Strategy and Options for Alignment and Steps to Create an ACO
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1 White Paper Strategy and Options for Alignment and Steps to Create an ACO A Suggested Strategy James M. Daniel, Jr., JD, MBA Hancock, Daniel, Johnson & Nagle, P.C. (866) jdaniel@hdjn.com P.O. Box Richmond, Virginia Phone (804) Fax (804)
2 Table of Contents Executive Summary... 1 I. ACO Background... 2 II. Our Approach... 3 A. Develop Leadership and Vision... 3 B. Develop an Engaged Provider Network... 3 C. Establish a PHO or Proprietary Network... 3 D. Electronic Health Record System and Information Sharing... 5 E. Enrollment... 6 F. Peer Review Body... 6 G. Patient Safety Organization... 7 H. Pay-For-Performance and Gainsharing... 7 I. Additional Features Management Services Organization Joint Purchasing Arrangements Risk Purchasing Group Physician Hospital Organization Tag-Along PHO MEWA Clinical Co-Management Professional Employee Organization Credentialing Verification Organization Recruitment Assistance Physician Leadership Standard of Care Teams Continuing Medical Education Other Services III. Conclusion... 11
3 Executive Summary The text that follows outlines a strategy for creating an interim step to a fully implemented ACO. The critical element to creating an ACO is in establishing a contracting vehicle, either as a proprietary network or as a PHO model. The network needs to be established to engage a group of physicians who are clinically integrated, who share an electronic health record system and who agree to actively share and process information to develop evidence based order sets. Participation in the network, either in total or on a contract-by-contract basis, needs to be linked to the willingness on the part of physicians to adhere to these guidelines. Given the large degree of information that will be shared and the work product that will be generated, the ACO s operations should be conducted in a peer review protected environment. As one option, the network would be only partially integrated in that the health system might own/employ a number of the elements of the provider chain, but would invite and include non-employed (unaffiliated) physicians and potentially other providers, such as post acute providers, as participants in the network. Under a parallel track, payment mechanisms should be developed either internally (i.e. a network of provider employees) or with employer or employer groups out of managed care plans. Insurance companies have communicated a desire to develop pilot programs for payment mechanisms to operate as an alternative fee for service. The proprietary network or PHO should operate in the interim as a typical managed care contract and should offer a number of benefits to affiliated physicians in order to provide the benefits of alignment/affiliation while the markets for ACOs mature. Page 1
4 I. ACO Background. To begin, in its most general sense, an ACO is an organization of providers that takes collective responsibility for improving patient care. The focus of this memorandum is on the Medicare ACO opportunity and ACO-look-alike options available with private health insurance plans. The ACO concept has existed for some time with innovative programs such as the Brookings-Dartmouth Pilot Project designed to incent efficient healthcare and quality outcomes through arrangements with private insurance companies. The Patient Protection and Affordable Care Act of 2010 ( PPACA ) accelerated the push towards accountable delivery models, with federal money becoming available as soon as January 1, 2012 under the Medicare Shared Savings Program. To participate in the Medicare program, the ACO must: Have a formal legal structure to receive and distribute shared savings; Include sufficient number of primary care professionals for the assigned beneficiaries; Have a minimum of 5,000 assigned beneficiaries ; Agree to participate for no less than three years; Document information regarding participating health professionals to support beneficiary assignment; Implement a leadership and management structure that includes clinical and administrative systems; Define processes that promote evidence-based medicine; report data for quality and cost measures; and coordinate care; Demonstrate a model of patient-centeredness. Page 2
5 While interest in the Medicare ACO program is high, many providers are electing to take a wait-and-see approach as best practices emerge. In reality, until CMS revises the Stark rules on physician-self referral, the government s vision for accountable care, in many instances, cannot be achieved without incurring regulatory risk. Others are opting to participate in private pilot programs in order to experiment with the wide range of variables to best develop their ACO infrastructure. Regardless of approach, the consensus is that clinical integration will be essential. Clinical integrations options include: (i) professionals in a group practices; (ii) networks of individual providers; (iii) hospitals that employ physicians; and (iv) partnerships or joint ventures between hospitals and physicians. II. A Suggested Approach. A. Develop Leadership and