Care Coordination and Contracting Entities: The CHC Perspective on IPAs and ACOs. Today s Discussion

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1 Care Coordination and Contracting Entities: The CHC Perspective on IPAs and ACOs Ohio Association of Community Health Centers June 2014 Contact Us Andrew Principe PO Box , Cambridge, MA P / Amanda Stangis P / 1 Today s Discussion What is an ACO? What is an IPA? Financial and clinical integration: the common bond Structure and function of IPAs and ACOs Next Steps Question and Answers 2 1

2 About Starling Advisors We work nationally with Health Centers, Networks, and PCAs to answer the question: What changes, if any, do we need to make to insure a role in providing high quality, comprehensive primary care under Health Reform? 3 Background In May, we met with Health Center leaders to discuss different options for organizing under Health Reform Today, we will examine IPAs and ACOs and how these networks support advantageous payment terms and clinical performance 4 2

3 Exploring Network Development We will be delivering 3 live webinars and recording these to help share information with Health Center Staff and Boards. Network Context Discovery 2 3 Weeks Education 4 Weeks Data Gathering 4 Weeks Strategy Development 4 Weeks Overlap 5 WHAT IS AN ACO? 6 3

4 Purpose of ACOs and IPAs ACOs and IPAs are distinct business entities that allow healthcare providers to formally organize to participate in reform. Each allows the healthcare providers to participate in payment terms that they could not participate in otherwise. 7 Differences between ACOs and IPAs ACOs typically organize to participate in a very specific program, or ACO contract. IPAs typically organize to legally secure the right to negotiate their own contracts. Many IPAs have now entered ACO contracts and many ACOs have begun negotiating other contracts. 8 4

5 What is an Accountable Care Organization? ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Source: 9 What is an Accountable Care Organization? ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily 1. Working to give together coordinated to coordinate high quality care. care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at the right time, with the goal of avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds in both delivering high quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Source: 10 5

6 What is an Accountable Care Organization? ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily 1. Working to give together coordinated to coordinate high quality care. care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at 2. the Improving right time, patient centeredness with the goal of and avoiding reducing unnecessary waste. duplication of services and preventing medical errors. When an ACO succeeds in both delivering high quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program. Source: 11 What is an Accountable Care Organization? ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily 1. Working to give together coordinated to coordinate high quality care. care to the Medicare patients they serve. Coordinated care helps ensure that patients, especially the chronically ill, get the right care at 2. the Improving right time, patient centeredness with the goal of and avoiding reducing unnecessary waste. duplication of services and preventing medical errors. When an ACO succeeds in both delivering high quality care and spending health care dollars 3. more And sharing wisely, in it savings will share when in quality the savings and cost it achieves outcomes for are the met. Medicare program. Source: 12 6

7 ACOs are Expanding 600+ CMS ACOS Many States ACO Programs 150+ Commercial ACO Programs New insurers on Health Insurance Exchanges As of January, over 600 organizations have entered into the CMS Shared Savings Program as Accountable Care Organizations. States have adopted their own ACO programs. VT, MN, IL and others have created programs for Medicaid and the Medicaid Expansion population. Commercial health insurers are increasingly following the lead of CMS, and introducing their own value based products. Many entrants into the Health Insurance Exchange marketplace will require quality measurement, and many will introduce products with shared financial risk. 13 Important Aspects of ACO Programs 1. They reward improvements in total medical expense. 2. They require performance against quality measures in order to receive compensation. 3. They require a clearly defined patient population, and adequate scale (usually at least 5,000 patients.) 4. Patients can seek care where they choose ACOs do not restrict patient choice. 5. Must be a distinct legal entity from its participants. 6. Have other specific requirements (i.e. compliance programs, data reporting, annual reattribution of patients) 14 7

