Slide 1

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 2

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 3

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 4

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 5

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 6

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 7

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 8

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 9

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 10

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 11

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 12

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 13

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 14

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 15

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 16

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 17

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 18

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 19

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 20

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 21

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 22

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 23

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 24

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 25

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 26

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 27

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 28

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 29

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 30

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 31

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 32

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 33

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 34

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 35

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 36

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 37

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 38

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 39

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 40

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 41

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 42

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 43

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 44

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 45

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 46

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 47

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 48

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 49

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 50

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 51

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 52

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 53

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 54

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 55

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 56

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 57

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 58

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59


Slide 59

2012 PLUS Medical PL Symposium

ACOs:
Much Ado about Nothing (?)

Chicago - March 29-30, 2012

Moderator:
Douglass G. Hewitt, Esq., Partner, Kubasiak, Fylstra, Thorpe &
Rotunno, P.C.
Panelists:
Bradford A. Buxton, President, BTB Associates, LLC
Ciara Ryan Frost, Esq., Partner, Kerns, Frost & Pearlman, LLC
Kristin D. McMahon, Esq., Chief Claims Officer, IronHealth

The Patient Protection and
Affordable Care Act (“PPACA”)
Public Law 111 -148, signed March 23, 2010

Overview of PPACA
• Sweeping 2,000+ page overhaul of U.S. health care system (not including
the implementing regulations, some of which remain to be issued/finalized)
• Aims to reform health care:
♦ delivery
♦ financing
♦ insurance

4

Key PPACA Objectives
• Access to health care for all Americans
• Improve quality of health care
• Lower cost of health care

5

PPACA Timeline
• Staggered deadlines for implementation between 2010 and
2018
• Myriad regulations issued since PPACA passage
• Judicial challenges to PPACA

6

Title III – Improving The Quality and
Efficiency of Health Care
• Strives to transform the U.S. health care delivery system:
♦ links payment to quality outcomes under Medicare
♦ creates Center for Medicare and Medicaid Innovation (CMI)
♦ Accountable Care Organization (“ACO”) initiatives

7

2012 PLUS Medical PL Symposium

ACOs
Three Letter Acronym
of the Year
Hot Topic in American
Health Policy
Chicago - March 29-30, 2012

8

2012 PLUS Medical PL Symposium

ACOs Defined
A group of physicians, hospitals and other healthcare
providers who assume responsibility for the quality
and cost of healthcare for a defined population
attributed to them on the basis of patients' use of
healthcare services. If the ACO meets quality
benchmarks and reduces per-beneficiary spending
below what would otherwise have been expected, it
will receive a share of the savings
Chicago - March 29-30, 2012

9

2012 PLUS Medical PL Symposium

Impetus for ACOs
America’s Broken Health System
• US health expenditures -$2.6 trillion in 2010, over ten times the $256 billion spent
in 1980
• Health care accounts for 16% of the US GDP, the highest among the world’s
industrialized nations without improved outcome

Ineffective System for Paying Healthcare Providers
• Payment for volume on a fee for service basis rather than for value on a fee for
outcome basis.

Chicago - March 29-30, 2012

10

Impetus for ACOs (cont’d)
“In the US, we hold no one accountable for our problems.
Accountability is as fragmented as care, itself; each separate
piece tries to craft excellence, but only within its own walls.
Meanwhile, patients and carers wander among the fragments.
No one manages their journey, and they are too often lost,
forgotten, bewildered.”
- Dr. Donald Berwick, former CMS Administrator
Source: Donald M. Berwick, “A Transatlantic Review of the NHS at 60,” http://www.pnhp.org/news/2010/may/a-transatlanticreview-of-the-nhs-at-6-, July 1, 2008.

11

18%

Total Health Expenditure as a Share of GDP,
2012
PLUSSelected
MedicalCountries,
PL Symposium
U.S. and
2008

16%
As Percentage of GDP

14%
12%
10%
8%

16.0%

6%
4%

8.1%

8.5%

8.5%

8.7%

9.0%

9.1%

9.4%

9.9%

10.4%

10.5%

10.5%

10.7%

11.1%

11.2%

2%
0%

Source: Organization for Economic Co-operation and Development (2010), "OECD Health Data", OECD Health Statistics (database). doi: 10.1787/data-00350en (Accessed on 14 February 2011).
Notes: Data from Australia and Japan are 2007 data. Figures for Belgium, Canada, Netherlands, Norway and Switzerland, are OECD estimates. Numbers are
Chicago - March 29-30, 2012
PPP adjusted.

