Physician Integration Models: ACOs as the Latest and Greatest? David T. Lewis LifePoint Hospitals, Inc.

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1 Physician Integration Models: ACOs as the Latest and Greatest? David T. Lewis LifePoint Hospitals, Inc. Brentwood, TN Kim Harvey Looney Waller Lansden Dortch & Davis, LLP Nashville, TN Guidance on ACOs October 20 th Releases: Final ACO Rule from CMS & HHS HHS Waivers FTC Policy Statement IRS Fact Sheet 2 1

2 Triple Aim of ACOs Better care for individuals with respect to safety, patient-centeredness, timeliness, efficiency and equity Better health for populations through preventive services and education Slower growth in costs through improvements in care and elimination of waste in the healthcare system 3 What is an ACO? Accountable for quality, cost, and overall care of a defined population of patients Participate in program for at least 3 years (not one and done ) Formal legal structure Assigned beneficiaries Shared savings / losses Quality measures 4 2

3 Who Can Be An ACO? Physicians in group practice arrangements Networks of individual practices of physicians Partnerships or joint venture arrangements between hospitals and physicians Hospitals and their employed physicians NEW: Federally Qualified Health Centers (FQHCs), Critical Access Hospitals (CAHs), Rural Health Centers (RHCs) Such other groups of providers of services and suppliers as the Secretary determines appropriate 5 Legal Structure Legal entity with a TIN formed by one or more ACO participants An ACO entity must be capable of receiving and distributing shared savings, repaying shared losses, and establishing, reporting and ensuring provider compliance with quality criteria Not required to enroll in Medicare Legal entity separate from its participants Existing legal entity may qualify if it already contains all elements necessary to form an ACO 6 3

4 Governance ACO must maintain a separate, identifiable governing body with authority to execute the functions of the ACO as required under the Act and the final rule Defined process to promote evidenced-based medicine and patient engagement Report on quality and cost measures and coordinating care 7 Governance (continued) Governing bodies must have the following characteristics: Oversight Transparency Fiduciary Duty Conflict of Interest policy Composition and Control 8 4

5 Governance (continued) Governing Body must include a Medicare beneficiary representative CMS did not agree with many comments that requested that the governing board include representatives of all ACO participants at least 75% controlled by ACO participants (i.e., providers and suppliers) comments requested elimination of this requirement final rule permits potential ACOs that would not meet the 75% control requirement to request permission to involve ACO participants in innovative ways in ACO governance 9 Governance (continued) Composition and Control ACO participants must have at least 75 percent control of the governing body ACO will remain provider-driven Medicare beneficiaries served by the ACO and representatives of entities that are not enrolled in Medicare may constitute remaining 25 percent Health plans Investment companies 10 5

6 Leadership Management manager of operations chief executive of ACO appointment/removal controlled by governing body clinical management/oversight managed by senior-level medical director final rule no longer requires that this position be full-time 11 Individual claims Fee for Service and Shared Savings Back-end percentage of the shared savings ACOs determine savings split Cannot avoid at-risk patients to reduce costs to ACO 12 6

7 Integration Is More Than Collaboration Benchmarking and benchmarks Monitoring, Reporting, Counseling Performance Improvement Tools Technology Infrastructure (e.g. EHR) Accountability of Participants and Sanctions (Financial and Non-Financial) Performance Based Compensation Productivity Quality Improvement Bar not static 13 Applying as an ACO Initial Participation Agreement Period: 2012 alternative starting dates: April 1 or July 1 first period will expire on December 31, 2013 contract will terminate December 31,

