ACOs: Fact or Fiction?

2011 Texas Health Law Conference Austin, Texas October 10, 2011 Kenneth Kramer

Senior Vice President Associate General Counsel Texas Health Resources Arlington, Texas 76011 [email protected]

Susan Feigin Harris

Partner Baker Hostetler 1000 Louisiana, Suite 2000 Houston, TX 77002 [email protected]

2

Today

• • • • •

Review of “How did we get here”?

– What is “delivery system reform” and why was it so important?

Emerging models of healthcare delivery

– Evolution and development of reimbursement methodologies

Overview of proposed ACO rule and related statements and waivers Pioneer ACOs CMS Bundled Payment Initiative

3

Context: Unsustainable Healthcare Costs

Unsustainable healthcare costs will require payors to shift responsibility to providers for the cost and outcomes of care because this is the best way to improve the value of healthcare.

Health Care Spending as a Percent of U.S. GDP 1990s:

Control health care costs through HMOs; failed due to consumer

1990s:

Control health care costs through HMOs; failed due to consumer resistance to tight through deliveries”) networks, inability of many physicians to manage risk payments, and popular press attacks on cost control techniques (“drive through deliveries”)

Early 2000s:

Employers shift costs to deductibles; bought time but failed due to lack of cost increased co-pays and deductibles; bought time but failed due to lack of cost control mechanisms

Late 2000s

: Health plans, Medicare reduce physician reimbursement to offset volume and intensity growth. Physicians panic and want to integrate to improve care and gain leverage Source: U.S. Department of Health and Human Services, Centers for Medicare and Medicaid Services, “National Health Expenditure Projections 2008 2018,” February 24, 2009, cited in Kaiser Family Foundation Health Care Costs Primer

Context: A Call for Change

4 •

2009 Medicare Trustees Report

– Paints a sad picture of Medicare’s fiscal health – by 2017, Part A will become insolvent – Trustees call “to transform the [Medicare] program from being a passive bill-payer to an active purchaser of healthcare” •

Medicare Payment Advisory Commission (“MedPAC”)

– has been critical of Medicare’s FFS system, paying providers based upon volume

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Payment for Services by Silo

• • • • • • • •

ASCs Clinical laboratory DME Home healthcare Hospice Hospital inpatient Inpatient rehab LTC hospital

• • • • •

Outpatient dialysis Outpatient hospital Physician Psychiatric hospital Skilled nursing facility

Accountable Care Organizations (ACOs)

•

“New” concept emanating from reform law

– “An organization of healthcare providers that agrees to be accountable for the quality, cost and overall care of Medicare beneficiaries who are enrolled in the traditional fee-for-service program who are assigned to it.” (CMS 2010) • Pre-PPACA — few aware of ACO concept • Post-PPACA — Google search for “accountable care organizations” now yields 4.8 M results Source: CMS, “Medicare Accountable Care Organizations Preliminary Q&A” (2010) 6

7 •

PPACA – “Shared Savings” Program (

§

3022)

Directs HHS to establish a Medicare “shared savings program” by January 2012 that:

“Promotes accountability for a patient population and coordinates items and services under [Medicare] parts A and B and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.” Under this program “groups of providers of services and suppliers … may work together to manage and coordinate care for Medicare fee-for-service beneficiaries through accountable care organizations … and receive payments for shared savings” Patient Protection & Affordable Care Act, Pub. L. No. 111-148 (2010) Section 3022

“Shared Savings” Program

8 •

Program participation —Eligible ACOs

– “Groups of providers of services and suppliers which have established a mechanism for shared governance” • ACO professionals in group practice arrangements • Networks of individual practices of ACO professionals • Partnerships or joint venture arrangements between hospitals and ACO professionals • Hospitals employing ACO professionals • CAH under Method II – in ACO regs Patient Protection & Affordable Care Act, Pub. L. No. 111-148 (2010) Sections 3022, 10307

“Shared Savings” Program

•

Participation requirements

– Accountability for quality, cost and care of Medicare beneficiaries assigned to ACO – 3-year minimum participation commitment – Formal legal structure that allows for receipt / distribution of shared savings payments – Sufficient number of primary care professionals to treat minimum of 5,000 Medicare beneficiaries – Leadership / management structure includes clinical and administrative systems – Meet patient-centered criteria 9 Patient Protection & Affordable Care Act, Pub. L. No. 111-148 (2010) Sections 3022, 10307

A Sea Change in Healthcare

• • • • •

Coordination / collaboration

– Overcome fragmentation across continuum of care

Data collection and use

– Consistent data across care settings to measure progress

Measure value

– Evidence-based savings, quality improvements and increased satisfaction

Population health focus

– Emphasis on rewarding wellness not number of services provided

Shared savings

– Align payment so providers can capture income based on savings delivered 10

11 • • • • •

Expected Guidance from ACO Rule

ACO framework

– Health IT; monitoring and data analysis – Develop standard evaluation process to compare performance of providers with peers

