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Accountable Care Organizations

Preliminary Look at Proposed Regulations

Oregon State Bar Health Law Section

Brown Bag Lunch Discussion

June 10, 2011

Peter D. Ricoy

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Basis of presentation

• CMS published proposed rule in federal register Thursday April 7, 2011.

• Focus is on ACO organizational requirements

• Not covered: fraud & abuse, antitrust waivers, IRS guidance, Pioneer Model

• Final rules to be issued in the future means content in this presentation will be stale in future.

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Outline

1. Background of ACO Program

2. ACO Requirements

3. Quality Measures

4. Savings

5. Oregon CCO Concept

6. Discussion

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General Advice Hypotheticals

You are an attorney in private practice approached by each of the following wanting to know: “There was a news article about ACOs. Should I be doing something?”

• Physician Group• Hospital• Health Plan• Director of State’s Medicaid Program• Chair of State Workers Benefits Board• Physical Therapy Practice• Self-Funded ERISA Plan

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• Chiropractor

• National Dental Practice

• Naturopath

• OIG Investigator


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You are an attorney in private practice approached by each of the following wanting to know: “Is it a good idea for me to form or join an ACO or CCO?”

• Small Group, 3 Physician Primary Care Practice

• Specialty 5 Physician Orthopedic Surgeons

• Large Multispecialty Physician Clinic 150 physicians, including primary care, dominant in a geographic area

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General Advice Hypotheticals• Large multispecialty clinic, 150 physicians, no-primary care

• Large Single Specialty Group of 50 Radiologists

• Large Hospital in Urban Area, many employed physicians

• Large Hospital in Urban Area, no/limited employed physicians

• Only Hospital in rural county, no employed physicians

• Staff-Model HMO-style Health Plan

• PPO Health Plan – Network only

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Background: Basis for Shared Savings Program?

• Section 3022 of PPACA added section 1899 of Social Security Act to promote accountability for a patient population under Parts A and B;

• Program required to be established by January 1, 2012;

• On November 10, 2010, CMS published a request for information (RIF) regarding accountable care organizations.

Reference: 76 FR 19531

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Background: Why do we Need ACOs?

Current medical system:– Fragmented services across providers;

– Little coordination of care;

– Pays for units of service rather than outcomes; and

– Holds no one organization or individual responsible for either the quality or cost of care.

Reference: Congressional Research Service, “Accountable Care Organizations and the Medicare Shared Savings Program”, David Newman, November 4, 2010.

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Background: Estimated Impact of ACOs

Congressional Budget Office Estimated ACO Program

– Reduce Medicare expenditures $4.9 billion over the 6 year period.

– After two years, 20% of fee-for-service Medicare beneficiaries would be assigned to participating primary care physicians.

– By 2019, 40% would be assigned.

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Background: Key Definitions“ACO Professional”

Physician

Physician Assistant

Nurse Practitioner

Clinical Nurse Specialist

“ACO Provider”Hospital

Skilled Nursing facility

Home Health Agency

Hospice

Others

“ACO Participant”ACO Provider (e.g. hospitals & others)

ACO Supplier (e.g. physicians, & others)

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Background: Who can be an ACO?

5 Categories:

1. ACO professionals in group practices

2. Networks of individual practices of ACO professionals

3. Partnerships or joint venture arrangements between hospitals and ACO professionals

4. Hospitals employing ACO Professionals

5. Other groups or providers and suppliers determined by CMS

Reference: SSA Sec. 1899(b)

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Emphasis on Physicians

“The emphasis is on physicians rather than insurers or hospitals since physicians ‘control (directly or indirectly) 87% of all personal health spending.’”

- CRS ReportReference: Congressional Research Service, “Accountable Care Organizations and the Medicare

Shared Savings Program”, David Newman, November 4, 2010.

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What is an ACO?

• Legal entity

• Comprised of eligible “ACO Participants”

• Manage and Coordinate Care for Medicare fee-for-service beneficiaries

• Establish mechanism for shared governance

Reference: Proposed 42 CFR 425.4

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Provider Payments Continue as Usual

Reference: Section 1899(d)(a)(A) of SSA; 76 FR 19532, 19602,

Payments continue to be made to providers of services and suppliers participating in an ACO under original Medicare FFS program under Parts A and B in the same manner they would otherwise be made, except that a participating ACO is eligible for shared savings payment.

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Assignment of Beneficiaries

‘‘(c) ASSIGNMENT OF MEDICARE FEE-FOR-SERVICE BENEFICIARIES

TO ACOS.—The Secretary shall determine an appropriate method to assign Medicare fee-for-service beneficiaries to an ACO based on their utilization of primary care services provided under this title by an ACO professional described in subsection (h)(1)(A).