8 Application Must submit evidence of compliance of many of the eligibility requirements If the ACO will not comply with certain of the eligibility requirements, the ACO may propose an alternative means of addressing the requirement ACO must report to CMS the taxpayer identification numbers of all ACO participants and the National Provider Identifiers of all ACO providers/suppliers, and indicate those who are primary care Must explain how the ACO intends to distribute shared savings and how this methodology achieves the goals of the Shared Savings Program. CMS declined to issue requirements on how shared savings amounts should be distributed by the ACO 15 Application (continued) Coordination of Care: The application must include the following: a sample care plan; an explanation of how the program will promote improved outcomes for high-risk and multiple chronic condition patients; a description of additional target populations that would benefit from individualized care plans; and a description of how they will partner with community stakeholders (acknowledging that having a stakeholder organization on the governing board will be deemed to have satisfied this requirement. 16 8

9 Assignment of Beneficiaries Step-wise approach to beneficiary assignment Step 1 - Beneficiary received a primary care service from a primary care physician enrolled in an ACO Beneficiary is assigned to the ACO where the plurality of primary care services provided by primary care physicians were received 17 Assignment of Beneficiaries (continued) Step-wise approach to beneficiary assignment Step 2 - Beneficiary did NOT receive a primary care service from a primary care physician enrolled in an ACO Only assigned to an ACO if s/he received at least one primary care service from an ACO physician (regardless of specialty) Assigned to ACO where plurality of primary care services provided by physician or non-physician practitioners were received 18 9

10 Evidence-Based Medicine Promotion of Evidence-based Medicine: ACO must define, establish, implement and periodically update its processes to promote evidence-based medicine, covering diagnoses with significant potential for the ACO to achieve quality improvements. 19 Reporting on Quality and Cost Measures Reporting on Quality and Cost Measures: ACO must define, establish, implement and periodically update its processes and infrastructure for its ACO participants and ACO providers/suppliers to internally report on quality and cost metrics to enable the ACO to monitor, provide feedback and evaluate ACO participant and ACO provider/supplier performance and to use these results to improve care and service over time. ( ) 20 10

11 Coordination of Care Coordination of Care: ACOs must define their care coordination processes across and among primary care physicians, specialists and acute and post-acute providers, and define methods to manage care throughout an episode of care and during transitions. 21 Aggregate Data Reports Limited identifying information about beneficiaries in aggregate reports (including beneficiaries who may have declined to share their PHI data) Beneficiary identifiable claims data UNLESS beneficiary chooses to decline to share their data Explain how it intends to use data to evaluate performance, conduct quality assessment and improvement activities, and conduct population-based activities to improve health of assigned beneficiary population Not used to limit care to beneficiaries NOTE: Proposals related to sharing of aggregate data finalized without change

12 Option for Beneficiary to Share Data No penalty to beneficiary if decline Opportunity for ACO provider/supplier to engage patients in discussion about inherent benefits as well as risks of data sharing Incentive for ACOs, ACO participants and ACO providers/suppliers to develop positive relationships with beneficiaries 23 ACOs Accountable to All Assigned Beneficiaries Compare metrics and costs between beneficiaries who have declined to share data with those beneficiaries who have allowed data to be shared to evaluate effectiveness of data sharing provisions NOTE: Legal Authority Exists (within limits) to Share Medicare Claims Data with ACOs without consent of Beneficiaries 24 12

13 Quality Performance Must meet the Quality Performance Standards to be eligible for MSSP payments One-sided model: 50 percent of shared savings Two-sided model: 60 percent of shared savings Must completely and accurately report data on all program measures Possible sanctions or termination for failure to comply Will require significant infrastructure and coordination between ACO and its physicians and other suppliers 25 Quality Performance (continued) Proposed Rule 65 measures, 5 domains Final Rule 33 measures, 4 domains Patient/Caregiver Experience (7 measures) Care Coordination/Patient Safety (6 measures) Preventative Health (8 measures) At-Risk Populations (12 measures) 26 13

14 Quality Performance (continued) Quality measures can change during the agreement period ACOs must comply with the changes Quality measure data collection methods Claims data Group Practice Reporting Option data collection tool Survey instruments 27 Quality Performance (continued) Eligibility for Shared Savings Year 1: pay-for-reporting Complete and accurate data reporting on all program measures Subsequent Years: pay-for-performance Based on ACO s performance across quality measures as compared to established benchmarks ACOs with better quality scores obtain higher MSSP payments 28 14

