AHLA. BB. Accountable Care Organizations and the Medicare Shared Savings Program. Troy Barsky Crowell & Moring LLP Washington, DC

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1 AHLA BB. Accountable Care Organizations and the Medicare Shared Savings Program Troy Barsky Crowell & Moring LLP Washington, DC Daniel F. Murphy Bradley Arant Boult Cummings LLP Birmingham, AL Terri L. Postma Medical Officer Center for Medicare and Medicaid Services Windsor Mill, MD Institute on Medicare and Medicaid Payment Issues March 26-28, 2014

2 Accountable Care Organizations and the Medicare Shared Savings Program Institute on Medicare & Medicaid Payment Issues 2014 Daniel Murphy, Esq. Bradley Arant Boult & Cummings LLP Troy Barsky, Esq. Crowell & Moring Overview Additional Background: Pioneer ACO Model Challenges Financial IT Contracting Rewards Financial Quality Future of ACOs Commercial ACOs And Beyond 2 1

3 Pioneer ACO Model Designed specifically for health care organizations with experience offering coordinated, patient-centered care, and operating in ACO-like arrangements. Allow providers to move more rapidly from a shared savings model to a population-based payment model. Currently 23 organizations participating. Center for Medicare & Medicaid Innovation is exploring whether to allow additional ACOs to enter Pioneer Model. 3 Challenges - Financial High Start-Up Costs In the MSSP Proposed Rule, CMS estimated startup and first year operating costs for MSSP ACOs at $1.755mm Based on CMS experience in Physician Group Practice Demonstration Sites (76 Fed. Reg. at ) National Association of ACOs (NAACOS) survey (January 2014) $2.0 mm average cost of startup and first year expenses; range of $300k to $6.7mm Based on survey of 35 Medicare MSSP ACOs American Hospital Association hypothetical cost models (April 2011) Prototype A: $11.6 mm (200 bed, 1 hospital system, 80 PCPs, 150 specialists) Prototype B: $26 mm (1,200 bed, 5 hospital system, 250 PCPs, 500 specialists) 4 2

4 Challenges - Financial Startup Costs Include EMR acquisition and development EMR interoperability ACO management and staff Legal and consulting fees Developing financial and management information systems Network development Compensation for physician leaders 5 Challenges - Financial No Revenue for Extended Period ACOs must have access to capital to finance startup and first year operating costs, typically from the following sources: Owner capital contributions Interest-bearing debt Certain ACOs eligible for Advance Payment ACO Model (physicianbased and rural providers) ACO will burn cash for extended period before first shared savings payments are received Participants, particularly small physician practices and solo physicians, may have limited ability to withstand long period of negative cash flow 6 3

5 Challenges - IT Importance of EMR Systems and IT to ACOs Tracking aligned beneficiaries and reconciling aligned beneficiaries per CMS reports Analysis of aligned beneficiary costs and utilization of services Analysis of aligned beneficiary conditions and comorbidities Coordination of care among ACO participants and non-participant contracted providers Ability to create management and financial reports Ability to process and reconcile CMS data with ACO data ACOs must have robust EMR and IT systems in order to function 7 Challenges - IT Costs of EMR Adoption and Implementation Depending on the size of the ACO, implementation costs and ongoing license fees for the ACO EMR can cost well over $1mm and up Each EMR interface between the ACO EMR system and a participant can cost thousands of dollars Depending on the ACO s in-house IT expertise, the ACO and/or its participants may need to rely on costly reports prepared by the EMR vendor for Data analysis Quality reporting Additional costs if connecting to a Health Information Exchange 8 4

6 Challenges - IT Working with CMS Data 40% of surveyed ACOs identified issues related to working with CMS data as the top operational challenge in year 1 (NAACOS survey, January 2014) Challenges include: Beneficiary Assignment: reconciling aligned beneficiary reports from CMS with internal patient records Expenditure and Utilization Reports: lack of real-time data, lack of detailed visibility to diagnoses and services related to expenses Claims Information: incomplete data due to ability of beneficiaries to opt out of data sharing, exclusion of data related to substance abuse Data Reconciliation 9 Challenges - IT Sharing and Using Data Among ACO Participants Ideally, all ACO participants and the ACO itself would operate under the same EMR system Inevitably, some ACO participants will either not have implemented EMR systems, or will have a different vendor than the ACO For ACO participants with no EMR or different vendors, establishing costly interfaces will be necessary Advantages of multiple providers implementing EMR system from same vendor 10 5

