Not too many law students think they will one day help sick people get better. That’s what medical school is for, right? Not entirely. Doctors, nurses, therapists, and all other allied health professionals are the most important people in the delivery of healthcare services. But if recent history has shown, it is that the financial side of healthcare can be a matter of great significance for millions of people. And where money matters, so too do lawyers.
Daniel Zaccardo, senior vice president and general counsel for Accretive Health, knows how this works. “My vision of what lawyers did came from LA Law,” he says, referencing the television series that ran from 1986–1994. “After a few weeks I learned it wasn’t.”
What the remaining two years and fifty weeks of law school taught him—and his career since—is that business law is about making things happen. Before joining Accretive, Zaccardo was associate general counsel for ADP, the payroll processing company, and before that, he worked in mergers and acquisitions for a New York law firm. Each position enabled him to touch people’s lives and livelihoods. But working in a healthcare-related business—in a time of significant, systemic change—took that to a whole new level.
Accretive is a provider of revenue cycle management services to hospitals. That includes the management of patient admissions, insurance verification, medical coding, billing, and collections primarily from insurance companies and government payers and, therefore, hospital cash flow.
But perhaps the part of Accretive’s work with hospitals that gets really interesting—and which involves Zaccardo—is the value-based reimbursement model and Accretive’s new services to help its clients with that new model. VBR is the part of the Affordable Care Act (ACA, or “Obamacare”) that is designed to whittle down costs for healthcare service delivery. It replaces the entrenched fee-for-service structure, where each provider and prescribed services, devices, and hospital stays would rack up charges with no set limits. Under the VBR system, the full cycle of care for an illness, injury, or condition has to stay within reasonable cost parameters. If the expense of a patient’s care exceeds that limit, the provider will not be fully reimbursed by insurers for all expenses. But if the expense is less—if the illness or injury was managed to a good health outcome, but at a cost below the limit—the provider earns a profit.
This is a hugely important, if not disruptive, component of the ACA. Accretive’s own 2015 whitepaper on the topic (“The Provider Crossroad to Value-Based Reimbursement”) explains how this system had replaced fee-for-service care in 8 percent of providers in 2014 and will grow to 25 percent of providers by 2017 and 50 percent by 2020.
“That’s a big change in a short period of time for how providers deliver healthcare in the US,” Zaccardo says. “We are helping our clients get their arms around this, helping them figure out how to do a more coordinated approach. It’s disaggregating some providers, which leads to more M&A activity in many cases.”
So that’s where financial health plays an important role. Note that Accretive services more than ninety hospital systems across the United States, responsible for managing the revenue cycle functions for about $17 billion annually in billings for those providers. How it successfully manages those functions plays a critical role. As Zaccardo explains, most of the hospitals Accretive services are nonprofits operating on very thin margins. The influx of more patients easily affects both costs and revenues, but in complex ways.
“On the one hand, Obamacare signed up millions more people in insurance plans,” Zaccardo says. “But many more patients have higher-deductible plans, meaning a higher percentage of billings are to patients and not insurers.” This, he says, places greater stress on individuals as well as the system. Consequently, Accretive’s services have a larger role in managing the hospital’s collections from both patients and their insurers. Without adequate payment for services, those hospitals would fail at their mission to meet the needs of their communities (several dozen hospitals, mostly in rural areas in states that did not expand Medicaid coverage, have been shuttered in the past four years).
It is another way of saying the regulatory environment is driving much of the size and scope of Accretive—so much so that the top attorney has a big role to play in how the company plans for the future. While there is a separate compliance officer, Zaccardo’s task includes staying abreast of changes in the regulatory environment. “I have to look around corners to see if there will be changes in the regulations and rules that affect our clients and how we operate our business,” he says. “That’s part of my role.”
Such responsibility spells in part the rise of the general counsel as a businessperson. “GCs have morphed from legal advisers to business strategists,” Zaccardo says. “So much more of what we do has to be seen through the lens of legal and business risk. Early in my career, I used to be relegated to just the law. But now I have an equal seat at the table with executives. From the conversations there, you wouldn’t necessarily know I’m a lawyer.”
The Zaccardo of decades ago, studying for the LSATs, might be surprised and intrigued by what he does in 2016, as general counsel roles continue to expand in the healthcare industry.