ACO evolution

– Set broad parameters to allow for innovation – What’s consequence of failed ACO

Quality improvement

– Role of NCQA

Patient pool

– Size and manner of assignment

Network exclusivity

ACO Proposed Rules

12 • • • • • • •

Defined ACO Beneficiary assignment Calculation of shared savings and benchmarking Quality benchmarking and data-sharing Establishment of governance CMS application process 1565 comments on Regulations.gov

78 Fed. Reg. 19528 (April 7, 2011)

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Color Commentary

• • • • •

Bar has been set high to get it all done before Jan. 1, 2012 Heavy emphasis on protecting patient choice and transparency Quality safeguards and reporting standards are rigorous Connectivity to other CMS demonstration and pilot initiatives Concerns over competition and market share permeate the discussion and drive the proposed rules

What’s An ACO?

14 • • • •

Only for Medicare FFS population – payment plus bonus tied to beating benchmark on savings and quality Entity identified by Tax ID number Shared governance

– Including beneficiary representation – 75% provider driven – Medical director

Legal entity authorized to conduct business in state

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ACO Gaping Holes and Mysteries of Life Questions Answered

• • • •

Beneficiary assignment retroactive assuring all patients will be treated the same ACO participants

– NO health plans, management companies may hold part ownership, but majority must be entity directly responsible for healthcare delivery – Excludes hospitals and units that are not paid under PPS, such as psych, rehabilitation, long term care and children’s hospitals.

Benchmark for savings:

– Based on costs for beneficiaries who would have been assigned to ACO for past 3-year period – Target adjustment for health status and acuity

Bonus payment: track 1 and track 2

Gaping Holes (cont.)

16 • • • • •

Quality metrics defined – 65 metrics Each metric correlates to five domains

– Patient and caregiver experience – Care coordination – Patient safety – Preventive health – Care for frail elderly and at-risk populations

Data-sharing and public reporting requirements Compliance plan requirements

– Designated compliance officer who is not legal counsel to the ACO

Termination provisions and withholds to protect against losses

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Proposed Rule: Compliance

• •

Must submit compliance plan with application:

– Designated compliance officer who is not legal counsel to the ACO – Method for employees or contractors to report suspected problems – Compliance training – Requirement to report suspected violations of law to an appropriate law enforcement agency

Monitoring by CMS may include

– Analysis of specific financial and quality data – Site visits – Assessment of beneficiary and provider complaints – Audits, including analysis of claims, chart review, beneficiary surveys, and coding audits

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Proposed Rule: Termination

• • •

Avoiding at-risk patients

– CMS will notify of determination – Required to submit a corrective action plan for approval – Not eligible for shared savings payments during this period

Appeal rights

– None for termination due to failure to meet quality standards – Reconsideration review

Record retention

– 10 years

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Proposed Rule: Criticisms

• • • • •

Significant start-up costs

– $11.6M - $26.1M according to the AHA

Fairly small shared savings potential Method of assigning beneficiaries

– Primary care physicians only – Retrospective

Minimum savings rate is too high and should be uniform across both models Minimum sharing rate is too low

Proposed Rule: Conclusions

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“Rather than providing a broad framework that focuses on results as the key criteria for success, the proposed rule is replete with 1) prescriptive requirements that have little to do with outcomes, and 2) many detailed governance and reporting requirements that create significant administrative burdens.”

- Cleveland Clinic CEO Toby Cosgrove

Final rule expected any day!

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Antitrust Statements Regarding ACOs

• • •

“ACOs have an opportunity to achieve substantial efficiencies, yet the analysis must remain sufficiently rigorous to protect both Medicare beneficiaries and commercially insured patients from potential anticompetitive harm.” The Antitrust Statements seek to clarify the antitrust analysis of ACOs Coordinate the antitrust analysis with the CMS review of ACO applications

76 Fed. Reg. 21894 (April 18, 2011)

The Proposed Framework

• •

The rule of reason will be applied to ACOs that satisfy the criteria for the Shared Savings Program (both Medicare and private sectors) The policy establishes market share thresholds that determine whether an ACO must undergo antitrust review

– Market share is calculated as the combined share of the ACO participants for each service provided by two or more ACO participants in each Primary Service Area (“PSA”) – PSA is “the lowest number of contiguous postal zip codes from which the [ACO participant] draws at least 75 percent of its [patients]” for that service 22

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Antitrust Safety Zone

• • • •

Absent extraordinary circumstances, ACOs falling in the safety zone will not be challenged Criteria