7 Challenges - Contracting Contracting / Corporate Governance Merging Existing Corporate and Governance Structure into MSSP Requirements Regulatory Requirements Fiduciary Duty Revise Corporate/Governance Structure State Law Impediments like Corporate Practice of Medicine Doctrine Can you use existing governance board or do you need to create a new one? If you need to create a new board, will you lose benefits of existing integrated delivery systems. Does change in ACO governance board change focus or orientation of ACO or is it simply an administrative requirement? 11 Challenges - Contracting Contracting with Non-Participant Providers Allocation of shared savings with non-participants Establishing appropriate quality metrics for specific contracted providers: Which metrics apply to which types of providers? Should additional condition-specific metrics that are not part of MSSP be included in agreements? When applying MSSP metrics, should contracted providers be held to the same or higher performance standards than the ACO? Assigning and tracking the appropriate subset of aligned beneficiaries to contracted providers (e.g. ESRD patients) 12 6

8 Rewards - Financial Direct Benefits Reduced internal costs potential shared savings revenue from Medicare ACO Programs Secondary Benefits Processes, protocols, order sets, etc. applied to Medicare ACO beneficiaries can be used for non-medicare ACO patients Lower costs for non-medicare ACO patients Medicare ACO infrastructure can be used in commercial payor context 13 Rewards - Financial Synergy of ACO Performance Standards with Other CMS Reimbursement Policies Readmission Penalties CMS Hospital Readmissions Reduction Program applies to acute myocardial infarction, heart failure, pneumonia, COPD, etc. MSSP quality performance standards include COPD, pneumonia, heart failure EHR Incentive Program Incentives avoidance of reimbursement reduction available to providers through EHR Incentive Programs MSSP performance standards include the percentage of PCPs who qualify for EHR incentive payments Hospital Value-Based Purchasing Program CMMI Models, such as Bundled Payments for Care Improvement 14 7

9 Rewards - Financial Synergy of ACO Performance Standards with Other CMS Reimbursement Policies Hospital Value-Based Purchasing Program HVBP includes, e.g., HCAHPS scores and quality measures that overlap with MSSP standards MSSP performance standards include patient/caregiver experience, and other quality measures that overlap with HVBP CMMI Models, such as Bundled Payments for Care Improvement Comprehensive ESRD Care Initiative 15 Rewards Quality Direct Benefits Healthier ACO beneficiaries Secondary Benefits Healthier non-medicare ACO beneficiaries Application of quality initiatives, care coordination, and individual care planning developed in Medicare ACO context Discipline of Medicare ACO Program requirements Serves as a catalyst for clinical integration among participants across all patient populations 16 8

10 Rewards Fraud & Abuse Waivers Waiver of Fraud and Abuse Laws Anti-Kickback Law Stark Law Civil Monetary Penalty Benefit Of Waivers Payments Based on Volume and Value of Referrals Incentive Payments Shared Savings No Technical Violations Allows for start-up costs and capitalization between entities that refer to each other 17 Future of ACOs Commercial ACOs There are approximately equal numbers of commercial and Medicare Program ACOs* Defining ACOs in the Commercial Context No legal or regulatory definition or requirements for commercial ACOs, therefore what many refer to as commercial ACOs can take many forms Examples: Shared savings and pay-for performance Bonuses and/or withholds Based on achievement of cost and performance goals Capitated payments: partial or full capitation Case management fees Bundled payments for episodes of care *Source: Leavitt Partners Report, Growth and Dispersion of Accountable Care Organizations: August 2013 Update 18 9

11 Future of ACOs Commercial ACOs Incremental Steps Toward Fully Accountable Care Because commercial ACOs are not as well-defined as the Medicare ACO Programs, they have more flexibility: Designing the ACO arrangement and Designing interim steps to move providers from fee for service to accountable care Examples of incremental steps to fully accountable care similar to a Medicare ACO Progressively increasing percentage of payment at risk based on quality and cost targets Expanding scope of care for which ACO is responsible (e.g. beginning with certain chronic disease states, expanding to all costs incurred for the patients) 19 Future of ACOs Commercial ACOs Incremental Steps Toward Fully Accountable Care Providers and payors can use data and experience gathered during interim steps to prepare for smoother ACO contract launch Have more confidence in ability to succeed as an ACO Commercial payors willing to work closely with ACO or ACO-like providers and networks to provide useful, customized patient health and cost data 20 10

12 Future of ACOs MSSP and Pioneer New Enforcement Risks? Fraud And Abuse Will waivers remain in their current form? False Claims Act enforcement Lack of waivers outside of the MSSP and Pioneer programs Antitrust Recent uptick in activity and focus from FTC Impact on future ACOs? 21 Future of ACOs MSSP and Pioneer Medicare ACOs have been successful and popular Program is operated and managed well by the government While quality will improve under the program, will costs be reduced? Alternatives to ACOs or combinations with other programs? Financial Risk Bundled Payment Capitated Payment 22 11

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