The Role of Accountable Care Organizations in the New World of Federal and State Health Care Reform

Transcription

1 The Role of Accountable Care Organizations in the New World of Federal and State Health Care Reform May 5, 2010 Daniel T. Roble Ropes & Gray LLP Michele M. Garvin Ropes & Gray LLP LLP

2 Housekeeping How to Participate Dial the conference number located in your Audio Pane. Submit your text question using the Questions Pane. Your line will be muted. 2

3 Agenda Evolution of Accountable Care Organizations (ACOs) ACOs and Federal Health Care Reform ACOs and State Health Care Reform Initiatives: Massachusetts Case Study Organizational Models and Practice Considerations Potential Legal Constraints on ACO Development 3

4 Evolution of ACOs 4

5 Definition of ACO No single definition of ACO exists, but most definitions originate from the concept of an extended hospital medical staff -- a hospitalassociated multi-specialty group practice comprising local hospitals and the physicians who work within and around them (Fisher et al. 2007) 5

6 Evolution of ACOs Proposed Clinton HC Reform Managed Care Reforms / Decline of Risk Contracts Federal HMO Act Federal HC Reform Massachusetts HC Reform 1930s 1970s 1980s ACOs Group Practice Staff Model HMO Group Practice IPA AHP, PHO, IPA, IDS Pay for Performance Clinical Integration 6

7 ACOs and Federal Health Care Reform 7

8 Patient Care and the Patient Protection and Affordable Care Act Federal reform impacts the following four relationships: Provider-Patient: patient-centered care Patient-Insurer: cost, accountability, transparency Insurer-Provider: access, coverage, payment Provider-Provider: ACOs ACOs are the vehicle by which providers organize themselves to respond efficiently to key changes in the law that impact the provider-patient, patient-insurer, and insurer-provider relationships 8

9 ACOs Under the Patient Protection and Affordable Care Act (PPACA) Section 3022 of PPACA promotes development of ACOs and establishes financial incentives for ACO development through the Medicare Shared Savings Program Rationale for promoting ACO Model Promotes accountability for a patient population Permits coordination of items and services reimbursable under both Medicare parts A and B Encourages investment in infrastructure Redesigns care processes for high quality, transparent, and efficient service delivery Promotes meaningful, performance-based incentives Medicare Shared Savings Program (Section 3022); Subsection 1899 (a)(1) 9

10 Permitted ACO Structures Groups of physicians and suppliers that have established a joint system for making decisions Practitioners in a group practice arrangement Networks of practices Hospital and physician partnerships or joint venture arrangements Hospitals that employ physicians Other groups deemed appropriate by CMS Practitioners 10 Medicare Shared Savings Program (Section 3022); Subsection 1899 (b)(1)

11 Criteria for Participation in Medicare Shared Savings Program Agree to become accountable for the care of Medicare feefor-service (FFS) beneficiaries Agree to a 3-year participation in the ACO program Create a formal legal structure that would allow the organization to receive and distribute bonuses to participating providers Include PCPs for at least 5,000 Medicare FFS beneficiaries Institute a leadership and management structure Promote evidence-based medicine, report on quality and cost measures, and coordinate care Demonstrate that the ACO meets patient-centered criteria as determined by the Secretary Medicare Shared Savings Program (Section 3022); Subsection 1899 (b)(2) 11

12 ACO Payments & Savings ACOs will share a percentage of savings with the federal government if: 1) The ACO s estimated average per capita Medicare expenditures, adjusted for beneficiary characteristics, is below the benchmark rate; and 2) The ACO meets the quality performance standards established by the Secretary The Secretary is allowed flexibility in awarding contracts Medicare Shared Savings Program (Section 3022); Subsection 1899 (d) 12

13 ACO Data Reporting Requirements CMS may incorporate reporting requirements, incentive payments, and penalties based on: Electronic prescribing Electronic Health Records Physician quality reporting Any other data reporting requirements that CMS deems necessary Medicare Shared Savings Program (Section 3022); Subsection 1899 (c) 13

