CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW?

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1 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? WHAT IS CLINICAL INTEGRATION? Clinical integration is a new model for health care delivery. The model promotes collaboration among a community's independent providers to furnish high quality care in a more efficient manner. Physicians, hospitals, and other providers share responsibility for, and information about, patients as they move from one setting to another over the entire course of their care. Working together, clinically integrated providers develop and implement evidence-based clinical protocols, focusing on delivery of preventive care and coordinated management of high-cost, high-risk patients. Utilizing shared information technology, these providers conduct ongoing clinical care reviews to identify opportunities for improvement and ensure adherence to protocols. While the antitrust laws generally prohibit joint contract negotiations among independent providers, those laws permit clinically integrated providers to engage in collective negotiations with health plans. Working together, these providers can more effectively compete for payer contracts because they demonstrate high quality and greater efficiency in care delivery. In short, clinically integrated providers are accountable to each other and to the community they serve to deliver high quality care in an efficient manner. They accomplish this by (1) collectively establishing and enforcing standards of care, (2) coordinating patient care (especially for high risk, high cost patients), and (3) jointly negotiating and managing payer contracts. WHAT IS A CLINICALLY INTEGRATED NETWORK, ORCIN? A clinically integrated network is the lean infrastructure needed to support clinical integration among a community's independent providers. The network develops a governance structure through which these providers come together to decide on protocol development and implementation, performance measurement and enforcement, and formulas for rewarding performance. Other network activities include, for example, identifying, implementing, and maintaining supportive technologies (including data analytics); analyzing care processes to identify efficiencies; encouraging patient engagement; negotiating pay-for-performance payer contracts; and distributing incentive payments to members. While a hospital can provide administrative expertise for a CIN, network leadership is shared with physicians. Only physicians have the knowledge, skill, and experience needed to achieve improvements in clinical quality and efficiency. Unlike organizations such as integrated delivery networks (with hospital-employed physicians) and large multi-specialty physician practice groups, which base their clinical integration strategies on economic integration, a CIN respects and preserves the economic independence of its physician members Pershing Yoakley & Associates PC April2013 Page 1

2 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? HOW IS IT LAWFUL FOR A CIN TO COLLECTIVELY NEGOTIATE WITH PAYERS WHEN THE FEDERAL TRADE COMMISSION (FTC) IS ACTIVELY INVESTIGATING AND PROSECUTING PROVIDERS FOR COLLUSION? Provider worries about federal regulators are well-grounded. Since 2001, the FTC has prosecuted more than 30 independent practice associations and physician hospital organizations alleging price-fixing arrangements. The FTC, however, views provider collaboration through a CIN very differently than collusion among independent providers. To the extent joint contracting is both necessary and subordinate to a CIN's broader effort to improve quality and efficiency, the federal agencies view these arrangements as beneficial to consumers and pro-competitive. Thus, providers' full commitment to achieving critical integration is critical. WHAT ARE THE KEY CHARACTERISTICS OFA CIN? Well-defined governance structure to promote organizational goals while protecting individual interests. Physician-driven, professional management. Data driven. Relentless focus on improving the health of the population served. Adherence to evidence-based medicine guidelines and clinical protocols. IT SEEMS EVERYONE IS TALKING ABOUT CLINICAL INTEGRATION LATELY. WHY HAS INTEREST IN CINS GROWN SO RAPIDLY IN THE LAST SEVERAL MONTHS? The health care payment and delivery system is undergoing fundamental changes. Currently, a provider is paid for the individual services furnished by that provider. Such volume-based reimbursement offers no incentive for providers to work together in providing patient care. However, payers now are shifting to value-based reimbursement, i.e., rewarding providers that deliver high quality care in an efficient manner. The Centers for Medicare and Medicaid Services (CMS) is promoting this transition in the Medicare program through a number of initiatives authorized by the Affordable Care Act (ACA). These include, for example, the Medicare Shared Savings Program, hospital physician value-based purchasing, and bundled payments. Following the Supreme Court's decision on the ACA and President Obama's re-election, it appears these initiatives will move forward. Commercial insurers, as well as employers, also are aggressively pursuing value-based purchasing arrangements. More and more payers are introducing pay-for-performance provisions in their standard provider agreements. April2013 Page 2

