Themes from the Accountable Care Organization (ACO) Payment Reformers Consultation December 4, 2014

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1 Themes from the Accountable Care Organization (ACO) Payment Reformers Consultation December 4, 2014 The Payment Reformers Project Community convened for a group consultation session to discuss the development and implementation of ACOs and corresponding payment methodologies. The Project Community, which includes state teams from DC, IA, IL, NE, NY, TN, VT, and WA, engaged with state and national experts Marie Zimmerman (Medicaid Director, Minnesota Department of Human Resources) and Steve Shortell, (Blue Cross of California Distinguished Professor, Health Policy and Management, and Director Center for Healthcare Organizational and Innovation Research (CHOIR) Berkeley School of Public Health). The consultation focused on four issues related to ACOs and ACO-like entities: 1. Provider consolidation 2. ACO patient population size a. Total cost of care payment models b. Valid quality measures c. Attribution methods 3. Multi-payer ACOs 4. Integrating behavioral health into ACOs Themes and highlights that emerged from the discussion are below. Context setting: What does the ACO landscape look like in the Project Community states? DC Illinois Iowa DC is in the early discussion stages of payment reform, and there is not current ACO activity. The District is working with federally qualified health centers (FQHCs) and is particularly thinking about ways to integrate behavioral health into the health centers. IL is working to establish an integrated delivery system in which provider entities take on risk and partner with the state and community stakeholders. IL created Accountable Care Entities (ACEs), a network of Medicaid providers with which the state contracts. The ACEs are moving towards partial risk in the next 18 months and full risk in the next 36 months. IA has multiple operational ACOs in the state, including Wellmark Blue Cross Blue Shield, Medicare, and Medicaid ACOs. The four Medicaid ACOs represent 25% of Medicaid members, and IA plans to move all members into an ACO by 2016.

2 Nebraska New York Tennessee Vermont Washington Nebraska has four ACOs in the state, three of which are in the Medicare shared savings program. New York also has numerous ACOs in the state, many of which are part of the Medicare shared savings program. New York is in the process of creating regulations to establish and guide the development of ACOs; the comment period on the proposed regulation ended December 1, TN does not have ACOs in the state, but their episode of care model is complementary to the ACO model. VT also has several Medicaid, Medicare, and commercial ACOs in the state. As they begin year two of their shared savings ACOs, they are looking to refine their payment reform techniques. WA State currently has four Medicare ACOs. Under the state s SIM Model Test application, they propose four Integrated Accountable Care and Payment strategies, two that focus on Medicaid and two that focus on state employees and other purchasers. Theme One: Provider Consolidation Antitrust Challenges. Dr. Shortell discussed that this is an important issue to pay close attention to, but it should not deter ACO development. The Federal Trade Commission (FTC) and Department of Justice (DOJ) are working to come up with new approaches to assessing the positive features of new developments such as ACOs, while mitigating the potential influence that such developments might adversely affect market competition and the ability to negotiate prices. The Journal of Health Policy, Politics, and Law is going to devote an issue to this topic in the coming year. Ms. Zimmerman noted that this has not been as big of a concern for the ACOs in MN; the development of large integrated care systems in the state predated ACOs, so providers have had more time to work in that environment. Furthermore, there is a culture of partnership rather than consolidation. Providers in the state partner in integrated care systems rather than trying to buy and build. For example, providers have entered into memorandums of understanding with community partners.

