Is ObamaCare feeding the trial lawyers?

This summer marks over 40 years since the release of Steve Spielberg’s masterpiece “Jaws.”

The film depicts a blood-hungry great white shark lurking under the surface, stalking a small town’s peaceful beachgoers and striking fear in the hearts of moviegoers everywhere. Now over six years after the passage of the the Patient Protection and Affordable Care Act (ACA, or “ObamaCare”), an unaccounted-for threat to American doctors and hospitals appears ready to surface. This striking fear in the healthcare community is prompting calls for a big fix, akin to Chief Brody’s famous line: “You’re going to need a bigger boat.”

{mosads}Since its infancy, the ObamaCare debate has focused primarily on the health insurance itself, including the individual and employer mandates, the exchanges and cost of premiums. Buried within the law’s now-infamous 2,700-plus pages, and mostly unnoticed by consumers, is the Medicare Shared Savings Program. Along with it, the birth of a new health care delivery system, the Accountable Care Organization (ACO). An ACO is made up of doctors and sometimes hospitals that join together to form a separate legal entity accountable for the overall care and cost of their patients. This “accountability” on doctors and hospitals to drive care outcomes while containing costs is a dramatically different payment model than the age-old system of “fee for the service provided” (e.g., new patient assessment, podiatry exam). In contrast, the goal of the ACO model is to receive a set sum of money (i.e., a bundled payment) to care for its collective patients while accepting the risk of financial loss should the amount received not cover the overall services. The model is growing rapidly. As of last year, Levitt Partners cited 744 ACOs nationally, covering over 23.5 million American lives.

The benefit of an ACO to the American healthcare consumer is the incentive for doctors and hospitals to focus on their patients’ overall wellness compared to a specific treatment. Nicole Bradberry, founder and CEO of the Florida Association of ACOs, has witnessed the benefits of the model:

“The Accountable Care movement has been integral in moving healthcare providers in Florida and nationally to focus on outcomes resulting from the total care provided to their patients as compared to an individual visit or treatment. For doctors who have seen reimbursement steadily decrease, ACOs and the new payment models have become game-changers for some of the early adopters. As these models are expanding even more, doctors are feeling the push to join ACOs. Doctors are realizing that moving to a value-based/shared-risk type of practice model is becoming a necessity to allow them to continue their professional growth, keep or increase their standard of living and to ensure the best care for their patients.”

A real potential downside of the ACO model is that participating doctors and hospitals already feeling the squeeze for reimbursement may, out of fear of financial risk, be more conservative in their care ultimately leading to rationing. Finding a balance between wellness-driven care and cost reduction will take time. Only this past January did the Centers for Medicare and Medicaid, via its Next Generation program, launch the first fully “at risk” ACOs nationally. At-risk ACOs get to reap the rewards by sharing in some of Medicare’s savings when the groups achieve lower costs, such as by preventing expensive hospital admissions, as well as achieving high quality-of-care scores from patients.

Unfortunately, time may not be on the doctors’ or hospitals’ side. Even the most astute in the healthcare reform community are generally unaware of new legal risks endangering ACOs. As Bradberry notes, “the general assumption of industry leaders has been that the same laws that protect healthcare providers and managed care organizations apply to ACOs.” Not so. A massive hole in ObamaCare was its complete lack of meaningful medical malpractice lawsuit reform. The trial lawyers, smelling new claims and paydays, aggressively lobbied President Obama to keep tort reform out of the ACA. The law authorized $50 million to be appropriated for exploratory state programs, but the funds never made it out of Congress and weren’t in President Obama’s most recent budget. Meaningful reform would include federally sponsored ACOs receiving the same treatment under state law as their individual doctor and hospital participants, with regard to limitations on claims and damages. At an even more basic levels, ACOs could be granted the same protection as their HMO/managed care organization ancestors by making them subject to the Employment Retirement Investment Security Act (ERISA), essentially blocking care-based lawsuits at the corporation level.

Trial lawyers have taken notice of both the lack of lawsuit protections and the fact that doctors and hospitals are learning the ACO model on the fly. National law firm Quintairos, Prieto, Wood & Boyer has represented healthcare providers in over 90 jury trials. Quintairos managing partner Eric Boyer is regularly involved in negotiations with trial lawyers and sees the tide of potential ACO claims coming. “The ACO’s emphasis on applying bundled dollars toward a large group of patients creates the risk of budgetary strain which provides powerful ammunition for the trial attorney to claim that maintaining profit margins dictated the treatment of a patient as opposed to his or her true healthcare needs,” he noted.

When a doctor or hospital professional learns of this exposure, their surprise is palpable. It is unfathomable for many doctors to believe ObamaCare, with all the significant changes it placed on the way doctors practice medicine, did not include matching liability protections. Should doctors learn they are even more at risk in an ACO model than they were before, it could definitely impact their willingness to participate in these groups.

Like in “Jaws,” this summer, the sharks are swimming, with paddling ACOs the target of their appetites. Chief Brody didn’t end up getting a bigger boat. It took his cunning, a rifle and a fortunately placed oxygen tank between the shark’s teeth to keep him from being made a meal. With the ACO model apparently here to stay, let’s hope doctors and hospitals get an easier path to safety with a bigger boat full of new tort reform.

Rotella is founder and managing shareholder of the Rotella Legal Group.