12

13

THE PURPOSE OF ACOs
“The creation of ACOs is one of the first delivery-reform
initiatives that will be implemented under the ACA. Its
purpose is to foster change in patient care so as to accelerate
progress towards a three part aim: better care for individuals,
better health for populations, and slower growth in costs
through improvement in care.”
-Dr. Donald Berwick
14

Types of ACOs
• Medicare
1. Medicare Shared Savings Program (MSSP)
2. Advanced Payment Model

• Commercial (Private Insurers/Payors Health Systems)
• Pioneer – Hybrid Advanced Model

15

The Shared Savings Proposed Rule
• Issued March 31, 2011
• 65 Quality Measures
• 2 alternative tracks (one-sided, shifting to two-sided in year 3 and
two-sided)
• 2% threshold above minimum savings rate of 2%-3.9%
• Maximum Shared Savings Cap: 7.5% or 10%
• 25% withhold by CMS for years 1 and 2

16

Response to the Medicare Shared Savings Proposed
Rule

17

Medicare Shared Savings Program (MSSP)
• MSSP ACOs must meet HHS/CMS eligibility criteria, including:
♦ assume responsibility for Medicare patient population of 5000 or more
beneficiaries for at least three years
♦ adequate primary care physician participation
♦ a formal legal structure for receipt/distribution of shared savings
♦ shared governance over clinical and administrative processes; and
♦ processes to promote evidence-based medicine, coordinated care and
patient engagement

18

Medicare Shared Savings Program (MSSP) (cont’d)
• If the ACO’s costs are lower than the benchmark set by the MSSP, it
receives (in addition to normal fee for service payment amounts) an
additional payment that reflects a portion of the savings
♦ Track I Model: Shared Savings Only
♦ Track II Model: Shared Savings and Shared Losses
• By the end of 2012, at least 2,000,000 people are expected to be
enrolled in MSSP ACOs
19

The Shared Program Final
Issued October 20, 2011
•

33 quality measures

•

2 alternative tracks (one sided for all 3 years and two sided)

•

No 2% threshold above minimum savings rate of 2 to 3.9% (i.e., First dollars
savings)

•

Increase in maximum sharing rate: 50-60%

•

Maximum Shared Savings Cap: 10-15%

•

No 25% withhold by CMS

20

Advanced Payment Model
•

Part of the MSSP

•

Provide additional support to physician-owned and rural providers who would
benefit from added start-up capital to establish the needed infrastructure in the
form of additional staff or information technology

•

Upfront funding by CMS’ Innovation Center of $170M to support up to 50 ACOs

•

Eligible participants must be:
♦ ACOs that do not include any inpatient facilities and have less than $50 million
in total annual revenue; or
♦ ACOs in which inpatient facilities are critical access hospitals and/or Medicare
low-volume rural hospitals and have less than $80 million in total annual
revenue
21

Commercially/Privately Sponsored
Accountable Care Collaborations
• Private Payors including BCBS Plans, large for profit health
insurance carriers (e.g., CIGNA, AETNA) and health care
systems launching pilot programs across the country
• Radical departure from traditional fee for service approach
• CareFirst Blue Cross Blue Shield, dominant insurer in the
Washington DC
• Advocate Health Care (Chicago based) and BCBS IL formed one
of the nations largest ACOs, AdvocateCare
22

Pioneer ACO Model



CMS Innovation Center initiative



Approximately 32 organizations have been designated as Pioneer ACO Models
including: Banner Health, Beth Israel Deaconess, Dartmouth Hitchcock, and
Presbyterian Healthcare Services.