3 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? Achieving measurable improvements in quality and efficiency demanded under these new payment models requires coordination and collaboration among a community's providers. A CIN provides a vehicle for independent providers to work together for these purposes while protecting their individual interests. HOW IS A CIN DIFFERENT FROM AN ACCOUNTABLE CARE ORGANIZATION (ACO)? The term clinically integrated network dates back to the mid-1990s, when the Department of Justice and the Federal Trade Commission first acknowledged independent providers working together to improve quality and efficiency could engage in joint payer negotiations. The term accountable care organization was first used about a decade later in reference to a group of providers that assumes responsibility to provide care for an assigned patient population. Typically, an ACO bears some financial risk associated with providing such care. Generally speaking, an ACO is a more formal arrangement, structured to satisfy specific payer requirements. For example, only an ACO that meets certain regulatory requirements is eligible to participate in the Medicare Shared Savings Program. A CIN may elect to form an ACO for purposes of contracting with a particular payer. That decision, however, may be deferred until the CIN is fully operational. HOW DO THE FRAUD AND ABUSE LAWS IMPACT A CIN? The federal Anti-Kickback Statute, the Stark Law, and the Civil Monetary Penalties Act (collectively referred to as the fraud and abuse laws) place restrictions on relationships among health care providers. For example, any financial relationship between providers must be based on fair market value for the goods or services provided. Any financial relationship created as part of a CIN will have to be structured in a manner to comply with the fraud and abuse laws. A CIN does not provide any special protection from the civil and criminal penalties associated with violations of these laws. WHAT IS THE MEDICARE SHARED SAVINGS PROGRAM (MSSP)? An ACO that participates in the MSSP and meets certain quality standards is eligible to receive a portion of any savings generated through improved efficiencies in care delivery. CMS measures these savings based on its annual expenditure per beneficiary assigned to the ACO as compared to a historical benchmark. Beneficiaries are assigned to an ACO based on their primary care physician. April2013 Page 3

4 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? In addition to eligibility for shared savings, an ACO participating in the MSSP enjoys waivers from the Anti-Kickback Statute, the Stark Law, and the prohibitions on gainsharing and beneficiary inducements, all of which now serve as barriers to provider collaboration. (Groups of providers organizing for purposes of participating in the MSSP also benefit from these waivers.) As a result, ACO participants can enter into financial arrangements otherwise prohibited by law. If a CIN elects to pursue participation in the Medicare Shared Savings program as an ACO, it will enjoy significantly greater flexibility in structuring relationships among its member providers. CMS accepts applications for participation in the MSSP once a year. The next application deadline is July 31, 2013 (for a January 1, 2014, start date). Providers organizing to participate in the MSSP may take advantage of a pre-participation waiver starting one year prior to the application deadline. HOW DO PAY-FOR-PERFORMANCE CONTRACTS AND SHARED SAVINGS PROGRAMS WORK? Under a pay-for-performance contract (often referred to as a P4P contract), an individual provider continues to submit claims and receive fee-for-service reimbursement. If the provider achieves a certain goal specified in the contract, the provider receives an additional incentive payment. A P4P contract may provide for a penalty if a provider fails to meet a specified target. The Medicare Physician Quality Reporting System ("PQRS") is an example of a P4P program. Under PQRS, a physician will receive a 0.5% bonus payment if he or she submits a report on specified quality measures in If, however, a physician does not submit such a report in 2013, that physician will be penalized 1.5% on Medicare payments in Many commercial payers are looking to include P4P prov1s1ons in their contracts with individual providers. Generally speaking, a CIN can negotiate more favorable P4P terms. Also, a CIN supports an infrastructure that enables its members to achieve P4P measures. Under a shared savings program, a network of providers is eligible to receive a portion of a payer's savings generated by improved quality and efficiency. This is accomplished through a multi-step process: 1) The payer assigns a specific patient population to the CIN, usually based on the patients' primary care provider. 2) Providers in the CIN continue to receive fee-for-service reimbursement for all services, including services for patients in the assigned population. 3) The payer calculates a benchmark rate based on the payer's historical cost of providing care for that population. 4) At the end of the year, the payer calculates its actual cost of providing care for the patient population. (This includes the costs of care furnished by providers not included in the CIN. Patients in the assigned population are not limited to providers in the CIN). April2013 Page4

5 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? 5) If the actual costs of care are less than the benchmark and if specified quality measures are met, the CIN will receive a percentage of the savings based on a predetermined formula (e.g., the parties split the savings 50/SO). If the CIN does not achieve the quality measures, the payer will not share any savings with the CIN. 6) A CIN may opt for a "two-sided" shared savings program. Under this model, the CIN and the payer agree to share losses, i.e., the CIN agrees to repay a portion of the difference if actual expenditures exceed the benchmark. In exchange for the CIN accepting this risk, the payer agrees to pay a larger percentage of any savings to the CIN. 7) The CIN is responsible for deciding how the shared savings (or losses) are to be distributed among its members. Typically, a portion of any shared savings payment is retained by the CIN to pay its expenses. HAVE OTHER CINS BEEN SUCCESSFUL IN IMPROVING QUALITY AND EFFICIENCY IN HEALTH CARE DELIVERY WHILE PROTECTING PHYSICIAN INCOMES? Early adopters have achieved impressive results. For example, you can find success stories at Advocate Health Care in Chicago, Billings Clinic in Montana, and Mesa IPA in Grand Junction, Colorado. Advocate Health Care publishes an annual Value Report (available at which clearly demonstrates the value of a highfunctioning CIN to providers, payers, and patients. WHAT TYPES OF PROTOCOLS HAVE OTHER CINS ADOPTED? Typically, a CIN develops its initial set of protocols around delivery of preventive care and management of patients with chronic diseases (e.g., diabetes, COPD, asthma, heart failure). CINs have utilized wellrecognized quality standards as a basis for protocol development including, for example, National Quality Forum-endorsed standards. Other sources include CMS' Physician Quality Reporting System measures, the Medicare Shared Savings Program performance standards, and Stage 1 and 2 meaningful use quality reporting requirements. To view an example of CIN-developed protocols, please visit the website for lntegris Health Partners, a CIN in Oklahoma City. The web address is WHAT ROLE DOES TECHNOLOGY PLAY IN A CIN? A CIN can employ technological solutions in several ways to advance its goal of improved population health: First, technology can assist a physician in adhering to clinical protocols, such as tracking whether a patient has received certain preventive services. Second, reporting on quality measures to the CIN (or to payers directly) may be accomplished using IT solutions. April2013 Page 5