14 ACO Timelines Medicare Shared Savings Program (PPACA, 3022) January 1, 2012 Patient-Centered Outcomes Research (PPACA, 6301) Community Transformation Grants (PPACA, 4201) Medicaid Global Payment System Demonstration (PPACA, 3027) National Strategy for Improvement in Health (PPACA, 3011) Establishment of Center for Medicare and Medicaid Innovation (PPACA, 3021) Hospital Value-Based Purchasing Program (PPACA, 3001) Hospital Readmissions Reduction Program (PPACA 3025) Independence at Home Demonstration Program (PPACA 3024) National Pilot Program on Payment Bundling (PPACA, 3023) Quality Reporting from Long Term Care Hospitals, Inpatient Rehabilitation Hospitals and Hospice Programs (PPACA, 3004) Payment Adjustment for Conditions Acquired in Hospitals (PPACA, 3008) Improvements to Physician Quality Reporting System (PPACA, 3002)

15 Key Take-Aways ACOs will need significant staff, information, and infrastructure to improve coordination of care ACOs must be comprised of selective, scalable, highperforming provider networks relying on evidence-based best practices, processes for continuous quality improvement, and clear action steps for addressing underperformance Health plans will need innovative approaches to respond to the increased focus on value and will need to manage clinical and administrative costs consistent with the new medical loss ratio 15

16 Key Take-Aways ACOs are intended to impact the provider delivery system Impact quality Process Outcome measures Adapt to new technology Provide transparency Payment reform New analysis in how to look at payment Patient uses physician and hospitals CMS looks at historical data and assigns members to an ACO CMS compares expected and actual costs and quality CMS rewards Facilitates shared decision-making among key provider elements Fosters competition focused on quality and cost among ACOs 16

17 ACOs and State Health Care Reform Initiatives 17

18 ACOs and State Health Care Reform Medicaid expenditures are a key factor in state budget crises The focus for states in developing ACOs is enhancing efficiency through cost containment and coordination of care Affordability and access to health insurance remain critical issues today at state level notwithstanding federal reform If ACOs prove to be an effective vehicle for cost containment, we may see accelerated ACO development at the state level to impact Medicaid and commercial payment rates 18

19 ACOs and State Health Care Reform Without additional attention to cost containment, Federal health care reform may find itself in a similar predicament to Massachusetts: Subsidizing near universal health coverage in the face of rapidly rising health care costs Trying to control costs to the consumer through short-term fixes while deferring major reforms to years later Policymakers must react more quickly and pursue promising cost containment policies more aggressively in order to ensure long-term success and sustainability of insurance reform 19

20 State Health Care Reform: Massachusetts Case Study Five major initiatives impacting payment reform in Massachusetts today 1) Report of Special Commission on the Health Care Payment System 2) Attorney General s Examination of Health Care Cost Trends and Cost Drivers report 3) Insurance premium increase rejections (rate regulation) 3) Patrick Administration s proposed legislation an Act Providing for Job Creation by Small Businesses 4) Senator Murray and Senator Moore s forthcoming legislation ACOs are an important component of the health care reform debate particularly if a global payment methodology is adopted as the preferred payment methodology ACOs are also a potential bridge to align Medicare payment with Medicaid and commercial payment methodologies 20

21 Special Commission on the Health Care Payment System Special Commission charged with investigating reforming and restructuring the payment system to improve efficiency and reduce variations in the quality and cost of care Recommended move to global payment system featuring ACOs over a 5 year period What is an ACO? Defined broadly to include any organization, real (incorporated) or virtual (contractually networked), that accepts responsibility for all or most of the care that enrollees need including primary and specialty care, hospital care, therapy services, home care, and prescription drugs 21

22 Special Commission on the Health Care Payment System Additional components of Global Payment System Patient centered care and patient choice Adoption of medical home model Pay-for-Performance (P4P) Reimbursement in ACOs Payors retain insurance risk and ACOs bear performance risk (compare to capitation) Adjustments to global payment rate account for patient s clinical risk, socioeconomic status, and geography Stop loss arrangements and risk corridors Market determines global payment rate 22

23 Special Commission on the Health Care Payment System Obstacles to implementation Setting payment levels (global payments and allocation of global payments) Protecting providers from insurance risk Obtaining Medicare & Medicaid waivers Preemption with respect to ERISA plan participants Engaging consumers 23

