CPCA California Primary Care Association

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1 CPCA California Primary Care Association Accountable Care Organizations: Next Generation Systems for Community Health Centers? CPCA Annual Conference Sacramento, California October 10, 2014 Larry Garcia, Esq. 655 University Avenue, Suite 200 Sacramento, CA Phone: (916) Fax: (916) Outline of Today s Program Introduction ACOs participating in Medicare Shared Savings Program Experience of ACO formed by community health centers Consideration of ACO model to serve Medicaid patient population ACOs ACOs are one innovation created under the Affordable Care Act (the Act ) designed to advance to goals of health care reform ACOs designed under the Act were implemented and early results of the program have been mixed National Association of ACOs Report of 2013 revealed: Start-up Costs. Average start-up costs in first 12 months of operation were $2.0 million; with a range from $300,000 to $6,700,000. Costs did NOT include the development costs for lawyers, consultants and advisers. First Year Savings. Predicted financial results for the first year ranged from a gain of $9,000,000 to losses as much as $10,000,000. About 1/3 of ACOs surveyed indicated that they would break even, about a quarter estimated losses with an average of $1.3 million and the balance did not know. 1 ACOs: How Did We Get Here? the federal budget is on an unsustainable path: (CBO 9/2009) Rising health costs will put tremendous pressures on the federal budget... [Health ] does not substantially diminish that pressure. (CBO 5/2010) US healthcare expenditures exceeded 19% of GDP in Here a medical community came to treat patients the way subprime mortgage lenders treated home buyers: as profit centers. Atul Gawande, M.D. 2 1

2 The Unsustainable U.S. Health Care System Healthcare expenditures were 19% of GDP in 2010 $2.5 Trillion Health Care Expenditures 10 $1.1 Trillion (47%) - Public Payments Public expenditures for healthcare projected to exceed 50% of total in 2010! USA 2008 Healthcare Expenditures Other HC Spend 16% Other Personal Health 13% Hospital 31% Homecare 3% Nursing Homes 6% Rx Drugs 10% Phys/ Clin 21% 3 International Spending on Health, Average spending on health per capita ($US PPP) United States Canada Netherlands $7, Total expenditures on health as percent of GDP 16% 6000 Germany Australia United Kingdom New Zealand % $2, United States Germany 4 Canada Netherlands 2 New Zealand Australia United Kingdom Note: $US PPP = purchasing power parity. Source: Organization for Economic Cooperation and Development, OECD Health Data, 2009 (Paris: OECD, Nov. 2009). 4 Herbert Stein s Law If something cannot go on forever, it will stop. 5 2

3 US Health 2010 Two-Pronged approach to Redesign of the US Health Care System. Who will Lead Delivery System??? Coverage Expansion US Health Care Insurance Delivery System Insurance Exchanges Individual Mandate New Org Structures Payment ACO PCMH Value-Based Payments Bundled Payments PCMH = Patient Centered Medical Home ACO = Accountable Care Organization Shared Savings Copyright 2010 BDC Advisors Federal Health Payment Initiatives Federal health reforms focus on the Triple Aim: (i) to improve patient experience, (ii) to improve population health outcomes and (iii) to lower total costs of care. Payment s efforts include: (i) Value-based purchasing requirements for hospitals, SNFs, ASCs and physicians (ii) Payment reductions to hospitals for excess readmissions (iii) Prohibit payments for health-care acquired conditions (iv) Payment bundling resulting from a plethora of pilot programs that will be used to affect provider payments to improve clinical outcomes and reduce costs (v) The formation of Accountable Care Organizations ( ACOs ) permitting groups of providers including hospitals and physicians to share in Medicare cost savings (vi) Creation of a Medicaid Pediatric Care model with payments for quality and cost savings (vii) Enhanced primary care payments (viii) Investment in community health centers and expansion of 340B Program 7 What is an ACO? To participate in the Medicare Shared Savings Program an ACO must consist of a group of health care providers and suppliers of services that work together to coordinate care for Medicare patients they serve. ACO participants may include: Physicians, hospitals and health care professionals individually or in group practice arrangements ( ACO Professionals ) Networks of individual providers Partnerships or joint ventures between hospitals and ACO professionals Hospitals employing ACO Professionals Other Medicare providers and suppliers as approved by CMS ACO have a three year contract with CMS to participate in the Medicare Shared Savings Program 8 3

