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1 Accountable Care Organizations: Proposed Regulations and the Local Landscape May 26, 2011 John Clark, MD, JD Isaac M. Willett Medical Director, Clinical i l Informatics Attorney Indiana University Health Baker & Daniels LLP

2 The true meaning of ACO is Awesome Consulting Opportunities. - The Weekly Standard, 04/12/11 ACOs Spell Gold Rush For Health Care Consultants - Kaiser Health News, 04/02/11 2

3 Presentation Overview I. The Future of Payment Models II. III. IV. Key Points of Proposed Regulation Antitrust Issues Fraud and Abuse Waivers V. Tax-Exempt Issues VI. What s being said about the Rule VII. The Way Forward 3

4 I. The Future of Payment Models Pay for Performance Shared Savings Bundled Services Insurance Risk & Capitation ti Risk 4

5 Payment Models, pt 1 Pay for Performance Upside $ for reaching benchmarks No downside risk unconscious participation Example: IHIE s Quality Health First program 5

6 Payment Models, pt 2 Shared Savings Upside risk: $ incentive to bend the cost curve No downside risk: not responsible for reimbursing if cost curve doesn t bend Highly structured (contracted) participation Example: CMS ACO rule (sort of) Also: direct contracting between system and selfinsured employer 6

7 Payment Models, pt 3 Bundled Contracting Higher up front pricing (120+% of usual rate) Guaranteed outcomes: system at risk for related complications for a defined period of time Downside risk if processes do not produce high-quality outcomes Directly contracted with self-insured employers Example: Geisinger Clinic s ProvenCare Model 7

8 Payment Models, pt 4 Insurance Risk & Capitation Capitation (PMPM): full risk transfer from employer / payor to the care delivery system Insurance Risk: re-engineering of traditional claims payor model care delivery system takes a risk corridor Significant downside; only as much upside as the market will tolerate Example: captive plans 8

9 What is Accountable Care? A. Any and all of the above models B. An opportunity for transformational change C. What the health care system should have been doing all along D. All of the Above 9

10 Why does a health system want to contract under ACO rules? Monetary reward and recognition for providing safe, high quality care Potential to expand market share Promise of reimbursement for care coordination activities Opportunity to align physician and hospital goals like never before 10

11 II. Key Points of Proposed Regulation Eligibility and Contractual Requirements Patient-Centeredness Criteria Shared Savings and Shared Loss Payment Medicare Beneficiary Attribution Quality Measures Data Sharing CMS Monitoring of ACOs 11

12 Eligibility & Contractual Requirements Composition Primary care-centric but may also include specialist physicians, hospitals, physician assistants, home health agencies, hospices, nurses and other provider types ACOs must have a sufficient number of primary care physicians i so that t at least 5,000 beneficiaries are assigned to the ACO 12

13 Eligibility & Contractual Requirements (continued) Application Entities seeking to become ACOs will be required to submit an application with supporting documentation to CMS Upon request, an ACO must submit documents to CMS that demonstrate the ACO s formation and operations An ACO accepted into the Medicare Shared Savings Program by CMS must execute a 3 year agreement with CMS requiring the ACO to comply py with all of the Program s requirements 13

14 Eligibility and Contractual Requirements (continued) Medical Review Proposed Program requires each ACO to have processes and procedures in place to identify and correct clinical management and performance issues and address poor compliance Participants in the ACO must agree to adhere to the guidelines and be subject to performance evaluations and potential remedial actions 14

15 Eligibility and Contractual Requirements (continued) Organization Legal entity Provider/supplier participants must have at least a 75% control of governing body Governing body must include Medicare beneficiary representatives If the ACO is comprised of multiple l independent entities, the governing board must be separate and unique to the ACO 15

16 Eligibility and Contractual Requirements (continued) Initial Contracting Period: 3 years PGP Demonstration project: 10 groups, 3 years 2 achieved small savings in year 1 ($7.3M) 4 achieved savings in year 2 ($13.8M) 5 achieved savings in year 3 ($25.3M) Con: most groups who are not already closedpanel HMO s stand to loose significantly in the first 3 years AHA estimates cost to start up and run for 1 year at $11-26M (CMS estimates $1.8M)* * AHA letter to Don Berwick, CMS Administrator, 05/13/

17 Patient Centeredness Criteria An ACO must demonstrate patient-centeredness by: Utilizing a Medicare beneficiary experience of care survey Involving Medicare beneficiaries i i in ACO governance Evaluating the health needs of the ACO s assigned population Identify high-risk individuals and develop individualized id d care plans for targeted t populations 17

18 Patient Centeredness Cit Criteria i (continued) Additional patient centeredness criteria: having mechanisms in place for coordinating care communicating clinical knowledge and evidencebased medicine to Medicare beneficiaries in an understandable manner allowing Medicare beneficiaries to make decisions utilizing the shared-decision making process measuring clinical process by physicians across practices and utilizing the data to improve care over time 18