Vision. Hospitals should be identifying strategically important, high performing physicians committed to the goals of the organization. Strategically important physicians include those who would expand primary care access, bring needed specialty services to the community, and increase capacity to meet the community demand. These physicians should be open to collaboration and share the organizational vision. Finally, desirable partners would have a demonstrable record of delivering high-quality care and an ability to work within a community of providers to manage chronic disease. B. Develop an Engaged Provider Network. To engage physicians, physician leaders should be empowered with the tools to succeed, which would entail expanding opportunities for physician involvement in the governance and management of the enterprise. The organization would delegate many practice level strategies to physicians. Physicians antagonistic to the enterprise can be engaged through co-management efforts to foster collaboration and mutual accountability. C. Establish a PHO or Proprietary Network. A health system would direct a hybrid model consisting of a jointly owned entity, controlled by the health Page 3
6 system, but with significant physician involvement in governance and management, that contracts with its participants for the care of defined patient populations and that distributes a revenue pool in a way that rewards high performance on a basis that is not fee-for-service dominated. The model would possess the following attributes: Clinical integration; Joint contracting for services; Pay-for-Performance platform; Penalties for variance on select measures; Information technology infrastructure for data sharing and benchmarking; and A confidential platform for the development of best practices and evidence based standards. Successful networks should start small and layer additional features once the organization has chosen strong partners whose contributions will advance the organization s goals of efficiency and improved quality. Using the lessons of the PHO model, the ability share information, coordinate care, track results, develop clinical protocols, and enforce standards is essential to clinical integration. To promote participation in this network, the organization should adhere to the following strategic imperatives: Secure seed money for investments in transformed delivery structures; Limit risk and disruption through incremental, small pilots; Test innovative accountable care models through controlled models, such as an owned health plan or an insured employee base - many insurance Page 4
7 companies have expressed a willingness to participate in these experimental programs; Leverage clinical competence and demonstrated results to gain payer and physician interest in pilots; Capture first-mover advantage by establishing the rules of the game for the market; Work directly with large employers, or pursue a strategy such as clinical integration if payer negotiations prove difficult; Ensure contract language, risk adjustment, and attribution are well defined yet flexible should implementation hurdles require program changes; Determine readiness for Medicare accountable care models; and Prepare an exit strategy if experiments do not go as planned, such as loss ceilings, upside-only distribution structures, and opt-out clauses. D. Electronic Health Record System and Information Sharing. Using a common EHR to link the participants and sharing information to allow quality benchmarking and improvement would be made conditions of network participation. The common EHR system would be the building block of the affiliation. By conditioning the EHR subsidies on network participation, the health system could impose certain joint activities to further efficiency and quality, and importantly, allow participants to reduce costs. One of the elements would be consent to use their information through a shared profile to improve quality, profile physicians utilization, and establish best practice protocols. Taking advantage of the Stark exception for donation of EHR software, Hospitals can use EHR subsidies to spur physician participation. For example, physicians who agree to become part of the hospital s electronic health record Page 5
8 system and participate in its peer review activities might be eligible for up to 85% of the cost of the EHR software (the maximum subsidy allowed under the Stark exception). E. Enrollment. The ACO would likely need to obtain a separate National Provider Identification Number (NPI) to participate in the Medicare Shared-Savings Program or for contracting directly with other payors. Although regulatory guidance has not yet been provided by CMS, ACOs that participate in the Medicare Shared Savings Program may also need to enroll as providers through the completion of a separate Form 855. F. Peer Review Body. The ability to electronically compile and share information through EHR systems would facilitate the implementation of quality assessment and peer review activities and benchmarking. The health system should review the laws and regulations in its state applicable to peer review to determine how it may