Differences between Pioneer ACO Model and MSSP:

Eligibility-healthcare organizations experienced in providing coordinated, patient
centered care to Medicare beneficiaries (a minimum of 15,000 Medicare Part A and
B beneficiaries) in an ACO type environment

♦ First two years of Pioneer are shared savings payment with higher levels of
savings and risk than Shared Savings Program;
♦ By end of second year, Pioneer ACO must enter into similar payment contracts
with insurers and health plans constituting 50% of ACO revenue.
23

Common Characteristics of Successful ACOs
• Broader patient access to care, including extended evening and weekend
hours
• Case management and Disease management services
• Electronic Medical Records to better track medical history
• Embedded Care Coordinators
• Data Analytics
• Shared savings and in some cases losses with the Payor of medical services

24

2012 PLUS Medical PL Symposium
ACO Configurations Abound
Health
System

Medical
Groups

Hospital

Health
Insurer

Medical
Groups

ACO
ACO

Chicago - March 29-30, 2012

25

ACOs—Initial Barriers to Entry
• Antitrust concerns

• Start Up Costs—IT Technology
• Ability of specialists and primary care physicians to
work together and accept a reallocation of healthcare
dollars therein increasing the reimbursement levels of
primary care physicians
26

Are ACOs Different Than HMOs?
• ACOs have quality metrics that were not part of the Managed
Care model of the 1990s
• ACOs do not purport to limit patient choice of providers or act
as gate keepers to prevent patients from specialist care
• Specialist care is encouraged; although will be more closely
followed by the primary care physician
27

Sample ACO Organizational Components:

Hospitals, Diagnostic/
Therapeutic Service
Centers

Health
System/Hospital

Potential
Partners

ACO Resources

EHRs,
Interfaces,
Communication
Hubs

Patient
Centric CDRs
(Beneficiary)

Connections
 PMS
 EHR
 Claims
clearinghouse

Population
Health Data
Warehouse

Information
 Results
 Reports
 Orders
 Scripts
 Referrals
 Eligibility
 Claims
 Appointments
 CCRs
system
Other

Call Centers
Potential
Partners

Health
Information
Communication
Connectivity
Network

Care
Coordinators

Physician
Organizations

Alternate Health
Service Organizations

LTC
SNF

Employed
Groups
PHO
Physicians

MS

Home
Health
MS

Aligned Physicians
– Ind

Hospice

MS

Physicians Ind

Clinical
Pharma

MS

Specialists

Home
Based
Care

Not MS

FQHC
Safety Net

Rehab
Center

28

Provider-Payor Challenges
• Current Market-Place
• What’s to Come in Reform
• Payment migration and Provider Accountability

• What it takes to win

29

Reform has sparked reform. But results won’t happen
without reduction in costs.
At its roots, the ACO model is about changing
the reimbursement structure of the U.S.
healthcare system toward one that pays for
the quality of care delivered (and, by
derivative, the outcomes achieved) versus the
units of service provided.
- Beyond ACOs: The Pending Risk Shift to Providers, William Blair

Blue Shield of California gives $20M in
ACO Help

Hospitals with strong market power and higher
private-payor and other revenues have less
pressure to constrain their costs. Thus, these
hospitals have higher costs per unit of service,
which can lead to losses on Medicare patients.
Hospitals under more financial pressure—with less
market share and less ability to charge higher
private rates—often constrain costs and can
generate profits on Medicare patients.
- MedPac, Health Affairs, May 2010

- Healthcare IT News, October 18, 2011

30

Market Environment | Health Reform
2012 Highlights

2013 Highlights

Encouraging Integrated Health
Systems
Linking payment to quality
outcomes
Reducing avoidable hospital
readmissions

Improving preventative health
coverage
Encouraging provider collaboration
Increasing Medicaid for primary care
Fee for patient-centered outcomes
research

Health care organizations can expect to see impacts to their
customers, products, markets, and margins .
31

ACOs require a shift in provider accountability and a migration
from focus on revenue cycle management to cost management

Revenue Cycle Management

Cost Management/liability
32

Source: Healthways 2010

The current system cannot sustain itself without
a focus on cost management and lowering
the total cost of care
Hospitals and Specialists





Improved Patient Care Efficiency
Use of Lower-Cost Treatments
Reduction in Adverse Events
Reduction in Preventable Readmissions

Primary Care Practices
 Improved Prevention & Early Diagnosis
 Improved Practice Efficiency
 Reduction in Unnecessary Testing and
Referrals
 Reduction in Preventable ER Visits and
Admissions