6 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? Third, data analytics can identify those patients for whom certain interventions are appropriate, thus allowing providers to manage those patients more effectively. Fourth, technology can assist the CIN in tracking care costs to identify opportunities for improvement. Fifth, electronic health information exchange permits CIN members to effectively coordinate patient care (especially for high-cost, high-risk patients), thus improving outcomes and reducing costs. Sixth, patient and family member access to electronic records enables them to be more active and engaged participants in the care process. HOW DOES A CIN MAKE DECISIONS? HOW ARE THE INTERESTS OF A HOSPITAL BALANCED AGAINST THOSE OF PHYSICIANS? A CIN's governance structure must further its members' common goals while protecting their individual interests. This is achieved through the selection of governing board members, balancing voting rights among participants, reserving certain fundamental decisions to the respective parties, delegating organizational functions through carefully drafted committee charters, and other organizational processes. Before deciding on a particular structure, however, there should be consensus around common goals, i.e., identification of the functions the CIN will perform. Stated another way, the form the CIN takes should follow from the functions it will perform, not vice versa. WHAT TYPES OF SERVICES DO CINS OFFER TO PHYSICIAN MEMBERS? There are significant differences between types of services CINs offer their physician members. Some limit their operations to quality improvement and care coordination, while others offer an expanded range of services to support physician members. The following is a non-exclusive list of services a CIN might provide for its members. Keep in mind a CIN does not necessarily have to provide all services directly; a CIN may contract with third parties (including, for example, the hospital) for specific services. Also, in the future, a CIN may contract to provide services to third parties. This may be a way for a CIN to generate revenue to support its operations. 1. Operate disease registries/data analytics. 2. Implement evidence-based medicine practices/population health improvement strategies. a. Identify and develop practice protocols (e.g., align with payer-required measures). b. Support protocol implementation and adherence (e.g., education, technology solutions). c. Monitor protocol compliance (reporting on quality measures). d. Implement corrective action for protocol non-compliance. April2013 Page 6

7 CLINICALLY INTEGRATED NETWORKS: WHO, WHAT, WHEN, WHERE, WHY, AND HOW? 3. Establish chronic disease management/patient navigator program. 4. Develop transitional care management program (based on new Medicare Physician Fee Schedule payment for post-discharge transitional care management). 5. Implement medication therapy management program. 6. Provide Physician Quality Reporting System support for physician members (e.g., education, abstracting, technology solutions). 7. Provide CMS Maintenance of Certification program support for physician members (e.g., CME opportunities, practice assessment, attestations). 8. Develop patient education and engagement strategies and tools (e.g., shared decision-making). 9. Explore clinical co-management arrangements and/or gainsharing opportunities (hospital service line quality and efficiency improvement programs with financial rewards to physicians if program meets specified targets). 10. Develop bundled payments for specific episodes of care (e.g., surgical procedures, maternity). 11. Develop Centers of Excellence (by service line). 12. Participate in Medicare Shared Savings Program (accountable care organization). 13. Pursue preferred network contracts with private payers. 14. Pursue shared savings and/or global budget contracts with private payers (including employers). 15. Develop and market health plan (e.g., hospital employee health plan, Medicare Advantage). 16. Provide EHR/meaningful use technical support for physician members. 17. Furnish support for primary care providers in implementing patient-centered medical home model. 18. Form or contract with group purchasing organization. 19. Perform back-office functions for physician offices (e.g., coding, billing, collecting, accounts payable). 20. Provide support for ICD-10 transition and compliance. 21. Provide HIPAA Privacy and Security Rule compliance support. HOW ARE CINS' OPERATIONS FUNDED? Exploring funding sources will be part of the decision-making process for identifying the specific functions a CIN will perform. Other CINs fund their operations in a number of different ways including, for example, contributions from the participating hospital, physician dues, the sale of investment interests, revenue generated by selling services, and withholdings from payer reimbursement and/or pay-for-performance payments. April2013 Page 7