15 Quality Performance (continued) Physician Quality Reporting System Eligible professionals may only participate in PQRS incentive as a group practice under their ACO participant TIN ACO must submit quality data on GPRO quality measures 29 Quality Performance Standards and Other Reporting Requirements To satisfy quality performance: ACO must report all measures within a domain and score above the minimum on 70% of the measures in a domain For the first performance year, quality performance standard set at level of complete reporting for all quality measures Failure to meet quality thresholds: must meet one measure in each of the four domains EHR CMS no longer requiring a minimum level of EHR meaningful use EHR retained as a quality measurement and weighted higher 30 15

16 Shared Savings Providers paid under traditional fee-for-service method Plus if ACO meets both the quality and savings requirements a share of savings 31 Understanding Payments Payment of Medicare FFS Payments under Part A and Part B Shared Savings Distribution from CMS to the ACO Other payment models will be tested through the Center for Medicare & Medicaid Innovation Then, depending on the ACO Distribution from the ACO to ACO Participants, ACO Providers/Suppliers, etc. Use for Triple aim purposes 32 16

17 Basic Prerequisites for Shared Savings To be eligible for shared savings, ACOs must: Meet the quality performance standards Realize savings compared to the Expenditure Benchmark that exceed the Minimum Savings Rate Otherwise maintain their eligibility to participate in the Shared Savings Program 33 Two Shared Savings Models One-sided model No downside risk Share in up to 50% of savings Performance payment limit of 10% of benchmark expenditures Two-sided model Downside risk Share in up to 60% of savings Performance payment limit of 15% of benchmark expenditures After initial agreement period, all ACOs under two-sided model 34 17

18 What Expenditures Are Included in the Expenditure Benchmark Medicare FFS Part A and Part B payments for assigned beneficiaries Payments made under demonstration, pilot and time-limited programs Adjustments based on Part A and B claims such as geographic payment adjustment and HVBP payments Not included: Part C and D payments Hospital outlier payments IME and DSH payments GME, PQRS, erx, and EHR incentive payments Hospital outlier payments 35 Determining Shared Savings Establish Expenditure Benchmark Determine per capita Medicare expenditures in each performance year of the Agreement period Determine applicable Minimum Savings Rate Determine applicable Sharing Rate Compare Expenditure Benchmark to Actual Expenditures Compare Amount of Shared Savings Payable to ACO to Sharing Cap 36 18

19 Repayment of Shared Losses Each ACO under the two-sided model (or one-sided model ACOs requesting interim payment) must demonstrate that it has established a repayment mechanism For each performance year, CMS will notify each ACO of the ACO s shared savings or shared loss amounts (for ACOs participating in the two-sided model) Each ACO must then submit a written request to CMS for its shared savings payment, or acknowledge its shared losses, along with a certification of the ACO s compliance with the Medicare Program and ACO participation requirements Shared loss payments must be made within 90 days of notification 37 Compliance Program Requirements ACOs must include a compliance program requiring employees, contractors and ACO participants to report suspected fraud and abuse to appropriate law enforcement agencies While both may have a legal education, legal counsel and compliance officer must be different individuals Compliance plans must be updated periodically to reflect changes in law ACOs must submit annual certifications of program compliance to CMS (an additional required representation of compliance by participating ACOs) Providers not currently enrolled in Medicare must complete a screening process to be eligible to participate in an ACO 38 19

20 Intersection of ACOs with Fraud and Abuse Laws Physician Self Referral Law (Stark) Federal Anti-Kickback Statute Civil Monetary Penalties Law (gainsharing and beneficiary inducements CMP) 39 Striking the Right Balance Goal: Reduce costs Promote innovation Improve quality Without: Distorting decision-making Skimping on necessary care Instituting anti-competitive practices 40 20