All Providers

$

 Improved Management of Complex
Patients
 Use of Lower Cost Settings & Providers

Lower Total Health
Care Cost

33

Requirements for Success
• As provider risk expands, requirements for risk management become more complex:
• Reimbursement and Network Management:
♦ Multiple risk sharing arrangements from global rates to percent of premium, network
contracting and management
• Care/Population Management:
♦ HIS, PCMH, IOP, Data Integration (EMR), Nurse Managers
• Administration
♦ MSO Services (claims, eligibility, etc.)
• Financial/Risk Management
♦ Risk based capital, actuarial, underwriting, financial reporting, compliance and
auditing
• Regulatory/Legal
34

Requirements for Success | Lessons from the 1980s
In the 1980s when payors shared risk there were multiple provider failures and liability
concerns.
• What level of risk assumed?
• When moving from fee for service to risk, what is impact on cost delivery structure?
• Does the Integrated Health System cover all services necessary to assume risk?

• Do patient coverage policies outline expectations for members re: coverage and delivery
expectations?
• Role of insurance company versus delivery system in risk arrangement
(reinsurance/liability/coverage)?
•Role of Partners (administrative, ownership, risk, etc.)
35

The landscape is complex and choosing partners requires understanding oneself
and the target partner. Three types of partners meet different sets of needs.

• Vertical:
♦ Knowledge and tools for managing care (administrative services)
• Horizontal:
♦ Partners include other hospital systems, organized physician
entities, and community organizations within target service areas or
clinical specialties
• Global:
♦ Global Partners are entities who bring attributes of both horizontal
and vertical partners
36

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
Providers and payors require a structure in the new, transformed state
• Leadership must determine how broad they want to provide their
integrated health system services
• Determine organization (i.e. physician vs. strategic partnership)
Providers must consider the balance between geography and provider services
offered
• Evaluate services, people, contractual status (risk/no risk) by
geographical regions
37

Structure + High Value Efficiencies =
Ability to Take Risk and Increase Margin
• Providers must inventory what tools, skills and capabilities they have today,
determine the gaps in current systems and how to fill those gaps
♦ Understand what is required and how to fulfill need in technology, people
and organization (buy, build, partner)

• Understand best partnership options in order to build a effective and
efficient risk taking network
♦ Also define who owns lives today to help access network and partnership
options. Is it realistic to have a competitor also be a partner?
38

ACO Liability Exposures
• Vary, depending on the:
♦ Activities/services of the ACO and its constituent
participants
♦ ACO’s organization/legal structure, and
♦ Applicable state law

39

ACO Liability Exposures
• Similar to historical MCO liability exposures in many respects,
except:
♦ patients may obtain care from providers outside the ACO
without any cost or coverage penalty,
♦ financial incentives are tied to quality performance metrics

40

ACO Liability Exposures
• Some heightened exposure based upon ACO’s:
♦ ‘accountability’ for quality of care
♦ increased involvement in coordination of care
♦ increased control over ACO participants

41

Activities/Services Most Likely to Give
Rise to Claims Against ACOs
•
•
•
•
•
•
•
•
•

Medical treatment
Coordination of care/case management
Medical necessity or other coverage determinations
Utilization review (if applicable)
Provider selection / contracting / termination / payment
Claims processing/payment (if applicable)
Billing
Employment practices
Compliance with state and federal laws, including HIPAA, HITECH and PPACA
42

Common Sources of ACO Liability (Claimants)
Providers
Patients

Competitors

ACO
Other
(e.g., payor,
vendor)

Regulators

Employees
43

Patient Claims Against ACOs
• Medical negligence (direct or vicarious liability)
• Negligence or misconduct in:
♦
♦
♦
♦

•
•
•
•

utilization review
case management/coordination of care
selection/peer review/credentialing of participating providers
medical necessity or coverage determination

Breach of contract
Breach of fiduciary duty (including failure to disclose financial incentives)
Breach of privacy
Other (including statutory violations)
44

Provider Claims Against ACOs
• Breach of provider contract
• Negligence or other misconduct related to:
♦ provider selection/contracting
♦ provider deselection/termination
♦ provider compensation, including bonus or incentive
payments