be performed outside of the hospital setting. Even in the absence of statutory authority, there are several cases from various jurisdictions that support the ability of peer review organizations to share peer review information with similar organizations without jeopardizing the privileged nature of the information. A note of caution: any organization that engages in office-based peer review and that shares peer review information among network participants should closely adhere to its policies or risk being viewed as having engaged in sham peer review, resulting in the loss of the privilege. The following passage from a 2010 Vermont decision is particularly cautionary of this point: Because the dividing line between peer review and normal business operations can be unclear, courts generally apply the peer review privilege only when the formalities of a peer review process are clearly apparent. For example, conversations between a department chief and nurses will not be protected from discovery if there were no apparent peer review formalities... Formalities such as designated committees and explicitly labeled peer-review reports act as a Page 6
9 signal to medical employees, telling them when their opinions will be protected from discovery. Robinson v. Springfield Hospital, No. 109-CV-75, slip op. at 2 (D. Vt. Feb. 5, 2010) (emphasis added). In other words, stamping documents "Confidential - Peer Review," controlling the distribution of peer review documents, and taking other practical steps to maintain confidentiality are important to protecting peer review information. G. Patient Safety Organization. Going further, the ACO could interface with a patient safety organization ( PSO ), which would operate in conjunction with the peer review body. PSOs can be key tools in aggregating and analyzing data, establishing benchmarks, and conducting educational activities and corrective action plans. With a PSO, the aligned organization would have the ability to enforce network-wide protocols and quality of care standards. With a shared EHR system, an active peer review body and a PSO in place, the organization could efficiently exchange information regarding patients and practice experience, collect and analyze such information to improve treatment quality, rates of utilization and cost containment, monitor physician compliance and performance with physician-authored benchmarks, protocols and standards, and enforce consequences for non-compliance. H. Pay-For-Performance and Gainsharing. As healthcare moves away from the fee-for-service payment structure, the government is acknowledging that compensation structures that reward quality and efficiency can be valuable tools in reigning in the costs of healthcare. For example, in 2008, the OIG was asked to evaluate a pay-for-performance arrangement under which the hospital, which was rewarded by private insurers for improving efficiency and improving quality, would pay a physician-entity up to 50% of the bonus compensation received by the hospital Page 7
10 for meeting quality targets. In turn, the physician entity would distribute revenues on a per capita basis to its physicians. The program also included a cap on payments to the physician entity, which was tied to the base compensation paid by the commercial insurer to the hospital. Thus, any increase in patient referrals to the hospital would not increase the annual payment to the physicians. The hospital was also responsible for monitoring any inappropriate reductions or limitations on patient care. The OIG declined to impose penalties under the anti-kickback statute because the program had sufficient safeguards to reduce the risk of fraud and abuse. Advisory Opinion stands as a significant decision because is shows the OIG s willingness to allow new gainsharing arrangements, such as programs involving thirdparty commercial insurers using quality standards that are based on credible medical standards and contain appropriate safeguards against fraud and abuse. I. Additional Features. The affiliation between the health system and physicians might also include other add-ons, such as the options outlined below, which could be incorporated into the primary affiliation agreement through individual addenda. 1. Management Services Organization. It typically provides administrative services, non-physician personnel, and decision-making support in exchange for a flat fee or percentage of revenues. These organizations provide reasonably priced help with some of the more onerous administrative aspects of their practices. 2. Joint Purchasing Arrangements. Capitalizing on economies of scale, a joint purchasing arrangement would allow products or services to be purchased and negotiated by a single (independent) purchaser for the hospital and the ACO participants. Page 8