19 Shared Savings and Shared Loss Payments Two Track Approach Track 1 During first 2 years of participation, p not subject to shared risk; only shares in shared savings Eligible to share up to 50% of shared savings in years 1 and 2 Transitioned to Track 2 in year 3 19

20 Shared Savings and Shared Loss Payments (continued) Track 2 Share in savings and losses generated that exceed a minimum savings/loss rate of 2% May share in savings and losses at a rate of 60% must obtain reinsurance, place funds in escrow, obtain surety bonds, or establish a letter of credit that CMS can draw upon in order to ensure repayment of shared losses 20

21 Shared Savings and Shared Loss Payments (continued) Shared Savings the difference between (i) actual Parts A and B spending, and (ii) the CMS predetermined spending benchmark for the particular ACO that exceeds the minimum savings rate threshold. Total savings payment to a Track 1 ACO is limited to 7.5% of the CMS predetermined benchmark Total savings payment to a Track 2 ACO is limited to 10% of the CMS predetermined benchmark; shared losses are limited to 5% in year 1, 7.5% in year 2, and 10% in year 3. 21

22 Shared Savings and Shared Loss Payments (continued) Deep Cuts if savings targets are not met: Track 1: 7.5% of targets Track 2: 5%, 7.5%, then 10% of targets in years 1, 2 and 3 Automatic withholding: CMS holds back 25% of actual savings to offset future losses = expecting failure! 22

23 Medicare Beneficiary Attribution Retroactive Attribution Medicare beneficiaries are assigned to an ACO at the end of the reporting year if the beneficiary i received most of his or her primary care services during the reporting year from a primary care physician who is an ACO participant. Notification of Participation An ACO provider must post signs in each of its facilities regarding its participation in the Program and provide written notification to inform each Medicare beneficiary of such provider s participation in the Program 23

24 Medicare Beneficiary Attribution (continued) Retrospective assignment of patients Con: Can come months to a year or more after the measurement year / don t know whom to manage Con: when in a mixed ACO & FFS world, have to provide all expensive services to all Medicare patients Pro: referral centers are less cost driven for the referral service (as long as we don t provide primary care services!) 24

25 Medicare Beneficiary Attribution (continued) Unrestricted Patients: ACO may not restrict patient choice of physician or hospital Con: patients or systems may game the rule by having more care done outside of PCP s ACO network Pro: patients t can vote with their feet and use the system with the highest perceived value for them May drive market share for the most successful 25

26 Quality Measures No demonstration of quality care No savings to share Year 1 ACO is required to report on 65 Measures that span 5 Quality Domains: patient experience of care care coordination patient t safety preventive health at-risk population/frail elderly health Subsequent years ACO required to achieve minimum attainment levels to receive points for each measure 26

27 Quality Measures (continued) 27

28 Quality Measures (continued) Physician Quality Reporting Initiative Eligible ACO participants may receive 0.5% of their total Medicare Part B allowed charges during the reporting period as an incentive payment for reporting the required PQRI data ACO is required to ensure that at least 50% of the ACO s primary care physicians are meaningful users of EHRs by the start of the second reporting period of the three-year agreement in order for the ACO to continue to participate in the Program 28

29 Quality Measures (continued) 65 Measures in 5 Domains Con: requires deep analytical expertise - prohibitive even to larger groups that are not a health system Unrelated groups on many EMR s = more expense to report, or lose certified status Con: EMR s not currently equipped to capture all necessary data Vendors focused on Meaningful Use: market may not provide necessary functionality at an effective price point This requirement alone could price non-hospital systems out of the market for this type of contracting 29

30 Quality Measures (continued) IT platform: system to collect and evaluate data Con: Huge up front capital cost / shortage of qualified analysts Con: EMR s not well suited for collecting the necessary data elements Con: Confusion and poor alignment with other CMS programs Core Measures, Meaningful Use, others 30

31 Data Sharing An ACO may only receive data from CMS for Medicare beneficiaries who: have been seen by a primary care physician ACO participant during the performance year; have been informed how the ACO intends to utilize the data; and have not opted out of having their Medicare claims data shared with the ACO. Data Use Agreement with CMS required in order for the ACO to receive claims data from CMS 31

32 CMS Monitoring i of ACOs CMS will monitor and assess the performance of ACOs CMS can terminate ACOs and ACO participants from the Program Termination for continued failure to meet quality standards after CMS s initial warning of the failure is not subject to reconsideration Other terminations are subject to reconsideration if requested by the ACO 32

33 III. Antitrust t Issues Policy Statement Market Share Departures from Tradition 33

34 Policy Statement t t FTC and DOJ issued a Proposed Statement of Enforcement Policy Regarding ACOs Participating in the Medicare Shared Savings Program on March 31, 2011 (the same day the proposed regulations were issued) Would apply to ACOs formed after March 23, 2010 The agencies are soliciting comments on the Policy Statement until May 31,