21 Fraud and Abuse Waivers Interim Final Rule 5 separate fraud and abuse waivers that may be used by entities participating in MSSP Satisfying a waiver provides protection from Stark self-referral law Anti-kickback law Gainsharing CMP Certain applications of the CMP for inducements to beneficiaries 41 Fraud and Abuse (continued) NOW: Less Proscriptive reasonably related to the purposes of the Shared Savings Program FORMER: Necessary and directly related to ACO Purposes 42 21

22 Fraud and Abuse (continued) Waiver Mechanics Applicable to providers participating in MSSP and Advance Payment Initiative Generally apply uniformly to ACOs, ACO participants, and ACO providers/suppliers Intended to be self-implementing Parties do not apply for individualized determinations of the waiver authority No intent to codify waivers in CFR Text of waivers will be available on CMS and OIG websites and is included in the Rule Only have to fit one waiver 43 Fraud and Abuse (continued) Final Waivers ACO pre-participation waiver of Stark, AKS & CMP [NEW] ACO participation waiver of Stark, AKS & CMP [NEW] Shared savings distribution waiver of the Stark, AKS & CMP [MODIFIED] Compliance with the Physician Self-Referral Law waiver of the CMP and AKS (applicable to ACOs implicating Stark and meeting an existing Stark exception). [MODIFIED] Patient incentive waiver of the Beneficiary Inducements CMP and AKS (for medically-related incentives to encourage preventative care and compliance with treatment regimens). [NEW] 44 22

23 ACO Pre-Participation Waiver (NEW) Applies to Stark, AKS, and Gainsharing CMP Covers start-up arrangements that pre-date an ACO s participation in the MSSP Protects arrangements among ACO participants and ACO providers/suppliers as well as outside parties Does not include manufacturers, distributors, HHA or DME companies 45 ACO Pre-Participation Waiver (continued) Requirements: Good-faith intent to develop an ACO to participate in MSSP and submit an application for that year Diligent steps taken to develop an ACO that would be eligible for MSSP, including meeting governance, leadership and management requirements Governing body bona fide determination that arrangement reasonably related to purposes of MSSP Contemporaneous documentation Public disclosure of arrangement description Financial terms not required to be disclosed Submit application by last available application date or explain why not 46 23

24 ACO Pre-Participation Waiver (continued) May only be used one time Not single pre-participation arrangement, but ACO may only claim a single one-year period (plus any extension granted) Process for extension: ACO must demonstrate that it would be able to participate by next application due date. 47 ACO Participation Waiver (NEW) Applies to Stark, AKS, and Gainsharing CMP Blanket waiver Covers all aspects of an arrangement between an ACO, one or more ACO participants or ACO providers/suppliers or any combination 48 24

25 ACO Participation Waiver (New) Requirements: ACO entered into participation agreement with CMS and is in good standing ACO meets governance, leadership, and management requirements Bona fide determination that arrangement is reasonably related to purposes of MSSP Contemporaneous documentation of arrangement and authorization by governing body. Same documentation requirements as for pre-participation waiver. Public disclosure of arrangement description 49 Shared Savings Distribution Waiver (MODIFIED) Applies to Stark, AKS, and Gainsharing CMP Shared savings distributions may also fall under ACO participation waiver 50 25

26 Shared Savings Distribution Waiver (Modified) (continued) Requirements: ACO entered into participation agreement with CMS and is in good standing Shared savings earned by ACO pursuant to MSSP Shared savings earned during term of participation agreement, but distribution may be after expiration of agreement Distributions shared: (1) among ACO participants or providers/suppliers during year earned or (2) used for activities that are reasonably related to purposes of MSSP For Gainsharing CMP, shared savings distribution cannot be related knowingly by a hospital to induce a physician to reduce or limit medically necessary services under direct care of physician NOTE: Shared savings distributions may also fall within ACO participation waiver 51 Compliance with Physician Self-Referral Law (Modified) Arrangements that implicate Stark law and comply with a Stark exception shielded from AKS and Gainsharing CMP Waiver applies to any arrangement, not just those dealing with distributions of shared savings 52 26

