Transcript Slide 1

Accountable Care Organizations:
Can they live up to the hype?
Presentation for WMGMA
Thursday, May 12, 2011
By
Attorney Barbara J. Zabawa
Whyte Hirschboeck Dudek S.C.
1
Agenda
 ACO
Background
– Current “System”
– The “Perfect Storm” for change
 ACO
Models
 ACO Proposed Regulations
2
Current “System”
US health care is an “Ecosystem,” not
“system.”
 Unlike “system,” where each part works
together with the other to achieve the
same end goal, each player in ecosystem
is only concerned about its own survival.

3
Current System
 Atul
Gwande’s 2009 article in the
New Yorker about McAllen,
Texas:
–“The lesson of the high-quality, low
cost communities is that someone
has to be accountable for the
totality of care. Otherwise you get
a system that has no brakes. You
get McAllen.”
4
Current System
 In
our current fee for service system,
it’s all about:
– Making the appointment;
– Getting patient in the door;
– Getting the charge out;
– Getting the money back.
 We
as a “system” are still paid “per
click.”
– i.e., an “transactional environment”
5
Current System
 We
are laboring under perverse
incentives that deny needed care and
encourage care that isn’t needed.
6
Current System
 Current
provider economic model:
– 4-6% operating margin built on
remarkable 7-8% annual revenue
growth
– Expense increases have mirrored
revenue increases
 Grew
more than 7%/yr for past 25 yrs.
– Providers have passed on the 7+%/yr
cost increases to purchases and patients
– Reform will put pressure on providers to
reduce 7+%/yr growth
7
Current System
 Payers
and providers, playing
hardball and seeking their own selfinterest, are caught in a “prisoner’s
dilemma,” in which one tries to get
the best deal for themselves no
matter what the other does.
8
Current System
P
a
y
e
r
Provider
Stands Firm
Collaborates
Stands
Firm
Scenario 1: Stalemate
– cat & mouse games
continue to reduce
customer value rather
than create it; odds of
rate regulation increase
Scenario 2: Provider
develops programs to
reduce excessive
readmissions, ED visits,
etc. – and loses margins
that fund other services in
the process
Collaborate
s
Scenario 3: payer loses
because its investments
(IT, new programs, etc.)
may not go to initiatives
that ultimately improve
quality or save its
customers money.
Scenario 4: Each
coordinates deliver and
payment over a multiyear
transition period (e.g.,
2011-15) using reform &
CMS “value based
purchasing” policies as
9
guideposts
Current System

CFO will need to oversee transition from
unit reimbursement maximizers to
strategic negotiators
– Find new ways to maximize revenue
– Maintain quality and access.
– Need to benchmark commercial contract’s
margins, rates and administrative costs
– Need credible business case to justify
increases
– Providers who make their case early more
likely to get funds.
10
Current System
 Providers
and payers will need to
collaborate and move beyond “cat
and mouse” games.
– Provider: optimize revenue
– Payer: Take back revenue
– Not “patient-centric”
11
Current System

PPACA Insurance Regulation restricts insurers’
ability to accept increases.
– Guarantee issue.
– Bans recission
– Requires insurers to keep administrative costs
down to 20% of premium income
– Restricts premium rating by insurers so that
premium cost is based less on health risk than
currently.
12
Current System

Accountable Care Organizations
– An opportunity to create an organized system
of care that can, over time, evolve to provide a
high level of care to every American as a right
rather than as a privilege.
– Those who approach this as an experiment in
service delivery and reimbursement will derive
the most benefit from the model.
 Innovation,
experimentation and trial & error is the
“American way.”
13
ACOs

What are they?
– According to 42 CFR s. 425.4:
 ACO
means a legal entity that is recognized and
authorized under applicable State law, as identified
by a Taxpayer Identification Number (TIN), and
comprised of an eligible group (as defined at s.
425.5(b)) of ACO participants that work together to
manage and coordinate care for Medicare feefor-service beneficiaries and have established a
mechanism for shared governance that provides all
ACO participants with an appropriate proportionate
control over the ACO’s decision-making process.
(Emphasis added.)
14
ACOs
 ACO
is really an umbrella financial
and clinical care delivery redesign
strategy that uses fee-for-service,
pay-for-performance, bundled
payments and partial or full-risk
capitation tactics to improve quality
and efficiency.
15
ACOs

