Accountable Care Organizations & Other Reimbursement Reforms: The Impact on Physician Practices

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1 Accountable Care Organizations & Other Reimbursement Reforms: The Impact on Physician Practices Martin Bienstock, Esq. Wilson Elser

2 The New York Times Take... For the first time in its history, Medicare will soon track spending on millions of individual beneficiaries, reward hospitals that hold down costs and penalize those whose patients prove most expensive. The administration plans to establish Medicare spending per beneficiary as a new measure of hospital performance, just like the mortality rate for heart attack patients and the infection rate for surgery patients. Hospitals could be held accountable not only for the cost of the care they provide, but also for the cost of services performed by doctors and other health care providers in the 90 days after a Medicare patient leaves the hospital. ( Medicare Plan for Payments Irks Hospitals NY Times, A1, May 30, 2011). 2

3 Accountable Care Organizations and The Shared Savings Program Accountable Care Organizations ( ACOs( ACOs ) ) are groups of providers that are accountable for Medicare fee-for for- service beneficiaries, in terms of: quality, cost and overall care. ACOs will share in any Medicare savings they generate for Part A and B services; Draft regulations have been proposed. The proposal is important in-and and-of itself, and also as a model for how the government sees structural reform. 3

4 Why be part of an ACO under the Reimbursement: Shared Savings Plan? providers and suppliers participating in an ACO will continue to be paid on an FFS basis. In addition, an ACO will be eligible to share in savings achieved at the end of each year, so long as they meet quality benchmarks. But shared savings is also a euphemism for lost revenue Legal Protections. The law authorizes the Secretary to waive some laws, and federal agencies are inclined to waive others; Stark, Anti-Kickback, Antitrust 4

5 Structure and Governance An ACO is a separate legal entity under State law with its own Taxpayer Identification Number ( TIN( TIN ); An ACO is comprised of Group Practices Physician Networks Hospitals and Their Employed Physicians Hospital/Physician Joint Ventures These entities must have 5,000 beneficiaries assigned to it; Assignment is made based on where patients receive primary care services; Probably requires 10+ primary care physicians 5

6 Shared Governance Law requires shared governance. CMS proposal: At least 75% of the governing body must be controlled by the ACO participants and beneficiaries, and each ACO participant must exercise appropriate proportional control over decision-making. the board of one ACO may not serve as the board of the ACO itself (unless the ACO is composed of a single participant that is financially and clinically integrated and 75% of such participant s s governing body is comprised of representatives of the participant). 6

7 Management ACO operations must be managed by an individual responsible to the governing body ACO participants, as well as ACO providers and suppliers, must demonstrate a meaningful commitment to the ACO s clinical integration program, including, for example, through a meaningful financial investment in the ACO or a meaningful investment of time and effort in ACO operations. Clinical management and oversight are to be provided by a full-time senior level director who is a board certified physician and licensed by the state. The ACO s quality assurance and improvement program is to be directed by a committee of physicians. 7

8 Operations Primary Care Physicians: A sufficient number of primary care physicians, and at least 5,000 beneficiaries, assigned based on their visits to PCPs. The ACO is required to develop and implement evidence-based medical practices or clinical guidelines and processes for the provision of care. The ACO is also required to have an infrastructure that enables the ACO to collect and evaluate data and provide feedback to ACO participants, ts, providers and suppliers. This infrastructure may include information technology, such as electronic health record ( EHR( EHR ) ) technology certified to meet the standards adopted for meaningful use EHR incentive programs. An ACO must have a compliance plan and a compliance program; The ACO will certify its data as accurate, which could serve as the basis for an action under the False Claims Act: 8

9 Patient Centeredness ACOs must... Implement an experience of care survey and a plan to use the results to improve care; adopt a process for evaluating the health needs of the ACO s assigned population, and develop and implement a plan to address those needs; implement systems to identify and update high-risk individuals and a process to develop individualized care plans to care for those individuals; and establish a process for beneficiary engagement and shared decision-making that takes into account the beneficiaries needs, preferences, values and priorities. 9