27 Compliance with Physician Self-Referral Law (Modified) Requirements: ACO entered into participation agreement with CMS and is in good standing Financial relationship is reasonably related to purposed of MSSP Financial relationship fully complies with a Stark exception 53 Patient Incentive Waiver (NEW) Applies to beneficiary inducement CMP and AKS for certain items and services provided by ACO, ACO participants or ACO providers/suppliers to beneficiaries for free or at below fair market value Waiver applies to all beneficiaries, not just those assigned to the ACO 54 27

28 Patient Incentive Waiver (New) (continued) Requirements: ACO entered into participation agreement with CMS and is in good standing Reasonable connection between items or services and medical care provided to beneficiary Items or services are in-kind Items or services are one or more: Preventative care items or services Advance one or more of clinical goals: Adherence to a treatment regime Adherence to a drug regime Adherence to a follow-up care plan Management of a chronic disease or condition 55 Documentation Required for Waivers Contemporaneous documentation and an audit trail Maintained for at least 10 years No requirement for written and signed agreement No requirement that arrangements are fair market value No commercially reasonable requirement 56 28

29 Antitrust No mandatory antitrust review CMS will provide the FTC/DOJ with aggregate claims data regarding allowed charges and fee-for-service payments for all ACOs accepted into the Shared Savings Program CMS will also provide the FTC/DOJ with copies of all of the applications to the Shared Savings Program of ACOs formed after March 23, 2010 Upon request new ACOs can receive expedited 90 day review for antitrust guidance from the Agencies 57 Rule of Reason Analysis The Agencies will apply a rule of reason analysis (balancing anticompetitive effects against procompetitive efficiencies) to an ACO if, in the commercial market, the ACO uses the same governance and leadership structure and clinical and administrative processes as used to qualify for and participate in the MSSP 58 29

30 Safety Zone 30% or less of each common service In each participant s PSA What does safety zone mean? No agency challenge, absent extraordinary circumstances Does not foreclose private litigants No presumption of illegality outside of 30% Hospitals and ASCs Must be non-exclusive to fall within the safety zone Regardless of number of hospitals/ascs in the area 59 Conduct the Agencies Suggest ACOs Avoid Preventing or discouraging payors from directing or incentivizing patients to choose certain providers E.g., anti-steering, guaranteed inclusion, product participation, price parity, etc. Tying their services to payors purchase of other services from providers outside the ACO Requiring exclusivity of anyone other than PCPs Restricting ability of payors to make public cost, quality, efficiency, and performance information regarding ACO participants Sharing among the participants individual s competitively sensitive pricing or other information that could restrict competition outside the ACO 60 30

31 Voluntary Review Process What evidence must be submitted to the agencies? Application and supporting documents to CMS Documents relating to the ability of the ACO participants to compete with the ACO Documents discussing business strategies, plans to compete in Medicare and commercial markets, impact on quality or price Documents discussing competition among ACO participants and in markets to be served by ACO Share calculations, proof of restrictions on exchanging price information among ACO participants, payor contacts, identities of other ACOs in the market The agencies can ask for more information 61 Tax Exemption Hospitals and Other Healthcare Organizations Private inurement / private benefit Unrelated business income Criteria to share savings Concerns about other activities Don t need to control the board 62 31

32 Pros and Cons of ACOs Pros: Efficiency Cost of care is likely to decline in the future as a function of price and volume reductions Data Collection EHR and the ability to capture and interpret and report data Defining Quality Quality is going to play an increasingly larger role in computing payment 63 Pros and Cons of ACOs (continued) Pros: Providing lower cost settings while enhancing quality of care Reduce readmissions to hospitals and ED visits by more effective chronic care management More efficient transitions for patients across the continuum of care 64 32

