’s myriad rules and regulations. Providers will need to be in full compliance in order to avoid fines and penalties associated with government revenue audits.
  • Contractual Risk: Contracts between ACOs and their providers will stipulate who is going to indemnify whom and who is going to provide “Additional Insured” status to whom. If contracts are not worded correctly, providers can be held responsible for loss that occurs, but for which they otherwise would not be liable. Conversely, if the policy can’t respond the way the contract obligates the provider to respond, there could be significant out-of-pocket costs to indemnify the other party or to fight a breach of contract claim.

Addressing Risk Exposures

Long-term care providers already participating or thinking about participating in an ACO should work closely with their insurance broker to ensure their risk management program provides sufficient protection. Many of these exposures can be addressed through the following insurance policies, in addition to their standard Healthcare Professional Liability policies:

  • Directors and Officers Liability (D&O) Insurance Covers the entity and its directors, officers and employees from third-party liability claims alleging wrongful acts, including misleading statements,neglect, breach of duty or various other allegations.
  • Medicare Billing Errors and Omissions (E&O) Insurance Reimburses providers for fines and penalties that can be levied against them as a result of government-sponsored revenue audits, which seek to uncover Medicare billing errors, as well as waste, fraud and abuse in the system. This also pays for the costs associated with the provider hiring an independent third party to conduct a shadow audit, to refute the findings of revenue audits and potentially lessen or eliminate the associated fines/penalties.
  • Cyber/HIPAA Liability Insurance: Covers the costs, including patient notification and credit monitoring, as well as other potential fines/penalties associated with a breach of Protected Health Information (PHI) under HIPAA.

Contractual Considerations

A long-term care provider’s insurance broker should review the insurance, indemnification and subrogation provisions of any potential ACO agreements before they are signed to ensure that what providers are contractually agreeing to is supported by their insurance program. An insurance broker will examine how a provider’s stand-alone insurance program will dovetail with the coverage provided by the ACO. Specifically, close attention should be paid to ensure the provider is not assuming another party’s liability.

As more providers in the industry move towards this new model, they must reevaluate their exposures and insurance programs. The relationship between providers and the sponsors of the ACOs is constantly evolving, and therefore working closely with an insurance broker will be essential for making the transition as seamless as possible. 

Timothy E.J. Folk is a Vice President at The Graham Company, a property and casualty and employee benefits brokerage. He can be reached at [email protected] or 215-701-5231. Thomas P. Morrin is a Producer at The Graham Company. He can be reached at [email protected] or 201-701-5430.