Legal Considerations in Organizing a Network, in The Advisory Board Company’s Health Care Law Roundtable

Linda Tiano, a Member of the Firm in the Health Care and Life Sciences practice, in the Washington, DC, and New York offices, wrote an article titled "Legal Considerations in Organizing a Network."

Following is an excerpt:

One of the most significant and potentially transformative aspects of health reform is the impetus to ensure that patients' current and potential medical needs are managed more cooperatively and effectively. As part of the effort to implement the changes necessary to meet that goal, providers are either consolidating or joining and forming networks and agreeing to compensation methodologies that involve significant risk and reward components. Historically, most health plans had networks that were comprehensive networks of independent providers. ?...

Generally, a state insurance license is required in order to undertake "insurance risk," which is generally defined as undertaking the obligation to cover the costs of a fortuitous event occurring. In general, a network that contracts with a health plan may take and share risk without an insurance license—the network is essentially covered by the health plan's license. However, if the network plans to contract directly with employers or large groups, the network may want to consider obtaining an insurance license, so that it can take or share risk; without a license the network will be limited to offering the network and providing administrative services in return for a specific fee. ACOs that participate in the Medicare Shared Savings Program are specifically exempted from this requirement, but the exemption only applies to approved ACOs and only to services provided under the Medicare program.