1 The ACO Effort: A Status Report J. Mark Waxman mwaxman@foley.com 617-342-4055
2 Whats the fuss about? A need for accountability for cost and quality A belief that the system can improve if: Provider led organizations with a strong primary care component deliver integrated care Payments are linked to quality improvements that reduce overall costs Performance measurement is necessary to support improvement efforts and instill confidence A view that new ACOs can build on the experience of past efforts, most notably Medicare Physician Group Demonstration Projects Kaiser, Geisinger, Mayo Clinic models
3 The MSSP ACO Program Section 3022 of PPACA creates the MSSP Program Allows MSSP ACOs to begin contracting by 1/1/12 The program: promotes accountability for a patient population and coordinates items and services under Part A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.
4 ACO Definition A legal entity under state law and comprised of an eligible group of ACO participants that work together to manage and coordinate care for Medicare FFS beneficiaries and have established a mechanism for shared governance that provides all ACO participants with an appropriate proportional control over the ACOs decision making process.
5 Eligibility and Governance An entity formed under state law capable of: (1) receiving and distributing savings; (2) repaying shared losses; (3) establishing, reporting, and ensuring all participants comply with program requirements; and, (4) performing other required ACO functions. Participants represent at least 75 percent control Medicare beneficiaries represented in governance Potential CMS oversight on meaningful governance roles
6 MSSP Participation Requirements Participating primary care professionals sufficient for the number of Medicare fee-for-service beneficiaries assigned At least 5,000 beneficiaries The ACO shall provide the Secretary with such information regarding ACO professionals participating in the ACO as the Secretary determines necessary to support the assignment of Medicare fee-for-service beneficiaries to an ACO, the implementation of quality and other reporting requirements, and the determination of payments for shared savings
7 Leadership and management structure that includes clinical and administrative systems and appropriate Board representation (including consumers) Processes to promote evidence-based medicine and patient engagement report on quality and cost measures, and coordinate care, such as through the use of telehealth, remote patient monitoring, and other such enabling technologies An ability to meet patient-centeredness criteria specified by the Secretary, such as the use of patient and caregiver assessments or the use of individualized care plans
8 Cannot participate in other Medicare shared savings programs A process for evaluating the health needs of the population it serves
9 Types of ACOs Two types of ACOs that are based on Medicare FFS payments. No partial capitation program is proposed (likely to be tested in CMMI which just announced an effort as well as the Pioneer ACOs). Shared Savings Model: One-sided Risk: ACO can qualify for a portion of shared savings in all three years, and is at risk for losses in the third year. In the third year, the payment model will mirror the first year standard of the two-sided risk model, but third-year quality standards will apply. Shared Savings/Loss Model: Two-sided Risk: ACO can share savings and assumes risk of sharing losses for all three years.
10 Shared Savings Determination For each ACO, CMS is required to: o establish a benchmark; o compare the benchmark to the assigned beneficiary per capita Medicare expenditures for each performance year; o establish the percentage that expenditures must be below the applicable benchmark to realize savings; o determine the appropriate sharing rate for ACOs that realize savings; and, o determine the required sharing cap on total amount of savings that can be paid to an ACO.
11 Calculating the Benchmark Expenditure benchmark involves: o determining the patient population to be used for historical expenditure experience; o making appropriate adjustments in spending levels for beneficiary characteristics (e.g. health status, demographics); o determining whether any other adjustments to the benchmark are warranted; and, o identifying a method for trending the 3-year benchmark to the agreement period and for updating the benchmark for each performance year.
12 Calculating the Benchmark (cont.) To be set using Part A and B FFS expenditures incurred by beneficiaries who would have been assigned to the ACO in each of the three prior years (as if the ACO had been in existence.) Uses a risk adjustment method that accounts for age, gender, Medicaid status, basis for Medicare entitlement, and diagnostic information based on the CMS Hierarchal Condition Category (which is used in Medicare Advantage). Excludes payments related to PQRS, e-prescribing, and EHR incentives for eligible professionals. IME and DSH payments, geographic payment adjustments, and hospital EHR incentives are included.