8 PYA PYALeadership Briefing Medicare ACO Road Map April2013

9 Medicare ACO Road Map The Centers for Medicare & Medicaid Services ("CMS") has announced 106 new accountable care organizations ("ACOs") have been selected to participate in the Medicare Shared Savings Program ("MSSP") effective january 1, That brings the total number of ACOs participating in the MSSP to 222. small accomplishment, and interested provid ers should commence work as soon as pos sible. The starting point should be a careful and thorough review of the requirements for MSSP participation. For a program many considered "dead on arrival" when the proposed MSSP rule was published in March 2011, provider participation in an accountable care organization seems to be moving from optional to inevitable. The deadline for submitting an application to The level of detail contained in the hundreds of participate in the MSSP effective January 1, pages of MSSP regulations and guidance can be 2014, is July 31, An organization inter- overwhelming. PYA has merged the regulations ested in submitting an application must file a and guidance down to their core requirements. Notice of Intent to Apply with CMS by May 31, We have arranged the information in a man CMS accepts MSSP applications once a ner to facilitate substantive discussions and year; the next opportunity will be summer decision-making, rather than "hand-wringing" Completing the MSSP application is no over every last regulatory provision. Part 1- FQrmation and Operations Part II - Sha,.ecl Savings Pcayments Part Ill - Oth r ACO Options -. Private Payers 2 I Medicare ACO Road Map

10 Part I - Formation and Operations Getting Started An ACO is a distinct legal entity involving one or more Medicare-enrolled providers identified by their TIN (referred to as ACO participants) "who agree to become accountable for the quality, cost, and overall care of the Medicare fee-forservice beneficiaries assigned to the ACO." An ACO that meets certain requirements (as demonstrated through an application process) may enter into a threeyear agreement with CMS to participate in the MSSP. Each year of the contract is called a performance year. 1. An ACO that applies to participate effective in January 2. An ACO that elects early termination shall be subject 1, 2014, will be notified of CMS' decision in late to specified penalties. CMS will refuse participation if the applicant fails to meet any regulatory requirement. CMS' decision is not appealable. 3. The regulation lists specific grounds on which CMS may impose a corrective action plan or terminate an ACO's agreement for cause. Required ACO Functions An application to participate in the MSSP must show how the ACO will perform four core functions: promote evidencebased medicine, report cost and quality metrics, promote patient engagement, and coordinate care. More specifically, the ACO must: 1. Establish and maintain an ongoing quality assurance and improvement program led by an appropriately qualified healthcare professional Required documentation: describe scale and scope of program, including remedial processes for noncompliant ACO participants. 2. Promote evidence-based medicine Required documentation: describe evidence-based guidelines the ACO intends to establish, implement, enforce, and periodically update; identify diagnoses with significant potential for the ACO to achieve quality improvements. Medicare ACO Road Map I 3

11 3. Promote patient engagement Required documentation: identify measures for promoting patient engagement taking into account patients' unique needs and preferences, e.g., decision-support tools and shared decision-making methods. 4. Report on quality and cost measures Required documentation: describe process to monitor internally, provide feedback, and take action based on such measures. 5. Promote care coordination across physicians and acute and post-acute providers Required documentation: identify mechanisms to promote, improve, and assess integration and consistency of care, e.g., information technology, transition of care programs, deployment of case managers in Primary Care Physician ("PCP'') offices, use of predictive modeling; describe individualized care program for high-risk and multiple chronic condition patients; and identify target populations for program expansion). 6. Drive patient-centeredness Required documentation: use of patient satisfaction survey results to improve care; process for evaluating health needs of assigned population with consideration of diversity; system to identify high-risk patients and develop individualized care plans integrating community resources; policies on beneficiary access to services and medical records. ACO Governing Body 1. With the exception of a single-entity ACO, an ACO must have a distinct and separate governing body with responsibility for oversight and strategic direction through a transparent process. 2. ACO participants (as defined below) must hold 75% of voting rights on the governing body. At least one member of the governing body must be a Medicare fee-for-service beneficiary who receives services from an ACO participant. CMS may waive these governing body requirements if the ACO demonstrates good cause for non-compliance. 3. Members of the governing body owe a fiduciary duty to the ACO and must be subject to a conflict-of-interest policy requiring disclosure of a member's financial interests. 4 I Medicare ACO Road Map