8 Example: CMS ACO Program Participation Rules CMS only recognizes ACOs that enter into the CMS ACO Shared Savings program. Take financial accountability for no less than 5,000 Medicare beneficiaries Enter into a 3 year contract with CMS to operate under the Shared Savings payment methodology Be one of the following types of entities: ACO professionals in group practice arrangements Networks of individual practices of ACO professionals Partnerships / joint ventures between hospitals and ACO professionals Hospitals employing ACO professionals Other Medicare providers and suppliers as determined by the Secretary. All participating providers must be represented in governance At least one Medicare beneficiary must participate on the governing board Some Critical Access Hospitals are eligible to participate Source: 15 CMS Program: 4 Components #1 Base payments When patients see any eligible Medicare provider (whether within our outside of the ACO) those providers are paid the same FFS payment as prior to the ACO arrangement. #2 Population cost baseline CMS establishes a specific cost baseline for the population of patients assigned to the ACO. This is the Total Medical Expense against which savings are measured minus a small percentage for year to year variation in cost. #3 Shared savings pool The shared savings pool is the difference between the population baseline cost and the actual cost for treating the population. A portion of savings that is shared with the ACO. #4 Quality measures A series of 33 measures that determine what portion of the shared savings pool is shared with the ACO. Source: 16 8

9 #1 Base Payments Medicare continues to pay providers and suppliers for specific items and services as it currently does under the Original Medicare payment systems. What this means: FQHCs receive the same payments for ACO patients they see. When a patient sees a provider outside of the ACO, that provider is paid the same as they would have been previously. The savings must come from reduced utilization. There are no requirements to contract and/or administer funds for services rendered outside of the ACO. 17 #2 Population Cost Baseline Source: CMS Innovations Institute webinar entitled Health Care Innovation Challenge: Achieving Lower Cost Through Improvement. Care Innovation Challenge Webinar 3 Slides.pdf 18 9

10 #3 Shared Savings Pool $2M saved in 2010 Margin Improvement Annual spend by state: $17.8M 5,500 Medicaid Patients Medicaid Premium of $270 pmpm Cost of Care: Claims Administration (14%) $2.5M Medical Expense ($202 pmpm) $13.3M Annual Savings: $2M $17.8M ($2.5M + $13.3M) = $2M 19 #4 Quality Measures The Program links the amount of shared savings an ACO may receive to its performance on 33 quality standards. Five key areas that affect patient care are measured: 1. Patient/caregiver experience of care (e.g. CAHPS, How well your doctor communicates) 2. Care coordination (e.g. Ambulatory sensitive admissions for COPD) 3. Patient safety (e.g. Medication reconciliation post discharge) 4. Preventive health (e.g. Weight screening and follow up) 5. At risk population/frail elderly health (e.g. Diabetics in poor control, A1C > 9) The full manual: https://www.cms.gov/medicare/medicare Fee for Service Payment/sharedsavingsprogram/Downloads/ACO_QualityMeasures.pdf 20 10

11 CMS ACO Payment Methodology: Pulling it All Together A health center enters the ACO Shared Savings program with 5,000 beneficiaries with a historical PBPM cost of $700. A population cost baseline of $700 x 5,000 x 12 months x 96% (to factor the minimum savings rate) would equal $40.32M. The total of all base payments made for the population = $38.12M. $40.32M minus $38.12M yields a shared savings pool of $2.2M. The health center scored above baseline on 96% of all of the quality indicators. They are eligible to receive 96% of 50% of the $2.2M = $1.06M. Another way to look at it would be that the health center had $18 PBPM to spend on care coordination to achieve the result. 21 WHAT IS AN IPA? 22 11

12 IPA: Defined An independent practice association (or IPA) is an association of independent practices, and provides services to managed care organizations under negotiated financial terms. 23 IPA: Defined By joining an IPA, an independent practice can maintain its independence and autonomy, while receiving favorable payment terms and other terms from payers. The IPA, however, may require the practice to use a shared business infrastructure and adhere to other standards