11 3. Risk Purchasing Group. A Risk Purchasing Group is an organization which purchases liability insurance on a group basis from an insurance company or a risk retention group for its members. This would provide the option of physicians to purchase malpractice insurance on a group basis (hopefully at a discount), to what is otherwise available in the market. Additionally if the hospital were to sponsor this type of vehicle, there are other options that could be considered such as vicarious liability for the hospital and joint defense arrangements. 4. Physician Hospital Organization. A PHO acts as a clearinghouse for managed care contracting and, in some cases, other administrative functions. This model allows both the hospital and the physicians to maintain autonomy over their respective operations, but helps consolidate and reduce administrative costs. Because of antitrust/price-fixing concerns associated with competing physician groups sharing payor reimbursement information, some hospitals have created variations on the traditional PHO, such as a PHO that only admits one group of each specialty. PHO participation for hospital physicians can be mandatory or voluntary. Any PHO must be carefully planned such that any collective negotiations do not violate anti-trust laws. Section 1 of the Sherman Act prohibits any contract, combination, or conspiracy that unreasonably restrains competition. Agreements between competing physicians, or other health care providers, on the prices to be charged for their individual services are agreements in restraint of competition and are generally illegal, absent a showing of substantial financial or clinical integration. 5. Tag-Along PHO. The FTC has not challenged an employer s ability to negotiate on behalf of its employed physicians because they are a single economic unit. Some hospitals and PHOs have adopted a system where they take the prices they have negotiated for their employed physician and then ask the payor if they can offer the same price to other providers (i.e., they are just acting as a messenger). This arrangement is generally acceptable, so long as the hospital does Page 9
12 not imply that the payors have to take on all the PHO providers or they won t sign the employed physicians. 6. MEWA. MEWA is an acronym for Multiple Employer Welfare Arrangement and is any plan or arrangement established to offer or provide coverage for health care services to employees of two or more employers. MEWAs are often used as another vehicle to enhance negotiating power through increased pool size. 7. Clinical Co-Management. Physicians and hospitals create a limited liability company or other entity to provide management services for a specific clinical department. By making management concessions, a hospital will engender greater cooperation and trust with its physician partners. The management company is paid a fair market value fee for its services, which is divided among the hospital and the physicians in accordance with their ownership interests. 8. Credentialing Verification Organization. As many providers or small plans can not perform credentialing in a cost-effective manner, they may outsource this function to credentialing verification organizations (CVOs). CVOs should be certified by the National Committee on Quality Assurance (NCQA) to ensure that their services meet those standards. 9. Recruitment Assistance. For those practices that do not wish to be fully integrated, hospitals may offer recruitment assistance packages to encourage the group to hire new talent (who will hopefully also refer to the hospital). These programs typically include income guarantees, student loan forgiveness, and relocation packages. Page 10
13 10. Physician Leadership. The hospital includes physician-leaders on its board and/or major committees and as officers. If physicians feel that their interests are more adequately represented in the decision-making process and understand the financial factors involved, they are more likely to comply with hospital policies, to support cost-saving methods and to refer to the hospital. They will also have fiduciary responsibilities to the hospital. 11. Standard of Care ( SOC ) Teams. SOC teams and physician advisory boards are often created through these types of mechanisms. In some instances, they may be allowed to be in compensated positions, to provide leadership and development of clinical evidence based sets and assist in clinical redesign that will allow the providers to operate better in the health reform environment. 12. Continuing Medical Education. The affiliated entity could sponsor continuing medical education programs for its participating physicians. 13. Other Services. The ACO might also offer the following services to its participants: fee comparison; CPT code analysis; payer mix analysis; and handling of Medicare, Medicaid and NPI applications. III. Conclusion The urgency of reducing healthcare costs while increasing quality is resulting in rapid and fundamental changes in the delivery of and reimbursement for healthcare in the United States. Collective responsibility among groups of providers to achieve quality outcomes is viewed as a viable alternative to fee-forservice reimbursement. The prevalence of these delivery structures is likely to grow. Organizations that respond to these emerging changes will benefit from the steps they take now to develop the affiliations and infrastructure needed to succeed in an outcome-driven environment. Page 11
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