13 ACO Shared Saving Amounts One-sided risk model: ACOs that exceed the MSR are eligible to share in net savings above a 2% threshold (that Medicare will retain). Can receive up to 50% of allowable shared savings. ACOs with less than 10,000 beneficiaries may qualify for an exemption from 2% net savings threshold. Increased sharing rates of up to 2.5% for ACOs with FQHCs and/or RHCs. A flat 25% withhold is applied to any earned performance payment to guard against potential losses in year three. Maximum sharing cap is 7.5% of ACOs benchmark.
14 ACO Shared Saving Amounts (cont.) Two-sided risk model: This type of ACO can receive up to 60 percent of the allowable shared savings. Able to share in first dollar savings once the MSR is exceeded. Increased sharing rates up to 5 percent for ACOs with FQHCs and/or RHCs. Maximum sharing rate is set at 10 percent of ACOs benchmark. For shared losses, there is a cap of 5 percent in 1 st year, 7.5 percent in 2 nd year, and 10 percent in 3 rd year.
15 Quality Requirements Performance Standard: An ACO will be considered to have met the quality performance standard if they have reported quality measures and met the applicable performance criteria for each of the three performance years. First year Quality performance standard defined as full and accurate measures reporting. Future years Defined based on measure scores. Proposed Quality Measures: 65 measures in 5 domains are proposed for use in the calculation of the ACO Quality Performance Standard.
16 Public Reporting CMS believes increased transparency would support a number of program requirements. Therefore, CMS proposes to publicly report on several aspects of an ACOs operation and performance, including: o Providers and suppliers participating in the ACO; o Parties sharing in the governance of the ACO; o Quality performance standard scores; and, o General information on how an ACO shares savings with its members.
17 Other Factors of Importance Physician Self-Referral Waivers Anti-Kickback Statute Waivers CMP Waiver
18 Antitrust FTC and DOJ issued a joint proposed Policy Statement on how antitrust laws should be enforced for healthcare collaborations among otherwise independent providers and provider groups seeking to be an ACO. The Agencies will apply a rule of reason analysis to ACOs operating under the Medicare program and will apply the same analysis to the ACO in the commercial market if the ACO uses the same governance and leadership structure and clinical and administrative processes. An ACOs share of services in each ACO participants Primary Service Area (PSA) is the key variable. FTC and DOJ contend that higher market share correlates to a greater risk that the ACO may be anticompetitive.
19 Antitrust (cont.) The agencies establish three tiers to evaluate ACOs based on the combined share for each common service within a PSA as follows: o Antitrust Safety Zone: ACOs with combined shares of services of 30 percent or less. No initial review by the Agencies is required. ACOs will not be subject to enforcement actions. o Voluntary Expedited Review: ACOs with combined shares of services greater than 30 percent but less than 50 percent. Initial review by the Agencies is not required. These ACOs subject to investigation. The ACO can ask for a review. The Agencies will respond within 90 days. o Mandatory Expedited Review: ACOs with combined shares of services greater than 50 percent. Initial review by the Agencies is required. A letter from the Agencies indicating there is no present intention to challenge the ACOs is a prerequisite before CMS can enter into an ACO agreement. The Policy Statement provides guidelines for calculating market share of services.
20 Internal Revenue Service Issues Exemption under 501(c)(3) Tax on Unrelated Business Income Inurement
21 Internal Revenue Service The need for arms length written agreements ACO certification by CMS Distributions proportional to benefits or contributions Losses dont exceed share of benefits All contracts with tax exempt organizations and between ACO and ACO participants (where TE organization is involved) are at fair market value
22 The Response to The Proposed Regulation April publication A resounding thud Too complicated Too expensive Insufficient reward Level of quality burden and benchmarks
23 Balancing Risk and Gain RISK n Start-up Costs (agreements, data systems, care protocols, MA-like compliance) n Potential FTC Market Scrutiny n Chance of meeting ever changing Quality Scores and attaining the 52.5%-65% sharing n Lag in Shared Savings payments (~2 years) n 25% withhold on Shared Savings payments n Upside Capped at 7.5% - 10% GAIN In best case scenario will get 10% reward for 3 years of risk bearing, fully paid out 5 years after the start of program. On 10,000 beneficiaries in an average cost area it could be $10-12 million; high cost area (Miami) $20-22 million n Possible losses of up to 10% n Unilateral CMS requirement changes
24 Next Steps Prepayment of savings Pioneer ACOs Demonstration projects The commercial market moves forward with its own ACOs