13 Independence and Autonomy Independent refers to the fact that the practices that join an IPA remain separate and freestanding organizations, and maintain autonomy over their business governance and operations. Participating in an IPA does not preclude a practice from participating in other Health Systems. 25 Favorable Payment Terms Favorable payment terms could take several forms: Enhanced FFS payments New payment methodologies such as capitation or shared savings Enhancement payments for expanded services (e.g. care coordination) Network management payments for services provided to the payer and others

14 Other Negotiated Terms An IPA may seek other negotiated terms on behalf of their members: Access to data and information Preferred status within the network of providers Improved access to specialists and hospitals Business planning support Co marketing and/or co branding and others. 27 Shared Business Infrastructure IPAs will often build some level of shared business infrastructure to serve its members and payers: Data analysis infrastructure Revenue cycle management infrastructure Shared Health IT Contract management and administration Shared clinical functions (e.g. pre authorization services) and others

15 IPA Standards To achieve its goals of favorable terms, IPAs must negotiate based on its standards. An IPA may set several types of standards for its members: Clinical standards (e.g. chronic disease care) Operating standards (e.g. hours of operation) Financial standards (e.g. drug cost performance) and others. 29 IPA Math IPAs attempt to improve the financial well being of its members by negotiating payment and other terms with Health Insurers. To do so, IPAs must have significant enough size of membership to make a negotiation worth the effort applied by both parties (the IPA and the Insurer.) 30 15

16 IPA Math Individual Health Centers often lack the necessary volume of covered lives within any one plan to make unique contractual relationships viable. Insurers therefore default Health Centers to their most basic contract options. Individual Health Center BCBS 466 lives Aetna 214 lives Coventry 801 lives Numbers presented are fictitious and representative. 31 IPA Math Individual Health Centers often lack the necessary volume of covered lives within any one plan to make unique contractual relationships viable. Insurers therefore default Health Centers to their most basic contract options. Individual Health Center BCBS 466 lives Aetna 214 lives Coventry 801 lives This might mean: Individual Health Centers cannot participate in basic P4P arrangements No opportunity to explore advanced contracts Leaving financial opportunity on the table. Numbers presented are fictitious and representative

17 IPA Math In forming, the IPA itself becomes the sought after contracted entity for the Health Insurer, because it represents a significant portion of the insurers network. Health Center IPA BCBS 1,566 lives Aetna 778 lives Coventry 2,526 lives Individual Health Center Individual Health Center Individual Health Center Individual Health Center Numbers presented are fictitious and representative. 33 How and IPA Creates Financial Opportunities Why would a Health Insurer want to pay us more money to treat the same patients? Health Insurers do not simply give out better payment terms to networks, such as IPAs. Instead, they look for the following types of benefits from the network: Commitment to quality performance Sharing of financial risk Performing of important Health Plan functions Entry into new markets (the ready made network ) 34 17

18 FINANCIAL AND CLINICAL INTEGRATION 35 IPAs and ACOs must demonstrate integration When organized as an IPA or an ACO, the provider organizations must be able to function differently than before: Clinically integrated organizations gain new clinical capabilities from the network. Financially integrated networks share risk together in ways their participants could not do alone

19 Integration is Important Organizations made up of healthcare providers are likely to be considered trusts unless they can prove clinical or financial integration. Further, integration is a key component of a negotiation strategy for getting better terms. 37 ACOs: What integration does CMS expect? 1. Ability to monitor and control utilization of healthcare services, control costs, and ensure quality. 2. Manage total medical expense at the ACO level, as a trigger for incentive payments. 3. Publicly report ACO outcomes. 4. CMS ACOs may qualify for safe harbor from antitrust as a financially integrated networks

20 IPAs: What integration does the FTC expect? 1. Ability to monitor and control utilization of healthcare services, control costs, and ensure quality. 2. Selectively choose healthcare providers who are likely to further key objectives. 3. Demonstrate significant investments in the infrastructure to realize claimed efficiencies. 39 Integration: Defined There is no single definition: the FTC knows it when they see it Want to see protection from real harm to competition and consumers Win together, lose together At the end of the day, ask an attorney BUT keep in mind that anti trust attorney will need education about the health center model 40 20