In an ACO, hospital(s) and its physician
organization are analogous to anchor
tenants in a shopping mall.
– Other “tenants” might include
 SNF
 long-term
acute care hospital
 rehabilitation hospital
 Health plan
– While all occupants can benefit from
participation in the ACO (mall), ACO cannot
function without a hospital and physician
organization as anchor tenants.
16
ACOs
 PPACA
does not require inclusion of
acute care hospitals in Medicare
ACO.
– However, ACO unlikely to succeed
without hospital as full partner.
17
ACOs
ACO
System
Physician
Organization
Employed physicians
Captive Group Practice
Joint Venture Practice
Foundation model
Hospital
Other facilities
and services
Hospital physicians
Other facilities
Clinic
18
ACOs
 Legal
Structure (42 CFR s.
425.5(d)(7))
– ACO must be constituted as “legal
entity” for purposes of all the following:
 Receiving
and distributing shared savings;
 Repaying shared losses;
 Establishing, reporting, and ensuring
provider compliance with health care quality
criteria, including quality performance
standards;
 Other ACO functions identified in this part.
19
ACOs

3 options for organizing ACO:
– Particular component of ACO owned or
controlled by ACO or system that operates
ACO;
– ACO components tied together through
common ownership in ACO (joint venture); or
– ACO components tied together through
contractual arrangements
 E.g.,
comprehensive affiliation agreement or
purchase or lease agreement with vendor
20
ACOs
 Most
loosely coupled options:
– JV partnership
– Series of contractual arrangements
21
ACOs
 More
tightly coupled models:
– Parent corporation model
 Not
very flexible for partners
– Subsidiary corporation model
 Happy
medium?
22
ACOs
 Overarching
management strategy is
to continually transform a loosely
coupled system into a more tightly
coupled system.
23
ACOs

Who are “ACO Participants” eligible for Shared
Savings Program?
– ACO professionals in group practices

MD, DO, PA, NP, Clinical Nurse Specialist
– Networks of individual practices of ACO Professionals
– Partnerships or JV arrangements between hospitals and
ACO professionals
– Hospitals employing ACO professionals
– Providers or suppliers otherwise recognized under the
Act that are not ACO.
– CAHs that bill under Method II (s. 413.70(b)(3))

42 CFR s. 425.5(b).
24
ACOs
 Shared
savings eligible participants
may participate in ACO separately or
in combination. s. 425.5(b).
 Other Medicare enrolled providers
and suppliers can participate in ACOs
as well, as long as they collaborate
with one of the 5 entities that are
eligible to independently form an
ACO.
25
ACOs
 ACOs
care:
must manage and coordinate
– ACO participants and ACO
providers/suppliers must have a
meaningful commitment to ACO’s
clinical integration program.
 Financial
investment
 Human investment
– 42 CFR s. 425.5(d)(9).
26
ACOs
 As
part of 3-year agreement, ACO
must certify that ACO providers and
suppliers forming ACO have agreed
to become accountable for and
report to CMS on quality, cost and
overall care of the Medicare FFS
beneficiaries assigned to the ACO.
– 42 CFR s. 425.5(d)(1).
27
ACOs
 ACO
must have infrastructure, such
as IT, that enables ACO to collect and
evaluate data and provide feedback
to ACO participants and
providers/suppliers across ACO,
including information to influence
care at point of care.
– May include meaningful use EHR
28
ACOs


ACO must implement evidence-based medical
practice or clinical guidelines and processes for
delivering care consistent with aims of better care
for individuals, better health for populations and
lower growth in health care expenditures. 42
CFR s. 425.5(d)(9).
ACOs must establish partnerships with
community stakeholders to advance 3-part aim of
better care for individuals, better health for
populations, and lower growth in health care
expenditures. 42 CFR s. 425.5(3)(v).
29
ACOs
 ACOs
must cater to Medicare FFS
beneficiaries.
– Must have at least 5,000
beneficiaries/yr
– It is through these beneficiaries that
ACO can achieve shared savings (or
losses)
30
ACOs


ACO must have sufficient number of
primary care professionals for the
Medicare beneficiary population
Medicare beneficiaries assigned to ACO
based on their utilization of primary care
services provided by primary care
physician who is ACO provider/supplier
during performance year for which shared
savings are to be determined. 42 CFR s.
425.6(a).
31
ACOs