35 Market Share The agencies propose to differentiate among ACOs according to their shares of defined markets > 50% of a defined market required to obtain approval from antitrust agencies before CMS would qualify them for participation in the Program (review to be completed within 90- days) < 50% but >30% of a defined market not required to seek a review by the antitrust agencies before applying to CMS, though they could if they wanted to protect against the possibility of subsequent enforcement action < 30% of a defined market the Policy Statement creates a safety zone for these ACOs. They would apply directly to CMS to qualify under the Program without seeking approval from the antitrust agencies first 35

36 Market Share ACOs are required to conduct a detailed market share analysis before applying to CMS for participation in the Program To conduct the required market share analysis, every ACO first would determine which services are provided by two or more competing providers (or groups of providers) The ACO would then calculate, for each such service, the share of all ACO providers within each provider's primary service area ( PSA ) For example, if an ACO were to include two otherwise independent groups of cardiologists, the PSA for each group would be separately determined. Then the combined shares of both groups would be calculated within each of the two PSAs 36

37 Departures from Tradition ACOs that participate in the Program would no longer need prove separately to antitrust agencies they are clinically integrated in order to negotiate prices with commercial payors. Instead, the antitrust t agencies would defer to determinations made by CMS If an ACO shows it uses the same governance and leadership structure and the same clinical and administrative processes as it uses to qualify for and participate in the Program, the antitrust agencies would deem it clinically integrated The ACO's negotiations with commercial payors would not be considered by the antitrust agencies as per se violations of the antitrust laws 37

38 Departures from Tradition Providers would be forced to engage in detailed market analysis and to seek permission from the antitrust agencies before they may provide their services (as CMS-qualified ACOs) in the marketplace The antitrust enforcement agencies would be converted into regulatory bodies charged with granting or denying applications from would-be market participants, instead of simply observing provider behavior and instituting law enforcement actions when believed necessary 38

39 IV. Fraud and Abuse Waivers CMS/OIG Joint Notice Gainsharing Limitationsit ti 39

40 CMS/OIG Joint Notice Joint CMS and OIG notice outlining proposed p waivers of the federal Stark law, the Anti-Kickback Statute and certain provisions of the civil monetary penalty law in connection with the Program. Issued March 31, 2011 Comments due by June 6,

41 Gainsharing i Proposed gainsharing waivers focus on the distribution of ACO shared savings, including savings distributions: to or among ACO participants; or for activities necessary for and directly related to the ACO's participation in the Program Gainsharing waiver requires that shared savings payments are not made knowingly to induce a physician to reduce or limit medically necessary items or services No protection would be granted for distributions of shared savings to referring physicians outside the ACO unless the distributions were for activities necessary for or directly related to the ACO's participation in and operations under the Program 41

42 Limitations it ti Stark Waiver Does not address any financial relationships other than gainsharing, so any other financial relationships involving physicians and DHS providers must fit within a Stark exception Stark exceptions that might apply include the exceptions for: Bona fide employees Isolated transactions Fair market value compensation arrangements Indirect compensation arrangements 42

43 Limitations it ti (continued) Gainsharing CMP and Anti-Kickback Statute Waivers The proposed waivers for the Gainsharing CMP and the Anti-kickback Statute both require financial relationships other than those created by the distribution of shared savings to fit within a Stark law exception to qualify for waiver protection 43

44 V. Tax-Exempt Issues The IRS expects that it will not find violations of the prohibitions against private inurement or private benefit when a tax-exempt organization participates in an ACO with for-profit participants in the Program if: the terms of the exempt organization s participation are set forth in an arm s length negotiated t agreement CMS has accepted the ACO s participation in the Program the exempt organization s share in the economic benefit and losses is proportionate to the benefit it provides, and its share of losses does not exceed its share of benefits all contracts and transactions of the ACO are at fair market value 44

45 VI. What s being said about ACOs Concern that already efficient organizations will have a difficult time achieving targeted savings Concerns about ACO participants being largely unable to effectively calculate and manage risk Forcing all ACOs to accept risk (year 3 for one-sided model) and other unrealistic requirements may deter many from stepping up to the plate Prospect of significant up-front and other costs (i.e., HIT, care mgt. tools, actuarial services) Concerns ACOs will lack adequate information to manage beneficiary care Too many quality measures and overall a too complicated and rigorous proposal p Sense of déjà vu from HMO era 45

46 VII. The Way Forward Detonate Innovate Blow up the old models of more is more Align goals and incentives so all are in the business of value creation Collaborate Within the ACO and with other innovators Re-Create Enable transformational change to build the self-sustaining, highly reliable learning organization 46

47 How to do it...? 1. Detonate 2. Innovate 3. Collaborate 4. Re-Create 47

48 Thank you! John Clark, MD, JD Isaac Willett 48

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