12 ACO Management 1. The governing body must appoint a manager to have operational oversight. 4. An ACO must adhere to specific audit and record re- tention requirements. 2. An ACO must have a medical director, who is a boardcertified physician licensed and present in one of the states in which the ACO operates, to provide clinical oversight. 3. An ACO must have a compliance officer responsible for maintaining a compliance program that incorporates the Office of the Inspector General's ("OIG") seven elements of an effective program. ACO Composition 1. An ACO is comprised of one or more ACO participants. An ACO participant is an individual or group of providers/suppliers that is identified by a Medicare-enrolled TIN. An ACO's MSSP application must list the TIN for each of its ACO participants. 2. Each ACO participant must commit to remaining in the ACO for three years. A written agreement between the ACO and its ACO participants should describe the parties' respective rights and responsibilities. 3. An ACO provider/supplier is a Medicare-enrolled provider or supplier that bills for items or services furnished to Medicare fee-for-service beneficiaries under a Medicare billing number assigned to the TIN of an ACO participant (e.g., solo practice, group practice, hospital, federally-qualified health center). Each ACO provider/supplier billing under an ACO participant's TIN must individually agree in writing to comply with all MSSP requirements in advance of the ACO submitting its MSSP application. 5. If an ACO participant bills Medicare for any primary care services (defined to include HCPSC codes ; ; ; G0402; G0438 and 39; and revenue center codes 0521, 0522, 0524, and 0525 submitted by FQHCs (for services furnished prior to january 1, 2011)) rendered by one of its physician, that ACO participant is limited to participating in one MSSP ACO. However, a physician billing under multiple TINs (i.e., a physician who has reassigned his/ her billing rights to more than one entity) could participate in multiple ACOs, each under a different TIN. 6. Any Medicare-enrolled provider/supplier may be identified on an application as an "other entity" affiliated with an ACO (although not included as an ACO participant). Such provider/supplier still may be involved in the ACO's activities and receive shared savings distributions. CMS will not consider any "other entity" for beneficiary attribution, and thus such provider/supplier does not have to be exclusive tooneaco. 4. The MSSP regulations do not specify the types of pro- 7. viders/suppliers an ACO must include, except that an ACO must have a sufficient number of physicians to maintain 5,000 attributed Medicare fee-for-service beneficiaries (see Section II.C for a discussion of the attribution rules). The IRS has issued guidance on the manner in which a tax-exempt organization may participate in an ACO without jeopardizing its tax-exempt status or having to pay unrelated business income tax on its shared savings distribution. Medicare ACO Road Map I 5

13 Fraud and Abuse Waivers The Secretary of Health and Human Services has statutory authority to waive requirements of the Stark Law, the Federal Anti-Kickback Statute, and the civil monetary penalties law as necessary to carry out the MSSP. Concurrent with the publication of the final rule, CMS and OIG promulgated five specific waivers. The following arrangements will not be subject to the fraud and abuse laws (provided all requirements listed in the waivers are satisfied): 1. ACO pre-participation waiver. Board-authorized 4. and properly documented arrangements undertaken as part of a diligent effort to develop an ACO up to one year prior to the MSSP application deadline. 2. ACO participation waiver. Board-authorized and properly documented arrangements between ACO participants reasonably related to the purposes of themssp. 3. Shared savings distribution waiver. Distribution of shared savings among ACO participants and/or use of such monies to support ACO operations. Compliance with Stark Law waiver. An arrangement between ACO participants that meets an existing Stark Law exception also is deemed to comply with the Anti-Kickback Statute and the civil monetary penalties law. 5. Patient-incentive waiver. Items or services offered to a beneficiary by an ACO or an ACO participant for free or below fair market value that are reasonable related to the beneficiary's medical care. 6 I Medicare ACO Road Map

14 Antitrust Analysis Concurrent with the publication of the final rule, the Federal Trade Commission ("FTC") and Department of justice ("DOJ") published their statement of antitrust enforcement policy regarding MSSP ACOs. 1. Antitrust safety zone. If (a) none of an ACO's primary service area shares exceed 30% (as calculated in the manner specified in the statement and subject to certain exceptions), and (b) none of the ACO's hospitals or Ambulatory Surgery Centers ("ASCs") are exclusive to that ACO, the agencies will not challenge 3. the agreement absent extraordinary circumstances. 2. Conduct to avoid. The agencies warn ACOs outside the safety zone from engaging in certain potentially anti-competitive conduct including improper exchanges of prices and other competitively sensitive information among ACO participants and pursuing certain arrangements with private payers. Expedited voluntary antitrust review. A newly formed ACO desiring further antitrust guidance regarding its structure and operations may request a 90-day expedited review from the agencies prior to its entrance into the MSSP. Interactions with Medicare Fee-for-Service Beneficiaries 1. Every ACO participant must give each Medicare 2. Neither an ACO nor its participants may (a) impose beneficiary to whom that ACO participant furnishes restrictions on a beneficiary's right to seek services services (excluding those enrolled in a Medicare from non-aco participants, or (b) attemptto avoid at- Advantage Plan) a standard written notice stating risk (high cost) beneficiaries. the ACO participant is part of an ACO, as well as a data use opt-out form (see Section II.C.3 below). Also, 3. Any marketing materials an ACO intends to use (and each ACO participant must post a similar notice at its facility. any revisions to those materials) must be submitted to CMS prior to any use. Such materials will be deemed approved following expiration of a five-day review period. Medicare ACO Road Map I 7

