ACOs & ESCOs. Interdisciplinary Nephrology Conference. October 25, 2013

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1 ACOs & ESCOs National Kidney Foundation of Illinois Interdisciplinary Nephrology Conference October 25, 2013

2 About Me Dan Viaches VP Corp. Development - DaVita 6 Years with DaVita - 5 Years center operations Years business development BSE Chem. Eng, Univ. of Michigan MBA, Harvard Business School Fun Facts: - Traveled to 5 continents - Helped author an encyclopedia - Running 1 st Marathon next weekend 2

3

4 Agenda What is an ACO? How do ACOs Work? What is an ESCO? Questions

5 ACO Defined An Accountable Care Organization (ACO) is a type of payment model that t ties provider incentives to quality metrics and reductions in the total cost of care for a population of patients An ACO is comprised of coordinated healthcare providers (doctors, hospitals, ancillary services, etc.) 5

6 Our Healthcare Environment 6

7 Reduce healthcare costs Donald M. Berwick, Thomas W. Nolan, and John Whittington. The Triple Aim: Care, Health, and Cost, Health Affairs, Vol. 27 No. 3 (May, 2008):

8 Current State- Fee For Service (FFS) Rate Volume Cost Overall Cost Unit Price Vicious cycle fails to address real cost drivers Units of Service 8

9 Goal Value Based Care Value-Based Care Cost Reward outcomes rather than volume Incentives for provider system redesign to support value based care Quality Improved: outcomes Patient experiences Affordability 9

10 ACOs as Catalysts of Change TRANSITION VOLUME ACOs VALUE 10

11 Affordable Care Act Section 3022 establishes Medicare Shared Savings Program, including potential for ACOs Accountable Care Organizations Assume care responsibility for a clearly defined population of Medicare beneficiaries Strive to achieve specific quality standards Share in savings if they reduce the cost of care Three-pronged Objective Better health for populations Better care for individuals Slower growth in costs 11

12 Myth or Reality? Medicare ACOs are structured capitation payment models that lay total financial accountability to participating providers Medicare ACOs are structured fee-for-service for payments models that offer participating p providers an opportunity to share in achieved savings and (sometimes) losses MYTH REALITY! 12

13 ACOs Organization Types PGP Demonstration 10 demonstrations 3/05-3/10 7 demos selected for 2 yr transition agreement (1/11) 9,000 40,000 Lives Medicare PGP Transition Demonstration 7 demonstrations Start date: 1/1/11 2 yr agreement (1/11 12/12) 9,000 40,000 Lives Commercial Formed before or in parallel with CMS ACOs in some communities,e.g. Louisville, Roanoke, Phoenix, Chicago Commonly involves insurance company providing administrative and IT support Pioneer ACO MSSP ACO 32 Pioneer ACOs CMS Expectations (3 from PGP Demo) 4/1/12-27 Start date: 1/1/12 7/1/ Models 1/1/2013 -? 5 Year Agreement 3 Year Agreement > 15,000 Lives > 5,000 Lives 13 Medicare ACOs Required to include Commercial pts over time

14 14 ACOs 2009: N = 29

15 ACOs 2013: N = 488* *July 2013, per Leavitt Partners 15

16 Agenda What is an ACO? How do ACOs Work? What is an ESCO? Questions

17 The ACO Deal Providers We ll invest to integrate care, improve patient experience, save money Payers We ll lower barriers and make it worth your while Form Organization Financial Incentives Accept Financial Risk Assign Patients Coordinate Cood atecae Care Share Data Legal Waivers 17 Better health for populations Better care for individuals Slower growth in healthcare costs

18 ACO Quality Measures 33 in four domains: Patient / Caregiver Experience Care Coordination / Patient Safety Preventative Health At-risk Population - Diabetes - Hypertension - Ischemic vascular disease - Heart failure - Coronary artery disease 18

19 ACO Models Basic Principles < Two-Sided Model > < One-Sided Model MSR (%) Savings Cap (%) Loss Cap (%) Shared Savings Shared Losses Benchmark CMS determines a benchmark cost to provide care based on the ACO patient composition. Benchmark is based on an avg. of three prior years cost experience and are risk- and inflation-adjusted. Minimum Savings/Loss Rate (MSR) Each year, an ACO will determine its cost to provide care. If it is outside the MSR, it is considered a statistically significant amount of savings or loss. Savings / Loss Caps ACOs will participate in shared savings and losses (outside the MSR) up to the cap amounts, which vary by each model. Shared Savings / Losses Depending on the model chosen, ACOs will split the amount of shared savings and losses with CMS (Actual Cost Benchmark). These amounts are subject to scaling based on achievement on quality metrics. 19 Savings Benchmark (100%) Losses One- vs. Two-Sided One-sided models only participate in shared savings while two-sided models participate in both shared savings and losses.

20 Funds Flow Example Baseline Service Cost $90 $8 Savings Actual Service Cost $82? $4 Medicare ACO (up to) $4 Less ACO Costs = Will there be Shared Savings for ACO Participants? 20

21 ACO Challenges Patient Attribution PCPs today Benchmarking Administrative costs/challenges Physician incentives/alignment How to split returns generated Data/IT 21

22 Status. When you ve seen one ACO you ve seen one ACO. A Texas-Sized ACO Takes Shape HealthLeadersMedia.com, September 18,

23 Agenda What is an ACO? How do ACOs Work? What is an ESCO? Questions

24 Renal Care Challenge ~1.5% 15%ofPatients 12 1,2 ~10% of Costs ESRD + Late Stage Chronic Kidney Disease (CKD) ~ $30B per year Other Medicare Other Medicare (1) Source: USRDS (publicly available comprehensive clinical and financial dataset reported to and used by CMS) (2) ~375K ESRD + ~300K Stage 4 Chronic Kidney Disease 24

25 ESCO Overview ESCO = ESRD Seamless l Care Organization i (i.e. Renal laco) Announced February 3, 2013 Only ESCOs to be selected / 3 year agreement Medicare FFS ESRD patients are eligible 500 patient minimum for LDOs (350 for others) Accountable for the total Medicare cost and clinical outcomes Financial performance measured against 3-year historical benchmark Savings/Losses shared amongst participant p owners 25

26 ESCO Participation Framework ESCO Community Dialysis Clinic ESCO based on geography (CBSA) Dialysis clinics identified to participate Patients matched by their clinic Coordination with community providers Interventions delivered in dialysis clinic Hospitalization Management Fluid Management Medication Management Co-morbidity Management 26

27 ESCO Funds Flow (Illustrative) ESCO Benchmark ESCO Saves 10% Distribute Savings ESCO Nephrologists $100K $10K x 70% $7,000 Dialysis Provider $10K x 30% $3,000 Other Provider CMS 27 27

28 Program Value Strengthens nephrologist / patient relationship Improved patient outcomes and lower mortality Aligns incentives to benefit our patients Enhances nephrologists role in local healthcare community It could be a compelling business opportunity 28

29 ESCO Structural Challenges Patients in ACO or ESCO? Rebasing Benchmarking methodology Limited Scope Expected 2/4 5/1 7/1 8/1 8/30 Q4 Q1? 29

30 Agenda What is an ACO? How do ACOs Work? What is an ESCO? Questions

31 31 Questions?

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