4 Understanding the ACO Provider Relationship Community Providers Accountable Care Organizations Bonus-eligible Providers Providers Used for Patient Assignment Community Providers: not part of ACO but may provide care to ACO patients. Some community providers may contract with ACO or routinely receive referrals, while others may have no relationship (or be out of area). ACO Providers: Members govern ACO and, if exclusive, have patients assigned to them. Other providers may join multiple ACOs. Bonus-Eligible Providers: ACO prospectively sets eligibility and allocates shared savings. ACOs have discretion to pay bonuses to a subset or all ACO members, varying treatment and amounts (e.g., all PCPs could receive bonuses, while only some specialists might). 9 Key Goals for ACOs Deliver seamless, high quality and coordinated care for Medicare beneficiaries Promote development of new provider systems of health care delivery Avoid adverse affects on existing systems that already provide accountable care Change provider culture and incentives from fragmented FFS Lower total cost of health care while improving population health Measure both quality and financial performance Hold provider systems accountable for both cost & quality of care for assigned patient populations Advance the triple aims health care reform 10 ACOs and Medicare Beneficiaries Medicare beneficiaries are assigned to an ACO through a two-step process: CMS identifies all Medicare beneficiaries that had service from a PCP in an ACO Medicare beneficiary is assigned if the cost of primary care services provided by an ACO PCP exceeds the costs of services by PCPs who are not in the ACO Medicare beneficiaries assigned to ACOS Are not strictly enrolled to the ACO as they might be to a health plan in the Medicare Advantage program Must be provided notice that they are assigned to an ACO ACO must have at least 5,000 Medicare beneficiaries to participate in the ACO program No inducements may be provided to Medicare beneficiaries to encourage participation in ACO 11 4

5 ACO Governance Structure ACOs must meet certain governance and leadership requirements to qualify for participation in the Medicare Shared Savings Program Separate legal entity that complies with state law 75% of the members of the ACO board must be an ACO provider ACO board must include at least one Medicare beneficiary ACO board must have broad responsibility for the administrative and clinical operations of the ACO and hold a fiduciary duty to the ACO ACOs responsible to monitor and report the quality of care they deliver ACOs must have written standards for how Medicare beneficiaries can obtain access to their medical records and Medicare beneficiary communications 12 ACO Quality Performance Requirements ACOS must meet threshold quality performance standards in order to be eligible to participate in shared savings Must measure, report and achieve applicable performance standards in 33 proposed clinical measures Must provide CMS with documentation describing how the ACO will: Promote evidence-based medicine; Promote Medicare beneficiary engagement Report quality and cost metrics to CMS; and Coordinate care to Medicare beneficiaries. ACO must demonstrate patient centeredness by: Utilizing a Medicare beneficiary experience of care survey; Involving ACO-assigned Medicare beneficiaries in ACO governance; Evaluating the health needs of population; Developing individualized plans of care; and Coordinating care. 13 ACO Shared Savings ACOs may participate in the Program through: Baseline Calculations. Ability to generate savings depends entirely on the quality of CMS data and the ability to tie that data to the Medicare beneficiaries assigned to the ACO. Track 1 Model- participation in shared savings only providing only an upside benefit from participation up the 10% of performance payment limit. Track 2 Model- participate in both upside and downside risk of financial performance measure against baseline of costs for Medicare beneficiaries assigned to the ACO up to 15% of the performance payment limit. Threshold Savings Requirement. Minimum 2% shared savings must be achieved and thereafter ACO can share 50% of savings realized. Interim Payments. Final regulations do permit for a limited interim payment after first 12 months of performance. 14 5

6 ACO Regulatory s In order to remove many of the regulatory barriers for ACOs to participate in the Medicare Shared Savings Program, the government adopted reforms to the application of the antitrust laws: Mandatory Review- ACOs with market concentrations in excess of 50%. Market Concentration Guidelines. Market measured by contiguous zip codes for each medical specialty in the ACO. Safe Harbor. Rule of reason applied to the analysis of ACOs. If market concentration is 30% or less, it will enjoy a safe harbor. Problematic Conduct. Agency will scrutinize certain behaviors of ACOs including; (i) sharing of competitive price information; (ii) inclusion of anti-steering or most favored nations clauses; (iii) exclusivity requirements preventing ACO providers from participating in other contracting networks; and (iv) restricting the ability of payers to publish provider costs and quality data. 15 Are ACOs appropriate for FQHCs? The Act triggers several events potentially favorable to FQHCs 1. The principal enrollment growth mechanism in health reform is an expansion of patient eligibility for Medicaid. Many of these patients (e.g. dual eligible patients) are already being served by FQHCs many for little or no pay and FQHCs are well positioned to expand services to these individuals. 2. Recognizing the vital importance of FQHCs, the Act commits to further investments in these safety net clinics The percentage of shared savings that ACOs can receive if RHCs or FQHCs are included as participants. 3. ACOs are being tasked with managing the health status of a population (minimum of 5,000 beneficiaries for Medicare ACOs). FQHCs are well equipped and positioned to be substantive partners in ACOs and to drive value. 4. FQHCs, RHCs, and other Medicare providers can participate in the ACO program on their own or by partnering with eligible providers An FQHC can partner with a network of individual practices this ability will allow for participation by a broad range of provider configurations. 16 6

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