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IRS ruling represents new complication for ACA

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WASHINGTON — Accountable care organizations (ACOs) face a major hurdle under a ruling by the Internal Revenue Service.

ACOs are groups of doctors, hospitals and other health care providers, possibly including pharmacists, who voluntarily come together to give coordinated high-quality care. The goal is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding duplication of services and preventing medical errors.

The IRS in a recent ruling denied a tax exemption sought by an ACO for people with private insurance. The tax agency said the organization did not merit the exemption because it was not operated solely for charitable purposes and it provided private benefits to doctors in its network.

The ruling does not affect ACOs that strictly serve Medicare patients. Under the Affordable Care Act, the government has recognized more than 400 ACOs for Medicare beneficiaries. But many ACOs coordinate care for both Medicare recipients and private patients.

Melinda Hatton, senior vice president and general counsel of the American Hospital Association, said the ruling looks to be “a serious obstacle” for nonprofit hospitals striving to coordinate care, according to The New York Times.

In a letter to the IRS, she said the decision goes against the Department of Health and Human Services’ hospital industry guidance. She called for the government to assure hospitals they can be in ACOs without suffering from “the catastrophic loss of their tax-exempt status.”

The IRS conceded that the ACO it ruled against was seeking to boost the quality of care, cut costs and improve the health of the community — the “triple aim” sought by President Obama. That notwithstanding, it said the organization has also negotiated pacts with insurers on behalf of doctors, which is not a charitable endeavor and has no direct community benefit.

“The presence of a single substantial nonexempt purpose destroys the exemption, regardless of the number or importance of the exempt purposes,” the tax agency said, according to The Times.

The IRS told the group seeking tax-exempt status, “You are not established pursuant to a statute, managed by government officials or funded by government grants,” and “there is no government oversight of your activities similar to that of an ACO” in Medicare.

The agency said that a Medicare ACO could be tax-exempt because it moves forward “the charitable purpose of lessening the burdens of government.”

The benefits of ACOs as health care shifts to value-based models were discussed by two pharmacists this year at the Academy of Managed Care Pharmacy (AMCP) Managed Care & Specialty Pharmacy Annual Meeting. Pharmacists can play a key role in ACOs, said Tina Joseph and Reena Jones, both from Nova Southeastern University.

They cited two major studies that looked at pharmacists and their roles in ACOs. In the first study, a retrospective chart review of 23 pharmacists working in 30 locations, researchers found 2,780 medication-related problems. In addition, they noted that patients with diabetes had a higher rate of being optimally managed, while the total health cost per person dropped by more than $1,500.

The second study, which looked at 300 patient records, determined that pharmacists’ recommendations during an annual wellness visit for an ACO were often accepted and generated additional revenue. Jones also discussed a number of situations in which pharmacists can help an ACO, noting that pharmacists provide more than medication-related services.


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