3 Dr. Shortell pointed to one example where the largest health system in Idaho acquired a large medical group, but the FTC overturned the acquisition on antitrust grounds. The FTC argued that the health system could achieve their same goals through a joint venture or related arrangement rather than an outright acquisition or merger. Developing an ACO Horizontal vs. Vertical Integration. States discussed organizational structures and methods for integrating different types of providers to create an ACO. Dr. Shortell noted that when creating an ACO, it is important to consider a fundamental question: what patient population are you serving? In order to best serve that population, with whom do you need to partner? This will help determine what kind of social service organizations, community supports, or specialists are necessary for a successful ACO. Dr. Shortell s survey found that approximately one-fourth of ACOs across the country have no hospital partner; some ACOs focus on primary care and link to acute facilities when necessary. Others require a more vertical and centralized hospital system to manage their patient population. In Nebraska, 12 patient-centered medical homes (PCMHs) joined together horizontally to create an ACO (called the South East Rural Physician Alliance-SERPA) with a lean administrative structure. One of MN s ACOs is composed of 10 FQHCs that joined as a non-profit. Another MN example is a group of 12 rural counties that joined together to create a virtual ACO; the group has sub-agreements with primary care providers, behavioral health physicians, and hospitals. MN allows its ACOs to have a flexible governance structure to encourage diversity and allow for local arrangements that best serve special populations. ACO Patient Population Size Population size for total cost of care. Nationally, about one-fifth of ACOs have fewer than 5,000 members. The modal population size is 20,000 to 25,000 patients. At the high end, large integrated delivery systems can have up to 350,000 patients. However, to spread the total cost of care model in ACOs, states will have to look at models with a lower patient population size to accommodate smaller and more rural groups. In MN, total cost of care payment model in ACOs can have a minimum population of 1,000 lives. ACOs with a smaller population size have a lower per person claims cap. If an ACO has between 1,000-2,000 lives, then their per person per year claims cap is between $50,000-$100,000. This reduces variability and allows smaller groups, particularly in rural areas, to come into a total cost of care ACO arrangement. Population size for valid quality comparison. For several basic measures, such as HEDIS metrics, hospital readmissions, or emergency room visits, an ACO can use a minimum population size of a few thousand and compare results that are valid. However, to conduct more specific quality analysis on conditions or particular demographics, an ACO needs a larger patient population of 5,000 to 20,000 lives. This allows for reliable quality comparison. Quality comparisons should always be risk-adjusted. Risk-adjustment

4 methods are growing to be more sophisticated. However, the majority do not account for all social demographic and community factors that affect the measures. ACO attribution methods. Currently, the Medicare ACO program uses retrospective attribution. The program may move to prospective assignment if Medicare ACOs are willing to take on more risk. Many commercial ACOs use prospective attribution based on patients primary care provider (PCP). MN uses retrospective attribution to align with Medicare shared savings but has created more sophisticated algorithms to capture people that are often left out of the ACO. Multi-Payer ACOs Aligning multiple payers around ACO quality metrics. One successful example of this is the Integrated Health Association (IHA) in California. The IHA oversees the country s largest Pay for Performance program, under which all the insurance plans and provider groups agreed to a common set of quality metrics. Those metrics were then incorporated into risk-bearing contracts. Dr. Shortell outlined three buckets for metric development: o Bucket one consists of traditional measures that have been tested and proven effective. They are ready for prime time. o The second bucket, labeled for further testing, is a group of potential measures that some stakeholders may find useful but others are unsure about. They may require more detailed specification of the numerator and/or denominator. o The third is the under development bucket, which includes metrics that are more difficult to measure, collect, or use, such as patient-reported outcome measures. MN has a statewide quality program that includes 10 core clinic and hospital measures that cover process, outcomes, and patient experience. ACOs can propose additional or alternative measures if MN s measures don t reflect a given ACO s patient population or clinical focus. Some ACOs are looking more broadly at population health or social determinants of health. WA passed legislation that included a process to create a core measure set. This measure set will be finalized in January and recommended to the Health Care Authority director. The state is beginning to incorporate these measures into payment methods with the Medicaid and the state employee population, but is working with other purchasers and payers to submit a contract to use the measure set for purchasing. IA has been able to create a multi-payer arrangement with their dominant commercial carrier Wellmark, in part because they both contract with the same vendor, Treo, on quality metrics and other technical components of their payment methodology. This coordination has been helpful, as the provider and hospital community were already familiar with Wellmark s payment and quality metric requirements. Integrating Behavioral Health into ACOs

5 One leading example of integrating behavioral health into ACO-like arrangements is Oregon s Coordinated Care Organizations (CCOs). The CCOs have a single payment for all services including fully integrated physical and behavioral health care. MN has integrated behavioral health services into some of its virtual and more rural ACOs, particularly those with safety net providers. Through MN s SIM project, the state has prioritized funding to behavioral health providers to help enhance their infrastructure. As a stipulation to that funding, though, the state requires those providers to create a partnership with an ACO in the state. In IL, all of the Medicaid beneficiaries moving into managed care have a capitated rate that includes mental health services. IL has also discussed integrating behavioral health into care by co-locating primary care in mental health care settings. Often, mental health patients prioritize their mental health provider and forego primary care. This method allows the health system to treat those patients for both mental health and primary care in the same physical location. If behavioral health conditions are neglected in holistic clinical care, it significantly increases costs, so this is something that many states are planning to incorporate into payment models moving forward.

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