33 Pros and Cons of ACOs (continued) Cons: Becoming an ACO is a large and complicated undertaking Application to HHS - Fully developed policies, agreements, leadership, legal entity needed before applying to be an ACO Assemble and negotiate with all providers and others who will be a part of the ACO Have a governing body under which all ACO participants have meaningful input Be comprised of an eligible group of ACO participants that work together to manage and coordinate care for Medicare beneficiaries 65 Pros and Cons of ACOs (continued) Cons: Clinical management and oversight must be managed by a senior-level state-licensed, board-certified physician medical director who is a member of an ACO participant who is physically present at one of the ACO s locations Quality assurance and improvement program required to with defined processes to promote evidence-based medicine, promote beneficiary engagement, report on quality and cost metrics and coordinate care 66 33

34 Issue: $$ Will there be enough shared savings to incentivize participation in ACOs particularly given uncertainty around the Affordable Care Act? Managing the Middle 67 CMS Innovation Center Charge ACA: Test innovative payment and service delivery models to reduce program expenditures, while preserving or enhancing the quality of care Three aims Better care for individuals Better care for populations (e.g., certain diagnosis) Lower growth of expenses $10 Billion in funding for FY

35 CMS Innovation Center Pioneer ACO Program Advanced Payment Initiative Bundled Payments Comprehensive Primary Care 69 Pioneer ACO Model Primary Care Capability ACOs must have at least 50% of their total revenues derived from outcome based contracts Sufficient PCPs to assign at least 15,000 beneficiaries (minus those aligned through specialists) 70 35

36 Pioneer ACO Model Shared Savings and Losses Risk/Payment Model Minimum Savings rate flat MSR of 1%; first dollar savings and losses are 1% once MSR is surpassed Length of Agreement Performance Metrics Same as MSSP final regulation 71 Bundled Payments Defined Episode of Care Sharing gains arising from better coordination of care Focus on flexibility Four different models, you may apply for more than one model 72 36

37 Bundled Payment Models Model 1: Retrospective acute care hospital stays Model 2: Retrospective acute care hospital stays with post-acute care Model 3: Retrospective post-acute care Model 4: Prospective acute care hospital stays (pay upfront for each episode of care instead of traditional fee for service) 73 HHA/IRF/SNF/LTCH Participation Model 2 and 3 Model 2: episode of care includes acute care hospital stay and all Part A/Part B services related to targeted condition for duration of episode (admission through 30 days after discharge) Model 3: episode of care includes all Part A/Part B services related to targeted condition for duration of episode (initiation of post-acute care services with participating IRF, SNF, LTCH or HHA within 30 days of discharge and episode lasts a minimum of 30 days) 74 37

38 Payment Under Models 2 and 3 Fee-for-service payment for dates of service Compare aggregate Medicare expenditures for episode of care to target price Expenditures less than target price, difference paid to awardee Expenditures more than target price, awardee pays difference to Medicare 75 HHA/IRF/SNF/LTCH Participation Models 1 and 4 Episode of care does not include post-acute care Post-acute care providers partner with hospitals and physicians to redesign care/share in any resulting gains if hospital agrees to share gains they receive 76 38

39 Payment Under Model 1 Model 1: Hospitals paid under IPPS, but at reduced payment amount pursuant to awardees provider agreement. Part B payments unchanged. Awardee at risk if aggregate expenditures for Part A/B expenditures increase beyond risk threshold for period of inpatient stay or during 30 days after discharge, compared to historical expenditure 77 Payment Under Model 4 Single, prospectively established bundled payment to acute care hospital All Part A/Part B services included in bundled payment Hospital distributes payment to other participating providers. Awardee financially responsible for Medicare expenditures for any related readmissions plus any increases in aggregate Part A/B expenditures beyond risk threshold for 30 day period after discharge as compared to historical expenditures 78 39

40 79 Questions? David T. Lewis LifePoint Hospitals, Inc. Brentwood, TN Kim Harvey Looney Waller Lansden Dortch & Davis, LLP Nashville, TN 80 40

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