Physician practice management companies (PPMs), which may also be referred to as administrative services organizations (ASOs) or management services organizations (MSOs), provide non-clinical practice management services to a medical practice (e.g., physician practice). The services provided by PPMs depend on the specific contractual arrangements with the medical practice but will often include revenue cycle management, managed care contracting, human resource management, marketing and public relations, and the provision of administrative personnel. Additionally, PPMs often aggregate individual physician or dental practices into larger groups that can negotiate better rates with insurance companies or other payers.

Most states regulate, to some degree, the legal form of organization under which a physician or dentist, or groups thereof, may practice. Typically, state laws only permit a medical professional to practice as an individual, a member of a partnership, or as an employee of a professional corporation (that is, a corporation in which all the shareholders are medical professionals). Further, state laws generally prohibit, either by specific provisions or as a matter of general policy, a medical professional from conducting a practice as an employee of a general business corporation. These limitations are frequently referred to as "corporate practice of medicine" (CPOM) prohibitions.

In states with strict CPOM prohibitions, PPMs may provide administrative and other non-clinical support to physician practices, but they are prohibited from impacting or controlling a physician's clinical judgment and independent, medical decision-making, which is reserved solely for the physician and the physician practice.

If the physician practice is not consolidated (see HC 4.5), PPMs should evaluate arrangements (i.e., individual contracts) with physician practices using the principal versus agent considerations under ASC 606 (see HC 4.3.2 and RR 10).

Accountable care organizations (ACOs) are specifically defined by the Centers for Medicare & Medicaid Services (CMS) as groups of doctors, hospitals, and other health care providers who come together to provide coordinated, high-quality care to patients in exchange for a portion of the savings that are achieved. ACOs strive for improved patient outcomes at a lower cost through care coordination and information sharing across the delivery network.

Similar to MCOs, ACOs often enter arrangements with payers and providers to perform care coordination services. These services typically include utilization management, care management for chronically ill members, and other services targeted toward reducing the overall cost of care. Given that ACOs typically do not assume primary responsibility for the provision of patient care (i.e., they do not control the delivery of health care services), they are not the principal in the arrangement with the patient. As a result, they typically present their net share of the overall member premiums that they manage as administrative revenue. Notwithstanding that “typical” conclusion, ACOs should consider their specific arrangements to determine if they are the principal or the agent in the provision of health care service, and, in turn, whether they should report revenue on a gross or net basis. In the event that an ACO concludes that it is an agent for the provision of some or all of the health care services provided to its patient population, it should also assess whether its arrangement includes a guarantee to a third-party payer that would be subject to the guidance in ASC 460, Guarantees. See FG 2 for more information about accounting for guarantees.

Through virtual health platforms, patients can interact with physicians live, in real-time, through virtual collaboration platforms. Through these platforms, providers and patients communicate directly, often resulting in a diagnosis, treatment plan, or prescription. In addition, technology companies have collaborated with providers to design patient and population health management platforms, which help increase patient engagement across all stages of a physician visit, including patient access, pre-visit, at the point of care, and post-visit. Companies that provide such technology platforms will need to evaluate the principal versus agent considerations under ASC 606 (see RR 10) to determine if they are the party controlling the provision of health care services to patients (i.e., the principal) or facilitating the connection between the patients and the providers using their platform (i.e., the agent). The considerations utilized in this assessment are similar to the considerations utilized for MCOs, PPMs, and ACOs and are discussed in HC 4.3.2.

MCOs, ACOs, PPMs, and virtual health platforms do not constitute an exhaustive list of all of the types of organizations involved in the health care delivery ecosystem. New business models continue to evolve in the quest to improve the quality of patient care at a lower cost. These models may incorporate characteristics of some, or all, of the organization types discussed above. For example, a physician practice management company may also participate in or own an ACO that provides care coordination services for patients, as well as a technology platform to coordinate care. While each business model is different, the underlying premise is the same whether an entity is considered a traditional provider, a payer, or takes some other form. All entities must carefully consider their contractual arrangements and underlying business activities to determine the appropriate accounting model. The concepts in HC 4.3.2 should be considered when an organization is either directly or indirectly involved in the provision of or payment for health services.