HEALTH CARE LAW. Accountable Care Organizations

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1 HEALTH CARE LAW September 10, 2010 Presented by University of Mississippi Center for Continuing Legal Education Topic: Accountable Care Organizations By Jonell Beeler Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. Jackson, Mississippi * Duplication of these materials is not authorized without the prior written consent of Jonell Beeler.

2 ACCOUNTABLE CARE ORGANIZATIONS BY JONELL BEELER INTRODUCTION The recently enacted Health Care Reform Law, referred to as the Patient Protection and Affordable Care Act ("PPACA"), creates a new Section 1899 of the Social Security Act which requires Health and Human Services (HHS) to establish a Medicare Shared Savings Program for providers/suppliers who work together to coordinate care through an Accountable Care Organization ("ACO"). 1 This paper outlines and discusses the provisions of Section 1899 of the Social Security Act. Under PPACA, groups of providers and suppliers are encouraged to work together to manage and coordinate care for Medicare Fee for Service ("FFS") beneficiaries through the ACO vehicle. The ACO must be "willing to become accountable for the quality, cost and overall care of the Medicare FFS beneficiaries assigned to it". As reward to the ACO for quality improvements and cost savings realized by Medicare, the ACO is eligible to receive monetary incentives and payments for the shared savings realized through the program. The deadline for implementation of the new Medicare Shared Savings Program is January 1, ACO ELIGIBILITY REQUIREMENTS Providers who are eligible to participate as an ACO are as follows: ACO professionals (i.e., physicians and certain non-physician clinicians) in a group practice arrangement; networks of independent practices of ACO professionals; partnerships or joint ventures between hospitals and ACO professionals; hospitals employing hospital professionals; such other groups of providers or suppliers as the Secretary determines appropriate. In addition, to be eligible to participate as an ACO in a Medicare Shared Savings Program established under PPACA, the organization must satisfy the following requirements: ACO has a mechanism for shared governance; 1 PPACA 3022, Pub.L (Mar. 23, 2010)(adding new 1899 to the Social Security Act) * Duplication of these materials is not authorized without the prior written consent of Jonell Beeler.

3 ACO willing to become accountable for the quality, costs and overall care in Medicare FFS beneficiaries assigned to it ACO enters into agreement to participate in the program for not less than 3 years. ACO s formal legal structure allows organization to receive and distribute payments for shared savings to participate in provider of services and suppliers. ACO includes primary care professionals sufficient for the number of Medicare FFS beneficiaries. (Minimum number of Medicare FFS beneficiaries: 5,000). ACO provides information regarding ACO professional as Secretary determines necessary. ACO has leadership and management structure that includes clinical and administrative systems. ACO must define processes to promote evidence-based medicine in patient engagement, report on quality and cost measures, and coordinate care, such as the use of telehealth, remote patient monitoring and other such enabling technologies. ACO must demonstrate that it meets patient-centeredness criteria specified by Secretary, such as the use of patient and care giver assessments or individualized care plans. QUALITY AND REPORTING REQUIREMENTS Under Section 1899, the Secretary is charged with determining the appropriate measures to assess the quality of care furnished by an ACO, such as measures of clinical processes and outcomes, patient and, where practicable, caregiver experience of care, and utilization (such as rates of hospital admission for ambulatory care sensitive conditions). It is likely that these measures will mirror current quality standards recognized by HHS, but they will like change over time. ACOs are required to report data on quality of care to the Secretary as the Secretary deems necessary. Such reports may include transitions across health care settings, including hospital discharge planning and post hospital discharge follow-up by ACO professionals. Additionally, Secretary may incorporate reporting requirements and incentive payments related to PQRI, such as e-prescribing electronic health records, etc. It is assumed that this obligation may require more than simple claim submission data. There may be additional costs to the provider for the data acquisition and reporting and such reporting requirements may not be consistent with private insurer measures. INELIGIBILITY Providers of services or suppliers that participate in other shared saving models, including but not limited to models tested or expanded under section 1115A, or home medical practice pilot programs are not eligible to participate in the Medicare Shared Savings Program. 2