– Market share less than 30% – Any hospital or ASC participating in the ACO is non-exclusive

Rural Exemption (safety zone applies)

– ACO may include one physician per specialty for each “rural county” (defined by Census Bureau) and Rural Hospital (defined by CMS) even if such inclusion increases the ACO’s share above 30 % provided that neither the specialist nor Rural Hospital participates in the ACO on an exclusive basis

Dominant provider (safety zone applies)

– The safety zone applies if a participant has greater than 50% share of its service in a PSA, no other competitor is a participant in the ACO, and the provider with 50% share does not contract exclusively with the ACO or require payors to contract exclusively with the ACO

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Mandatory Filing and Review

• • •

ACOs with any participant having a share of a PSA over 50% when two or more participants compete Not unlawful Subject to rule of reason

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Optional Antitrust Review

• •

ACOs with market share between 30% and 50%

– Reduce (not necessarily eliminate) antitrust risk by avoiding certain identified conduct

Conduct likely to mitigate concerns are:

– Preventing or discouraging commercial payers from directing or incentivizing patients to choose certain providers – No tying sales of the ACO’s services to the commercial payer’s purchase of other services from providers outside the ACO – Except for primary care physicians, exclusive contracting – Restricting health plan enrollees from accessing cost, quality, efficiency, and performance information – Sharing ACO or ACO participant competitively sensitive information

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The Antitrust Filings

• •

Submit materials to the Agencies 90 days before the last day CMS will accept ACO applications to participate in the Shared Savings Program Filing contents

• ACO business strategy documents • Identify whether participants are required to be exclusive • Policies restricting the exchange of price information about payers that do not contract with the ACO • Information about competing ACOs in each participant’s PSA • The impact of the ACO on prices/cost/quality of service • Any other information that you believe will facilitate the review

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The Antitrust Statements Create

• • • •

Mandatory filing requirements for ACOs with shares of overlapping services greater than 50% of a PSA (voluntary filing available)

– FTC/DOJ become gatekeepers to participating in the Shared Savings Programs

Rule of reason analysis if the ACO satisfies the eligibility criteria for CMS to participate in the Shared Savings Program Facially broader safety zones Guidance on PSA share screens

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The Antitrust Statements Preserve

• • •

Preserving competition continues to be a key goal of healthcare reform (even in Medicare and Medicaid sectors)

– Agencies seeking to have ACOs that reduce costs and enhance outcomes while creating ACO vs. ACO competition

Continued (heightened) concern with exclusivity

– Safe harbors do not apply if a hospital participates in an ACO and there is de facto or de jure exclusivity

Rule of reason analysis of healthcare collaborations (unchartered territory)

– This is not new but has been ignored by advisers

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Creating an Antitrust Compliant ACO

(it is still early, but …)

• • •

Choose the structure, partners and management consistent with the CMS rules and that will help achieve the ACO’s objectives For ACOs with PSA shares over 50%, include only one provider and adopt the non-exclusivity provisions of the guidelines and ensure they are enforced For ACOs with shares over 50%, prevent the prohibited conduct and ensure that the provisions are implemented

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Satisfying the Rule of Reason

•

Identify “true” antitrust markets, competitors, shares and entrants and show that shares are below 50%/30%

•

Identify, document and measure significant savings

•

In the application, explain why the ACO cannot exercise market power

•

Adopt an antitrust compliance policy

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Passing Muster

• •

When payers are part of an ACO, consider explaining in the application why such participation is efficient and not anticompetitive If a safe harbor, dominant firm or other defense relies on non-exclusivity, create a system of ensuring there is de facto non-exclusivity

32 •

ACOs: Fraud and Abuse Waivers

Stark Law waiver

– Distribution of shared savings to or among ACO participants, providers and suppliers – Distribution of shared savings outside the ACO directly related to participation in and operations under the MSSP • •

Identical waiver for anti-kickback statute Gainsharing CMP

– Waiver for distributions to physicians from a hospital, not made knowingly to induce the physician to reduce or limit medically necessary items or services •

Consider state fraud and abuse laws

76 Fed. Reg. 19,655 (April 7, 2011)

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Notice 2011-20: Tax-Exempt Organization Participation

•

IRS will not consider a tax-exempt organization’s participation to result in inurement or impermissible private benefit to the private party where:

– ACO participation terms set in advance in a written agreement negotiated at “arm’s” length – CMS accepts ACO into MSSP – Share of economic benefits derived from ACO is proportional to the benefits or contributions provided to the ACO – Share of the ACO’s losses does not exceed the share of ACO economic benefits it is entitled to – All contracts and transactions are at fair market value IRS, Notice Regarding Participation in the MSSP through an ACO, Notice 2011 –20 (April 18, 2001)

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Outstanding Issues

• • • • •

How will the agencies absorb and analyze the potentially large number of applications?