• Cross-claims for indemnification
45

Regulator Claims Against ACOs
• Violations of:
♦PPACA (Note PPACA penalty provisions)
♦False Claims Act or other federal fraud and abuse
laws
♦Federal or state antitrust laws
♦HIPAA, HITECH or other federal or state privacy laws
♦State licensure, solvency or other laws
46

Employee Claims Against ACOs
(including Claims by employed providers)
•
•
•
•
•

Wrongful termination
Discrimination
Breach of contract
Misrepresentation
Whistleblower claims alleging False Claims Act violations
47

Competitor Claims Against ACOs
• Violation of federal or state antitrust laws
(Note, Final ACO Antitrust Policy Statement provides for an Antitrust Safety Zone)

• Unfair competition

• Tortious interference with contractual or business relations

48

New or Heightened Exposures
Après PPACA
• Violation of PPACA or implementing regulations:
♦ MLR rebate obligations
♦ Penalties for non-compliance with claims processing and
appeals regulations
♦ Other
• Compliance is key

49

2012 PLUS Medical PL Symposium
ERISA Preemption in the Wake of PPACA?
ERISA Preemption Defense

Increase in Population
Insured Under Individual
Health Policies
Chicago - March 29-30, 2012

50

Relationship Between PPACA, ERISA And Other
Federal and State Laws?
• Interplay between PPACA and other federal and state laws unclear in many
respects
• PPACA preserves ERISA preemption, but ERISA does not apply to individual
health insurance markets
• PPACA preempts state laws that would “prevent the application of” Title I
♦ Sets a “floor” for state regulation
♦ Does not preempt state licensure, solvency and other ‘health-insurance
laws’
• Full employment for lawyers
51

2012 PLUS Medical PL Symposium
Newton’s Law of Motion

For every action, there is an equal and opposition reaction.
Chicago - March 29-30, 2012

52

2012 PLUS Medical PL Symposium
Increase in Integration of and
Coordination by Providers
Liability for medical and
managed care mishaps

Antitrust Exposure

Chicago - March 29-30, 2012

53

2012 PLUS Medical PL Symposium
Effects of PPACA on Health Insurance Market
PPACA Litigation

Regulatory Activity

Traditional
Managed Care
Litigation
Chicago - March 29-30, 2012

54

Litigation Over Historically Controversial Health Insurer Practices
Should Decline As PPACA Eliminates Or Regulates Those Practices
• Lifetime and annual limits
• Rescission (post claims underwriting)
• Explanations of coverage, including disclosures of cost-sharing,
common benefit scenarios, provider payment methodologies
(“usual customary and reasonable rates”)

55

Insurance Coverage & ACOs
• Types of Exposures Presented
♦
♦
♦
♦
♦
♦
♦

D&O
E&O
Professional Liability
Third and First Party Privacy Protection
General Liability
EPL
Fiduciary

• Critical to understand the ACO’s corporate structure
56

Insurance Coverage & ACOs
 Necessary to perform GAP analysis to determine whether existing
healthcare entity’s Insurance Program provides seamless coverage to the
ACO activities
 Policy exclusions could vitiate coverage if an insured provider files suit
against the ACO challenging compensation or bonus structure (e.g., Insured
v. Insured)
 Consider purchase of separate stand alone product to expressly cover ACO
Services and corresponding liability exposures
57

US Supreme Court to Rule on Two Major PPACA Provisions

• Individual Mandate
• The Medicaid Expansion

58

Douglass G. Hewitt
Kubasiak, Fylstra, Thorpe & Rotund, P.C.
20 S. Clark Street, 29th Floor
Chicago, IL 60603
(312) 630-9600
[email protected]

Ciara Ryan Frost, Esq.
Kerns, Frost & Pearlman, LLC
70 West Madison, Suite 5350
Chicago, IL 60602
(312) 261-4553
[email protected]

Bradford Buxton
BTB Associates, LLC
594 North Woodland Lane
Northfield, IL 60093
(847) 400-7450
[email protected]

Kristin D. McMahon, Esq.
Chief Claims Officer
IronHealth
175 Powder Forest Drive
Simsbury, CT 06089
(860) 408-7812
[email protected]
59