15 Part II - Shared Savings Payments An ACO participant will receive the same Part A and Part 8 fee-for-service payments as a provider who does not participate in an ACO. An ACO is eligible for an annual payment based on Medicare savings, i.e., the difference between Medicare's projected total expenditures for the ACO's assigned beneficiaries (benchmark) and Medicare's actual total expenditures for those same beneficiaries. Keep in mind the savings are not based exclusively on fee-for-service payments to ACO Participants; they are based on fee-forservice payments to all providers, including those who are not ACO Participants. For example, an ACO that includes only physician practices as ACO participants would realize shared savings through reduced hospitalizations, reduced utilization of independent diagnostics testing facilities, etc. One-Sided vs. Two-Sided ACOs In submitting its application, an ACO must state whether it wishes to participate initially as a one-sided or two-sided ACO. A one-sided ACO is eligible for an annual shared savings payment, but does not pay any penalty if actual expenditures exceed the benchmark. An ACO may elect the one-sided model for its first three-year agreement period only. A two-sided ACO pays a penalty based on a percentage of actual expenditures in excess of its benchmark. In exchange for accepting this risk, a two-sided ACO receives a higher percentage of the shared savings if actual expenditures are less than its benchmark. See Appendix A for a sample calculation of shared savings and shared losses (for a two-sided ACO). 8 I Medicare ACO Road Map

16 Beneficiary Assignment 1. The first step in determining whether and how much of a shared savings payment an ACO will receive is the assignment of Medicare fee-for -service beneficiaries to the ACO. CMS notes "the term 'assignment'... in no way implies any limits, restrictions, or diminishment of the rights of [beneficiaries] to exercise complete freedom of choice in the [providers] from whom they receive their services." CMS "characterize[s] the process more as an 'alignment' of beneficiaries with an ACO," based on a beneficiary's utilization of primary care services. Assign to an ACO each beneficiary who received primary care services from an ACO Participant but has not had such services rendered by a PCP either inside or outside the ACO during the most recent 12-month period if the total allowed charges for primary care services furnished by all ACO professionals 2 during that time period is greater than the allowed charges for primary care services furnished by ACO professionals who are part of another ACO and those not affiliated with any ACO. 3. Employing this step-wise process, CMS will make pre- 2. CMS will use the following step-wise process for ben- liminary assignments at the beginning of a perforeficiary assignment: mance year for the ACO's planning purposes, based on most recent available data. CMS then will update Assign to an ACO each beneficiary who received a primary care service (as defined previously) from one of the ACO's primary care physicians 1 during the most recent 12-month period if the total allowed charges those assignments quarterly, based on the most recent 12 months of data. Final assignment, which is used to calculate shared savings, will be based on actual data from the performance year. for primary care services furnished to that benefi- 4. Upon request, CMS will furnish the following infer- mation to an ACO: (a) aggregate claims data for those beneficiaries preliminarily assigned to the ACO; and (b) certain beneficiary identifiable claims data, but only if (i) the ACO has signed a data use agreement, and (ii) the beneficiary has not formally opted out of such data sharing. ciary by the ACO's PCPs during that time period are greater than the allowed charges for primary care services furnished by PCPs who are part of another ACO and those not affiliated with any ACO. 1 Defined as physicians with specialty designations of internal medicine, general practice, family practice, or geriatric medicine, or, for services furnished in a Federally Qualified Health Center or Rural Health Clinic, physicians listed on an attestation submitted with the ACO's application. z Defined as a physician, physician assistant, nurse practitioner, or clinical nurse specialist Medicare ACO Road Map I 9

17 Expenditure Benchmark 1. The ACO's contract with CMS will state the ACO's specific expenditure benchmark. The formula for arriving at this benchmark is complicated, and involves the following: CMS will calculate a preliminary benchmark based on actual Part A and Part B expenditures (excluding IME and DSH payments) for beneficiaries who would have 2. been assigned to the ACO for the prior three-year period. The initial benchmark then will be trended forward to current year dollars and adjusted each performance year for overall growth and beneficiary characteristics. Also, technical adjustments will be made to eliminate the financial impact of current value-based purchasing initiatives. CMS will update an ACO's benchmark annually, based on the projected absolute amount of growth in national per capita expenditures under Parts A and B. Minimum Savings (Loss) Rate An ACO must achieve a minimum savings rate ("MSR") (a set percentage by which actual expenditures are less than the ACO's benchmark) to be eligible for shared savings payments. 1. For one-sided ACOs, the MSR ranges from 3.9% for 2. For two-sided ACOs, a flat 2% MSR applies, regardless ACOs with 5,000 assigned beneficiaries to 2.0% for of the number of assigned beneficiaries. On the flip ACOs with 60,000 or more beneficiaries. side, these ACOs will not share in a loss of less than 2%. Both one-sided and two-sided ACOs receive first-dollar savings; CMS does not withhold the initial savings for itself. See Appendix A for a sample calculation of shared savings and shared losses (for a two-sided ACO). 1 0 I Medicare ACO Road Map