– Check list?

How will the Agencies divide the work and ensure consistency?

Will decisions be made public, allowing ACOs to rely on “precedent”?

What is the process for negotiating changes?

What happens after 3 years?

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More Outstanding Issues

• • • •

Why is steering seen as problematic?

Will companies have documents relating to ACO competition before ACOs are created?

– What will be inferred from a lack of documentation?

Why are there no geographic limitations on the document requests?

To what degree must an ACO search for responsive documents?

Pioneer ACO Model: The Basics

36 • • • • • •

Separate from PPACA shared savings

– Created by the Center for Medicare & Medicaid Innovation

Designed for organizations already functioning as ACOs Similar contracts with other payors

– More than 50% of the Pioneer ACO’s revenues should be derived from outcome-based contracts

Minimum 15,000 beneficiaries (5,000 rural) Up to 30 participants Finalists expected to be chosen in October 2011

Pioneer ACO Model Request for Application,

available at

http://innovations.cms.gov/wp-content/uploads/2011/05/Pioneer-ACO-RFA.pdf

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Pioneer ACO Model vs. MSSP

• • • • • • •

Beneficiary assignment

– Prospective or retrospective – Non-MDs may count for alignment purposes

1% flat minimum sharing rate Greater risk of shared losses Larger portion of shared savings are possible Population-based payment model in third year Applicants encouraged to propose other payment arrangement

– Selected Pioneer ACOs will choose from at least 2 models

Same quality standards as final MSSP regulations

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Pioneer ACOs: Conclusions

•

The “Big Players” have declined to participate

– Mayo Clinic, Cleveland Clinic, Geisinger Health System, Intermountain Healthcare •

Reports that few applications were submitted

•

On track to begin January 1, 2012

Source: Kaiser Health News

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Bundled Payments for Care Improvement Initiative

• • •

Developed by Center for Medicare & Medicaid Innovation Separate and new initiative from PPACA

§

3023 (The National Pilot Program on Payment Bundling) Providers may choose among one of four broadly defined models of care

Bundled Payments for Care Improvement Initiative Request for Applications,

available at

http://innovations.cms.gov/documents/payment-care/BundledPayments-Request_for_Application_v4.pdf

40 • • • •

Model 1: Retrospective Acute Care Hospital Stay Only

Episode of care is focused on the acute care inpatient hospitalization Hospitals may share gains beyond the predetermined MSDRG payment discount due to higher quality, more efficient care delivery, and more care coordination between and among physicians Physicians will be paid separately under the Medicare Physician Fee Schedule Full application for the model is due Nov. 18, 2011

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Model 2: Retrospective Acute Care Hospital Stay Plus Post-Acute Care

• • • • •

Includes the inpatient stay and post-acute care

– Either 30 or 90 days after discharge

Bundled payments include

– Physician services – Post-acute provider services – Related readmissions, clinical laboratory services – DMEPOS and Part B drugs

Payments are made at usual FFS rates

– Later, aggregate Medicare payment for the episode is reconciled against a target price

Applicable discounts range from 2-3%

– Participating providers share in savings below the target price

Nonbinding LOIs due Nov. 4, 2011; full application due by March 15, 2012

Bundled Payments: Models 3 and 4

42

Model 3: Retrospective Acute Care Only

•

Episode of care

– Begins on the date of discharge from the inpatient stay and extends through 30 days after discharge •

Otherwise structured as in Model 2

– Minimum discount rate is not specified

Model 4: Prospective Acute Care Hospital Stay Only

•

Single prospective payment to the hospital

– Includes all services furnished during the inpatient stay by the hospital, physicians, and other practitioners – Physicians and other practitioners would submit “no pay” claims to Medicare and would be paid by the hospital out of the bundled payment

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Bundled Payments: Conclusions

•

The Bundled Payment Initiative contemplates a gainsharing component to the proposed models and outlines the design and quality components for consideration in the proposed application

•

Providers may pursue more than one care coordination initiative and also be considered for this Bundled Payment Initiative

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Other Initiatives

•

Comprehensive Primary Care Initiative

– Public and private payers (including states) may submit a nonbinding LOI by Nov. 15, 2011; full application due Jan. 17, 2012

CMMI has received more than 400 proposals for new care models

Source: Richard Gilfillan, Acting CMMI Director

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Health Reform Redux

• • • • •

Will ACOs be the transformative change expected?

Will providers need to move forward in anticipation of fundamental change in payment by gov’t programs?

Will Medicaid and Medicare cuts impact movement toward innovation?

How will market share issues define the future?

Will the antitrust agencies be receptive to ACOs or aggressively enforce the law against them?