24 Mass AG Report: Examination of Health Care Cost Trends and Cost Drivers AG examined factors contributing to health care cost increases in Massachusetts Focused on how prices are negotiated between commercial health care insurers and health care providers Key findings Market leverage large determinate Contracting practices that reinforce disparities have distorted commercial health care market Implication a ceiling on prices at the rate of inflation will lock in the price distortions 24

25 Mass AG Report: Examination of Health Care Cost Trends and Cost Drivers Key findings (cont.) Higher priced hospitals are gaining market share at the expense of lower priced hospitals, which are losing volume Price variations for hospitals and physicians offering similar services are not explained by value measures (quality, complexity, etc.) Price increases, not increases in utilization, caused most of the increases in health care costs Bottom line: report raises concern that provider payments may need recalibration as a pre-requisite to moving to a global payment system 25

26 Insurance Regulation of Merged Markets Insurance Commissioner rejected 235 of 274 proposed rate increases for small business individual merged market that Commissioner deemed excessive and unreasonable relative to the benefits provided Rejected rate increases ranged from 8-32% Six of the largest health insurers in MA filed suit and sought a temporary injunction overruling the state s decision Argued state s decision would cause destabilizing losses of $100 million The insurers request to implement their rate increases and their motion for preliminary injunction was denied, but an administrative appeal is in process If Insurance Commissioner is upheld, there may be an accelerated move to ACOs and global payments to align insurer and provider cost control 26

27 Patrick Administration Proposed Legislation: An Act Providing for Job Creation by Small Businesses Restrictions on Insurers DOI may require advance filings of small group insurance and disapprove increases that are excessive, inadequate, or unreasonable Presumptive disapproval of increases that exceed 150% of the prior year s increase in the CPI for medical care services (rates effective between July 1, 2010 and June 30, 2012) 27

28 Patrick Administration Proposed Legislation: An Act Providing for Job Creation by Small Businesses (cont d) Restrictions on Providers Providers required to file contracts with insurers for services provided on or after April 1, 2010 with the Division of Health Care Finance and Policy Presumptive disapproval of provider payment increases that exceed the 12-month change in CPI for medical care services ACO Impact Payment caps may disincentivize providers to accept additional risk through ACO global payments because of diminished potential for true savings through care management 28

29 Forthcoming Legislation: Senator Murray and Senator Moore Two phased approach to reducing health care costs First phase legislation to provide immediate relief to small business health insurance costs Reduce premiums by 10-15% for small business Insurance companies required to file insurance rate increases 90 days in advance Option of meeting 90% Efficiency Guarantee to avoid rate review Otherwise, presumptive disapproval of premium increases that exceed medical inflation 29

30 Forthcoming Legislation: Senator Murray and Senator Moore Two phased approach to reducing health care costs (cont.) Second phase payment system reform informed by Special Commission s report and AG s report End fee-for-service system for most providers Second phase may include both rate recalibration and ACO global payments We are working with Governor Patrick on separate legislation that sets the path for Massachusetts to transform its health care system... To drive this change, this legislation will set the goal of ending the fee-for-service payment system for most providers within 5 years, while also providing greater transparency and accountability for provider contracts that impact overall cost growth. (emphasis added) Senate President, Therese Murray (April 2010) 30

31 Massachusetts Case Study Impact of rate regulation on ACOs Rate regulations may chill or accelerate ACO development Market is already moving to ACO development Key question is whether federal and state ACO initiatives will be aligned in financial incentives and timing 31

32 Reconciling Federal and State ACO Legislation Absent specific preemption, general preemption rules govern Federal law preempts state law if: Federal law occupies the field Federal and state laws conflict State law frustrates Congress s objectives Generally, state law stands if it does not conflict with federal law and furthers Congress s objectives 32

33 Reconciling Federal and State ACO Legislation PPACA specific preemption provisions are limited: Relating to individual or group health insurance reforms: no preemption of "State law which establishes, implements, or continues in effect any standard or requirement solely relating to health insurance issuers except to the extent that such standard or requirement prevents the application of a requirement of [federal law]". 42 USC 300gg-23 (Public Health Services Act) Unclear how state insurance regulatory proposals will impact ACO development and payment structures Additional preemption provisions include those relating to: operation of Exchanges (Sec. 1321), creation of a summary of benefits and coverage explanation document (Sec. 2715), abortion (Sec. 1303) 33