21 What does integration look like? Participation Criteria Performance Improvement Information Technology Joint Contracting Legal Entities Flow of Funds Physician Leadership ACCOUNTABILITY 41 Design Considerations STRUCTURE AND FUNCTION OF ACOS AND IPAS 42 21

22 Structure and Functions The structure and function of IPAs and ACOs vary based on three important design considerations: The scope (e.g. Primary Care only, or integrated with specialists and hospitals) The level of financial risk (e.g. upside only or upside and downside risk) The strategy for integration 43 Typical Services All ACOs should maintain a core set of functions and services: Contract Management and Administration Data Analytics Standards Setting and Enforcement Assist members in managing to contract terms Ensure payer honors contractual commitments Collect data necessary to support contract administration Identify areas to maximize performance under contracts Set standards for members to improve value of IPA Create accountability programs for non performing members 44 22

23 Typical Services A key difference between ACOs and IPAs is the addition of contracting capabilities: Contract Negotiation Represent the members in face to face negotiations Design contract terms and authorize acceptance Contract Management and Administration Data Analytics Standards Setting and Enforcement Assist members in managing to contract terms Ensure payer honors contractual commitments Collect data necessary to support contract administration Identify areas to maximize performance under contracts Set standards for members to improve value of IPA Create accountability programs for non performing members 45 Risk-Sharing Different IPAs and ACOs take on different levels of financial risk, which impacts their structure: Low Risk Distributes shared savings without downside Upside is often limited Least need for financial reserves Least sophisticated infrastructure May variants and hybrid models exist in between the two. High Risk May accept large capitated payments on behalf of patients Risk is tied to total medical expenditures May pay specialists and hospitals directly Greatest potential upside 46 23

24 Expanded Services Depending on the Scope, Risk Sharing, and Integration of the envisioned ACO/IPA, there are a universe of additional functions that may be advantageous: Medical Home Implementation Care Management Infrastructure Claims Payment Infrastructure Quality Improvement Financial Reserves and Reinsurance 47 Potential Design Independent Practice Association / Accountable Care Organization Governance: Member Managers Data Analytics (Staff and Partner) Contract Negotiation (Staff or Partner) Contract Administration (Staff or Partner) Medical And Standards Leadership (Part Time Staff) Advanced FQHC Medical Homes Potential Participants Strategic Partners FQHCs coordinate care across healthcare landscape Hospitals Specialists LTC Ancillary Analytics Partner Back Office Partner QI Medical Home 48 24

25 The Ready Made Network Depending on whether new Health Insurers will enter the marketplace, there may be a significant need to quickly establish networks of Primary Care providers. Such networks could have substantial value: Receive network access fees to assist Insurers of proving network adequacy Will be involved in Health Plan and Insurance Product design Can have significant influence on payment terms and payment methodologies Could see capital investment to close gaps/expand access Stand to reap other benefits, like focused specialty and hospital network building, data access, and enhanced patient benefits 49 Benefits Recap Independent Health Centers are generally too small to garner much interest from Health Insurers in terms of creating unique relationships Creating an ACO or IPA now could bring benefits to Health Centers in 4 key areas: Expand availability of low risk P4P options Create opportunities to share risk and reap financial rewards from performance Create new revenue sources associated with providing services to Health Insurers Influence the design and implementation of new Health Insurance Plans and Products with favorable terms 50 25

26 ACOs and IPAs: Summary Health Centers throughout the country are creating ACOs and IPAs to make themselves more desirable partners for contracting. They are securing payment terms that are advantageous. In return they are risking part of their compensation based on clinical or financial performance. This requires them to integrate in ways that they currently do not have to. 51 Q&A 52 26

27 Moving Ahead NEXT STEPS 53 Reminders Health center surveys distributes shortly Schedule your individual interview Attend the final webinars on MSOs 54 27

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