4 This provision limits participating ACOs from participating in demonstration projects and in other shavings programs established under PPACA. QUALITY PERFORMANCE STANDARDS AND PAYMENTS The Secretary is required to establish quality performance standards to assess the quality of care provided by ACOs (as distinguished from an individual ACO, discussed above). Over time, the Secretary is to specify higher standards, new measures, or both. Medicare FFS program payments under Part A & B are to continue; however, an ACO will be eligible for shared savings payments if the ACO meets the quality performance standards and meets eligibility criteria. The Secretary is to set the threshold for eligibility of shared savings payments. If the ACO s average per capita Medicare expenditures for Medicare FFS beneficiaries for part A and B services, adjusted for beneficiary characteristics, is at least the percentage threshold specified by the Secretary below the applicable benchmark (see below), then the ACO is eligible to share savings assuming meets the quality standards discussed above. The Secretary shall determine the appropriate percent threshold to account for normal variation in expenditures under this title, based upon the number of Medicare FFS beneficiaries assigned to the ACO. Benchmarks are to be determined based upon most recent available 3 years of perbeneficiary expenditures for parts A and B services for Medicare FFS beneficiaries assigned to the ACO. Benchmarks are also to be adjusted for beneficiary characteristics and other factors and updated by the projected absolute amount of growth in national per capital expenditures for parts A and B services under the original Medicare FFS program. Benchmarks are to be reset at the start of each agreement period. If an ACO meets quality criteria and complies with the requirements set forth for ACOs, a Secretary-determined percent of the difference between such estimated average per capita Medicare expenditures in a year, adjusted for beneficiary characteristics, under the ACO and such benchmark for the ACO may be paid to the ACO as shared savings and the remainder of such difference shall be retained by the program under this title. The Secretary sets the split and there is no assurance that this will be 50/50 split or that the split will remain constant over a period of time. Also, the Secretary may set a cap on total amount of payment to the ACO. SANCTIONS; TERMINATION The Secretary may sanction (up to and including termination) an ACO if it determines that the ACO is taking steps to avoid patients at risk in order to reduce the likelihood of increasing cost to the ACO. In other words, "cherry picking" of patients will not be allowed. The Secretary may terminate agreement with an ACO if the ACO does not meet the Quality Performance Standards. LIMITATIONS ON REVIEW PPACA provides that there shall be no administrative or judicial review of: 3

5 Specification of Quality Performance Standards; Assessment of the quality of care furnished by an ACO and the establishment of performance standards; Assignment of Medicare FSS beneficiaries to an ACO; Determination of whether an ACO is eligible for shared savings, or the amount of such shared savings, including the determination of the estimated average per capita Medicare expenditures under the ACO; and Percent of shared savings and any limit on the total amount of shared savings established by the Secretary; or the Termination of an ACO. CMP AND ANTI-KICKBACK WAIVERS PPACA authorizes the Secretary to waive the Civil Monetary Penalty statute, the Anti- Kickback Statute and SSA title XVIII (i.e., any other provision of Medicare law, including Stark law) to carry out the ACO provisions. Notably absent from this waiver authorization is the federal antitrust law and state insurance regulation. AUTHORIZATIONS GRANTED TO HHS SECRETARY The Secretary may use models in which the ACO is at risk for some, but not all, of the items and services provided, e.g. physicians' services. The Secretary may also limit partial capitation models to highly integrated systems of care and to ACOs capable of bearing risk. There may be additional standards developed, including cash reserve requirements, to take partial capitation. Payments to ACO are not to exceed the amount that would have been spent on Medicare FFS beneficiaries in absence of the partial capitation model. The Secretary may use other payments models in Secretary's discretion, subject to the payment limitation that payments should not exceed the payment to ACO in absence of the model's adoption. The Secretary is authorized to give preference to ACOs participating in similar arrangements with other payors. From the enactment of this section until the date the program is established, the Secretary may enter into an agreement with an ACO under the demonstration authorizing bonus payments to physician/health care group entities, subject to rebasing and other modifications. 4

6 CMS PRELIMINARY QUESTIONS AND ANSWERS On May 27, 2010, the Centers for Medicare and Medicaid Services, Office of Legislation, posted on its website "Preliminary Questions & Answers" regarding the Medicare Shared Savings Program. 2 A copy of this CMS publication is attached to this paper. Of interest in the Q&As are the treatment of beneficiary assignment to an ACO and the requirement of beneficiary freedom of choice. Assignment will be based on a beneficiary's primary care physician. Accordingly, it is highly likely that a patient will be assigned to the ACO in which his primary care physician participates. Although an assigned beneficiary is encouraged to obtain care from his ACO and the ACO is "accountable" for the quality, cost and care of that beneficiary, the Q&As state that Medicare beneficiaries may continue to seek services from the physicians and other providers of their choice, whether or not that physician or provider is a part of an ACO. Additional details are to be included in a Notice of Proposed Rulemaking which CMS has indicated that it will publish this fall. BAKER'S DOZEN THIRTEEN THINGS TO KNOW ABOUT ACO'S Additional highlights regarding ACOs and Health Reform are discussed in the attached article prepared by my partner, Thomas Bartrum of Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C. 2 Available at Care Organization pdf (last visited August 31, 2010) 5