18 Performance Standards (Quality Measures) To be eligible for any shared savings payment for a given year, the ACO must meet minimum performance standards based on 33 specified quality measures. This prerequisite is intended to prevent ACO participants from achieving savings by withholding necessary services. 1. Seven of the 33 measures address patient/caregiver experience of care; six relate to care coordination/ patient safety; eight are categorized as preventive health; and 12 concern at-risk populations (diabetes, hypertension, ischemic vascular disease, heart failure, and coronary artery disease). Each measure has National Quality Forum endorsement or is currently used in other CMS quality programs. 2. For Year One, an ACO that reports on all measures will receive the highest percentage of shared savings available to it (see Section F). For Year Two, the ACO's performance score (and thus its percentage of shared savings) will be based on a combination of reporting on some measures and the ACO's actual performance on others. 3. Thereafter, the ACO's actual performance on all 33 quality measures (expressed as a percentage of total points available) will determine the percentage of shared savings the ACO will receive. If the ACO's scores fall below a specified level, it will not receive any shared savings payment. Savings (Loss) Sharing Rate and Savings (Loss) Cap One-sided ACO 1. In its first year, a one-sided ACO will have a savings sharing rate of 50% (i.e., it will receive 50% of the savings, with CMS retaining the rest) if it submits reports on all 33 quality measures, regardless of its scores on those measures. 2. In its second year, a one-sided ACO with a 100% performance score also will have a 50% savings sharing rate. ACOs with lower performance scores will have correspondingly lower savings sharing rates (i.e., receive less than 50% of the savings). 3. A one-sided ACO's shared savings payment (actual dollars) cap is an amount equal to 10% of the ACO's expenditure benchmark (i.e., if the benchmark is $10,000,000, the ACO's payment could not exceed $1,000,000). Medicare ACO Road Map I 11

19 Two-sided ACO 1. A two-sided ACO with a 100% performance score will have a savings sharing rate of 605 (i.e., it will receive 60% of the savings). During the first year, a twosided ACO will receive a 100% performance score if it reports on all 33 measures, regardless of its scores. Again, ACOs with lower performance scores will have correspondingly lower savings sharing rates. 2. A two-sided ACO's shared savings payment (actual dollars) is capped at an amount equal to 15% of the ACO's expenditure benchmark (i.e., if the benchmark is $10,000,000, the ACO's payment could not exceed $1,500,000). 3. In the event of a loss (actual expenditures exceed benchmark by more than 2% ), the ACO's loss sharing rate will equal one, minus the ACO's savings sharing rate based on its percentage performance score. For example, if the ACO's performance score would have resulted in a 45% savings sharing rate, the ACO's loss sharing rate would be 55%. In that event, the ACO would owe CMS an amount equal to 55% of the amount by which the actual expenditures exceeded the benchmark. 4. For two-sided ACOs, the shared loss cap (i.e., the upper limit on the ACO's liability to CMS for losses) would be phased in over a three-year period starting in the year the ACO first participates in the two-sided model: 5% of the benchmark in Year One, 7.5% in Year Two, and 10% thereafter. See Appendix A for a sample calculation of shared savings and shared losses (for a two-sided ACO). Payments From and To CMS 2. For a two-sided ACO whose expenditures exceed the benchmark by more than 2%, CMS will make a written demand for repayment. The ACO must make pay- ment in full within 30 days, and submit a certification of compliance and accuracy of information. 1. CMS will notify an ACO in writing if it is entitled to 3. As part of its application, an ACO that elects the twoa shared savings payment and, if so, the amount of sided model must identify an acceptable method for that payment. Upon receipt, the ACO must distribute repaying losses equal to at least 1% of per capita the funds using the pre-determined formula speci- expenditures from the most recent year of data. Such tied in its application. methods may include recouping funds from Medicare payments to ACO participants, reinsurance, placing funds in escrow, obtaining surety bonds, or establishing a line of credit or other repayment mechanism. 4. There is no right of appeal with respect to CMS' deter minations relating to the amount of shared savings or losses. 12 I Medicare ACO Road Map

20 Part Ill - Other ACO Options - Private payers Private payors are developing products similar to the MSSP, such as the Blue Cross Blue Shield of Massachusetts Alternative Quality Program. Several products incorporate partial capitation, virtual partial capitation, conditionspecific capitation, and medical home payments. Most involve prospective assignment of beneficiaries, thus creating an incentive to manage those specific patients more aggressively, as opposed to the MSSP, which gives ACO participates the incentive to improve overall quality and efficiency in providing services to their entire patient population. Providers who have made the commitment to form an ACO in compliance with the MSSP regulations should not wait for private payers to come knocking. Instead, there is a tremendous opportunity for even a fledgling ACO to approach private payers and even employers with new contracting opportunities. We are, as they say, building it as we fly it when it comes to new payment and delivery models. Providers, therefore, should take every opportunity to chart their own course, rather than waiting for a flight plan. For more information regarding the MSSP and formation and operation of clinically integrated networks and accountable care organizations, please contact: Marty Brown, CPA mbrown@pyapc.com ( 800) Martie Ross, JD mross@pyapc.com (800) David McMillan, CPA dmcmillan@pyapc.com (800) Jeff Ellis, JD jellis@pyapc.com (800) Medicare ACO Road Map I 13

