The New York Times reports that an Internal Revenue Service  ruling creates a significant obstacle to many Accountable Care Organizations. The Obama administration has promoted ACOs as a way to provide better care at lower cost.

The Times reported the  IRS  denied a tax exemption sought by an ACO that coordinates care for people with commercial insurance  since, the agency said, it  didn’t meet the test for tax-exempt status “because it was not operated exclusively for charitable purposes and it provided private benefits to some doctors in its network.”

The  name and location of the ACO,  formed by a nonprofit healthcare system, weren’t disclosed. The ruling  doesn’t affect ACOs formed solely to participate in Medicare, but it could affect similar entities serving privately insured patients, the newspaper reported. Many ACOs coordinate care for both Medicare beneficiaries and privately insured patients.