10 The Contract with CMS Three-year contract, with January 1 annual start date (and maybe July 1 too). Terminable on 60 days notice, but you lose withheld savings bonus. Annual performance periods; Must specify method for distributing shared savings Significant limitations on adding new ACO participants. Contract can be terminated for failing to meet minimum quality benchmarks. 10

11 Shared Savings Models and Methodology Two Models: One-sided and Two-sided; One-sided allows shared savings, but not shared losses; Two-sided shares savings and losses; Two tracks: Track 1shares savings in all three years and risks losses in the third year. Track 2 shares savings and losses in all three years. Payments are higher in Track 2. After third year, all ACOs must share savings and losses; 11

12 Calculation of Savings and Losses Net savings are determined by comparing the ACO s average per capita benchmark (based on costs in prior years) to the ACO s actual average per capita expenditures in the relevant year. Up to 50% of these savings are available, with 10% awarded based on each of the following quality measures: Patient/Caregiver Experience, which includes seven measures; Care Coordination, Transitions, and Information Systems, which includes 16 measures; Patient Safety, which includes two measures; Preventive Health, which includes nine measures; and At-Risk Population/Frail Elderly Health, which is further subdivided into six categories (Diabetes, Heart Failure, Coronary Artery Disease, Hypertension, Chronic Obstructive Pulmonary Disorder, and Frail Elderly) and includes 31 measures. 12

13 Calculation of Savings and Losses (cont.) For a two-sided model, up to 60% of savings are available, with 12% awarded per measure. Losses are calculated the same way: quality scores determine the percentage of shared losses. Savings are capped at 7.5% for one-sided model, and 10% for two-sided model Losses are capped at a rate that increases over three years, 5%, 7.5% and 10%. 13

14 Legal Protections Stark: Waives prohibition for distribution of shared savings for ACO participants, and for other providers for activities necessary for or related to the ACO. Anti-Kickback: Protects financial relationships among ACO participants that are protected under Stark, but not necessarily under AKS. Civil Monetary Penalty: Protects shared savings payments if they are not made knowingly to induce the physician to reduce or limit medically necessary items or services. No special protection or limited protection for: Non- Medicare payments, non-participating providers, general capital investments. 14

15 Summary of Program Objective (if manipulable) cost measures; Objective and subjective quality measures; Significant process requirements; 15

16 Other Payment Reforms Payment Bundling Applies to up to 10 conditions selected by CMS for quality and efficiency improvements. Medicare will make one payment for an episode of care runs from 3 days prior to admission to 30 days after admission; Payment covers all costs for hospitals, nursing homes, home health agencies, rehabilitation services, physicians and DME. Payment goes to the entity, which then furnishes or directs the services; Payment will not exceed expected payment under FFS. 16

17 Other Payment Reforms (cont.) Hospital value-based purchasing program All base DRG payments to be reduced by 1% (2013) to 2% (2017); Quality and efficiency to be measured, and scored; Savings from reduced DRG payments redistributed based upon the score; Payment adjustments for conditions acquired in hospitals; Hospitals in the lowest quartiles receive a one percent reduction in DRG payment; Value Based Payment Modifier Under the Physician Fee Schedule differential payment based upon the quality of care furnished compared to cost during a performance period. 17

18 ACOs And The Health Care Marketplace Hospitals: Some hospitals are already integrating care delivery, and the ACO O model may serve as vehicle. Some hospitals (and physicians) will be reluctant to create ACOs,, since what Medicare calls shared savings, savings, they call revenue. revenue. Physicians: Physicians and hospitals may cooperate, or may compete for control ol over the ACOs; The Shared Savings Model advantages physicians by assigning patients based upon their primary care treatment; The ability to demonstrate savings may be valuable to other payers Physicians may seek out one-time arbitrage opportunities by changing referral patterns to lower-cost hospitals; Early bird catches the worm? Payers: Payers may play a role through management, pre-existing existing licensure and capital. 18

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