21 Appendix A Example of Shared Savings/Loss Calculations ONE-SIDED ACO Number of Beneficiaries Adjusted Per Capita Benchmark Aggregate Benchmark Actual FFS Expenditures 5,000 $9,0QO $45,000,000 (42,750,000) Minimum Savings 5,000 Benef. (3.9%) Savings Sharing Rate $1,7!:;5,000 (exceeded) 50o/o 14 I Medicare ACO Road Map

22 Ready, set, go! With the announcement of the July 31, 2013, deadline for Medicare Shared Savings Program (MSSP) applications, the race is on to complete all essential tasks in a timely manner. The following task list is derived from the MSSP regulations, the application, and relevant Centers for Medicare and Medicaid Services (CMS) guidance. Task Identify appropriate legal entity to serve as applicant accountable care organization (ACO) Establish ACO governance structure Adopt board resolution to secure MSSP preapplication waivers of fraud and abuse laws Submit Notice of Intent to CMS Submit CMS User ID Form Draft formal mission, vision, and values statement Target Date May 31 deadline June 6 deadline Notes ACO must be distinct legal entity comprised solely of ACO participants Governing body must (1) include one Medicare beneficiary serving as community representative; (2) be comprised of at least 75% ACO participants; (3) meet specific fiduciary duty requirements Necessary to submit application electronically Draft conflict-of~nterest policy and disclosure statement; obtain signed statements from ACO directors and officers Draft CEO job description Draft CMO job description Draft Compliance Officer job description Draft Quality Assurance and Improvement Director job description Hire/ contract for ACO officers and staff Not required to be a full-time position; must report directly to governing body Individual must be board-certified, state-licensed physician, regularly present at an ACO participant's care-delivery site Not required to be a full-time position Not required to be a full-time position Individual must be a credentialed healthcare provider Not required to be a full-time position Finalize ACO organizational chart (governance and management) Identify initial set of quality and efficiency measures for ACO participants Secure contractual commitment to participate in ACO activities in compliance with MSSP regulators from all ACO participants and providers/ suppliers Utilize 33 measures specified in MSSP regulations Compile information required in MSSP application for all ACO participants and provider/suppliers (provider numbers, addresses, etc.) ATLANTA I KANSAS CITY I KNOXVILLE I TAMPA BAY {800)

23 Finalize ACO participant list; identify potential Minimum 5,000 beneficiaries; target at least 7,500 number of attributed lives Draft ACO compliance program Request and analyze CMS claims data sharing on Medicare attributed lives Draft narrative regarding ACO history and purpose Draft narrative regarding intended use of any shared savings (or other incentive payments) Develop/implement quality assurance and improvement program (including remedial processes and penalties) Develop/implement evidence-based medicine processes Develop/implement processes to promote patient engagement Develop/implement internal reporting on cost/ quality metrics Follow OIG compliance program guidance Optional; must execute CMS Data Sharing Agreement to receive data Distribution of funds to participants and reinvestment in infrastructure (how such use furthers ACO's mission, vision, values) Program must address four processes listed in next four entries Subtask #1 of QAjQI program development: Processes should cover diagnoses with significant potential for quality improvement based on community served; Must include internal assessments to improve ACO participants' care practices Subtask #2 of QAjQI program development (five requirements): (1) Evaluate and plan to address community health needs, including partnerships with community stakeholders; (2) Incorporate patient education; (3) Establish shared decision-making; (4) Set standards for beneficiary communication, access to records; (5) Make internal assessment for improvement Subtask #3 of QAjQI program development: Include monitoring processes, feedback, performance evaluation and improvement Develop/implement care-coordination process Identify and implement supporting technology for quality assurance/improvement program Governing-body approval of final draft of MSSP application; electronic submission to CMS; response to subsequent CMS inquiries July 31 deadline for application submission; notification of participation in late 2013 Subtask #4 of QAjQI program development (five requirements): ( 1) Establish methods to coordinate care through episode of care and care transitions; (2) Develop individualized care plan (including sample plan) for high-risk/multiple chronic-condition patients; (3) Address community resources available to patients; (4) Identify target populations for care plans; (5) Make internal assessment for improvement PYA can support your organization in completing any or all of these tasks in a timely and complete manner. Also, we can assist you in leveraging your organization to secure favorable private-pay contracts. To discuss how PYA can support your organization in completing these tasks and submitting your MSSP application, please contact David McMillan or Martie Ross at (800) ATLANTA I KANSAS CITY I KNOXVILLE I TAMPA BAY (800)