Beneficiaries assigned to ACO not confined
to ACO
– Have free choice in determining where to
receive care. 42 CFR s. 425.6(a)(2).
– Clear reaction to managed care restrictions
from 1990s.
– It will be up to ACO to create “stickiness” for
patients so they voluntarily choose to stay
within system of care
 And
ACO can realize savings.
32
ACOs
If ACO’s assigned population falls below
5,000, CMS would issue warning and place
ACO on CAP, which could include plan to
add primary care providers to ACO.
 If ACO’s assigned population has not
returned to at least 5,000 by end of next
performance year, then ACO’s agreement
will be terminated and ACO will not be
eligible for shared savings that year.

– 42 CFR s. 425.5(13)(ii)(B).
33
ACOs
 Patient-centeredness
criteria will help
– ACO must demonstrate patientcenteredness by:
 Having
beneficiary experience care survey
and describe how ACO will use results to
improve care
 Patient involvement in ACO governance
 Evaluating health needs of ACO population,
including consideration of diversity
 Identifying high-risk individuals and
developing individualized care plans
34
ACOs

Patient-centeredness, cont.
 Coordinating
care (through technology)
– For providers enrolled in electronic exchange of
information, this process must be consistent with
meaningful use requirements under EHR Incentive
program.
 Communicating
evidence-based medicine to
beneficiaries
 Engaging beneficiaries in shared decision-making
 Creating written standards for beneficiary access and
communication
 Measuring clinical or service performance by
physicians across practices.
– 42 CFR s. 425.5(15)(ii).
35
ACOs
 Shared
help
governance requirement will
– ACO must establish and maintain
governing body with adequate authority
to execute functions of ACO, including,
promotion of evidence-based medicine
and patient engagement, report on
quality and cost measures, and
coordinating care.
 42
CFR s. 425.5(8).
36
ACOs
 Shared
governance, cont…
– Governing body must be comprised of:
 ACO
participants (or representatives)
– Must hold at least 75% control
 Medicare
beneficiary representatives
– No conflict of interest with ACO
37
ACOs
 Other
noteworthy items
– ACOs can operate in 1 of 2 tracks:
 Track
1: One-sided model
– No risk Years 1 and 2 (only shared savings)
– Year 3: ad risk (loss) and higher reimbursement
 Track
2: Two-sided model
– Shared savings or loss starting in Year 1
– Higher reimbursement starting Year 1
 For
subsequent agreement periods, ACO
may operate only under two-sided model.
– 42 CFR s. 425.5(6).
38
ACOs
 In
both Tracks, ACO’s share in
savings will be subject to 25%
withholding to help ensure
repayment of any losses to Medicare
program.
– Withheld amount will be applied towards
repayment of ACO’s losses.
39
ACOs

Shared savings payments
– As part of application to participate in Shared
Savings Program, ACO must describe:
 How
it plans to use shared savings payments,
including criteria it plans to employ for distributing
savings among participants;
 How the proposed plan will achieve specific goals of
program;
 How plan will achieve general aims of better care for
individuals, better health for populations and lower
growth in expenditures.
– 42 CFR s. 425.5(11).
40
ACOs

Shared savings payments
– An ACO is eligible to receive payment for
shared savings if:
 It
meets requirements of ACO agreement;
 It realizes savings compared to expenditure
benchmark that exceeds the minimum savings rate;
and
 It meets quality performance standards established
under 42 CFR s. 425.10
– Quality standards placed into 5 domains:
 Patient/care giver experience
 Care coordination
 Patient safety
 Preventative health
 At-risk population/frail elderly health
41
ACOs
 Shared
savings
– CMS proposes to make any shared
savings payments directly to the ACO
TIN.
– ACO will then make shared savings
payments, as outlined on its application
to the program, to ACO participants.
42
ACOs
 Timeline
– PPACA provided January 1, 2012 as
date by when ACO program must be
established
– CMS requirements/timeline may not
allow sufficient time for ACO’s to
complete application process by
1/1/2012
 CMS
requesting comments on alternatives
(e.g., July 1)
43
Questions?
 For
more information, contact:
Barbara J. Zabawa, JD, MPH, FACHE
Attorney at:
Whyte Hirschboeck Dudek, S.C.
33 East Main Street, Suite 300
Madison, WI 53703-4655
Phone: 608-234-6075
Email: [email protected]
44