34 Organizational Models and Practice Considerations 34

35 Organizational Structure Virtual (Massachusetts) Composed of contractual relationships Danger of model: Relationship could be treated as a partnership Joint and several liability Contracts are finite and terminable Actual (Federal but with Virtual Component) Limited Liability Company Not-for-profit taxable corporation Not-for-profit, tax-exempt corporation 35

36 Potential Legal Constraints on ACO Development 36

37 Potential Legal Constraints Federal Reform Laws Promoting ACOs State Reform Antitrust: Clinical Integration Accountable Care Organizations Information Privacy & Security Rate Setting Fraud & Abuse/ Stark Joint Commission: Independent Medical Staff Peer Review Protection Insurance Regulation: Assumption of Risk Potential Legal Barriers to ACO Development 37

38 Potential Legal Constraints How can ACOs fit into the current legal framework? Myriad of Provider Issues Reallocation of risk dollars/cross-subsidization: Stark; anti-kickback; tax exempt Connectivity and EMR: HIPAA; HITECH; Red Flag and state privacy and data breach laws; Stark; anti-kickback; tax Network standards and referral restrictions: Stark; anti-kickback; antitrust Consumer directed care, public reporting: risk management; malpractice Performance-based credentialing: medical staff; antitrust; reporting requirements Network formation and contracting: antitrust Role of the board: fiduciary obligations Coordinated responses of federal and state governments to reduce legal barriers is key 38

39 Legal Constraints: Antitrust ACOs and the Sherman Act May not present an issue for Medicare ACO payments, but an issue for ACO global payments Definitions of risk Considerations 1) Does the program involve clinical and/or financial integration? 2) Is the program likely to produce significant efficiencies? 3) Is joint contracting related and subordinate to, and reasonably necessary to further the efficiencies created by the program? 4) Will there be an anti-competitive effect on the market? What is the ACO s market share? Guidance from FTC Advisory Opinions Greater Rochester Independent Practice Association, Inc. TriState Health Partners, Inc. 39

40 Legal Constraints: Fraud & Abuse ACO internal payment arrangements implicate the Anti-Kickback Statute ( AKS ), the Civil Monetary Penalties Law ( CMP ), and Stark, as well as any corresponding state laws Organizational costs and ongoing overhead Pay for Performance / Gainsharing Cross Subsidization Referrals No specific safe harbors or exceptions currently in place under any of these laws However, PPACA gives the Secretary of the Department of Health & Human Services the authority to waive compliance with AKS, CMP, and Stark for the Medicare ACO program (Medicare Shared Savings Program (Section 3022); Subsection 1899 (f)) 40

41 Legal Constraints: Fraud & Abuse Generally available safe harbors/exceptions may be of limited applicability and difficult to satisfy AKS Stark Employee Personal services Reductions offered to eligible managed care organizations Price reductions offered by contractors with substantial financial risk to managed care organizations Employee Indirect compensation Personal services Physician incentive plan Risk-sharing 41

42 Legal Constraints: Additional Issues Information Privacy and Security Information sharing within an ACO Risk of data breach Peer Review Is an ACO entitled to peer review protection under either federal or state law? Medical Malpractice Tax When can one ACO provider rely on another ACO provider s diagnostic testing results, etc.? Impact of ACO structure on exempt members Impact of ACO structure on non-exempt members 42

43 Closing Remarks Looking Back and Looking Ahead Engage consumers from the beginning to make meaningful decisions Avoid consumer backlash as key implementation dates approach Key Challenges Devising methodologies to allocate payments among the providers participating in the ACO while avoiding hospital subsidies Avoiding specialist domination of the physician component of the ACO Aligning government and commercial insurer payment methodologies 43

44 Closing Remarks (cont d) Key Challenges (cont.) Creating limited provider networks acceptable to consumers Supporting continuous quality improvement Defining the role of the patient Using ACO structure to engage with patients in beginning of life and end of life care discussions Ensuring access to specialty providers (cancer centers, pediatric hospitals, rehabilitation hospitals, physician specialists) Continuing to build the HIT highway with maximum interconnectivity for all participants Obtaining the necessary amendments to existing law to allow ACOs to function effectively to the maximum extent possible 44

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