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Retrospective Beneficiary Assignment

• Beneficiaries are assigned to an ACO based on their utilization of primary care services by a ACO-affiliated primary care physician

• CMS will add up the total allowed charges for primary care services for each beneficiary for each ACO, and assign a beneficiary based on where beneficiary received a “plurality” of services.

• Neither primary care providers nor specialists know whether a particular patient at treatment point is in ACO or not.

Reference: Proposed 42 CFR 425.6.

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How does an ACO qualify for a Shared Savings payment?

3 Key Requirements Maintain ACO eligibility requirements Meet quality performance standards Exceed minimum savings rate

Reference: Proposed 42 CFR 425.5(2)

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Legal Entity Requirements

• State law recognized legal entity

• Perform key functions:

– receiving and distributing shared savings

– repaying losses

– meeting reporting requirements

– ensuring ACO participants comply requirements

• Unique TIN

• Not necessarily enrolled in Medicare; not necessarily licensed to practice medicine or provide clinical services

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Governance

ACO’s governing body:

• Must have adequate authority to execute ACO functions

• Must accept responsibility for administrative, fiduciary, and clinical operations.

• Must be comprised of:

– ACO participants or representatives

– Medicare beneficiary representatives


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Governance (Continued)

• At least 75% control of the ACO’s governing body must be held by ACO participants.– Comment: Leaves open possibility that 25% could be in control of

health plan or management company.

• Each ACO participant must choose appropriate representative and have “appropriate proportionate control” over governing body decision making.

• Governing body must be separate and unique to ACO in cases where the ACO comprised multiple otherwise independent entities


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Can Existing Boards Qualify?

“If the ACO is comprised of a single entity that is financially and clinically integrated, and if at least 75 percent control of the entity’s governing body is comprised of representatives of the entity, the ACO governing body may be the same as the governing body of that entity, provided it satisfies the other requirements of this section”

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Leadership• Must be managed by executive whose

appointment and removal are under control of governing body.

• Must have leadership team that has “demonstrated ability to influence or direct clinical practice to improve efficiency processes and outcomes”.

• Must have full-time senior medical director who is board-certified physician and on location.


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ACO Qualification Requirements

• Clinical Integration. Must have a “meaningful commitment” to the ACO’s clinical integration program to ensure likely success.– ACO participants have a meaningful financial or “human” investment in

the ACO to motivate appropriate behaviors

• Quality Assurance. Physician-directed quality assurance and process improvement committee must oversee program that established internal performance standards for quality, cost, and outcomes.

• Evidence-Based Medicine. Must implement program to promote evidence-based medical practice or clinical guidelines.

• Marketing Guidelines. All ACO marketing communications get approved prior to us.

Reference: Proposed 42 CFR 425.5(9), (4)

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ACO Qualifications (Continued…)• Participant Agreement. Participants must agree to comply with

guidelines and process, and ACO must have ability to expel those not meeting requirements.

• Infrastructure & IT. Must be able to collect and evaluate data and provide report cards to participants.

• Compliance Plan. Must have a designated compliance official (not legal counsel). Comply with False Claims Act, anti-kickback statute, physician self-referal law, civil monetary pentalies law.

• Sufficient Number of Beneficiaries and Providers. ACO must have an assigned population of 5,000 or more beneficiaries and a sufficient number of primary care physicians to support that population.

Reference: Proposed 42 CFR 425.5(9), (10)

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ACO Qualifications Continued ….

• Proof of Patient-Centered Focus. ACO must provide documentation of plans to:– Promote evidence-based medicine

– Promote beneficiary engagement

– Internally report quality and cost

– Coordinate care

– Conduct CAHPS survey

– Promote patient involvement in governance

– Implement process for evaluating population health needs


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ACO Qualifications (Continued…)

• Proof of Patient-Centered Focus. ACO must provide documentation of plans to:– Communicating clinical knowledge in “a way that is

understandable to them” (plain English? Plain Spanish?)

– Process for beneficiary engagement and shared decision-making that takes into account the beneficiaries’ “unique needs, preferences, values and priorities.”

– Standards in place for beneficiary access and communication

– Processes for measuring clinical or service perforance by physicians and using these results to improve care and service over time.


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• Distribution of Savings. A description of how it plans to distribute savings, achieve specific goals, and achieve better care, better health, and lower costs.

• Three-Year Agreement. Can elect for “Track 1”, one-sided model for savings, or “Track 2” for two-sided.

• Reinsurance. ACO must obtain reinsurance, place funds in escrow, surety bonds, or line of credit to ensure repayment of losses under “Track 2”

ACO Qualifications Continued ….

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Quality Measures

• CMS selects the measures designated to determine an ACO’s success in promoting:– better care for individuals

– better health for populations

– lower growth in expenditures

• CMS selects the quality performance standards

• ACOs must submit data on the measures according to method established by CMS.

Reference: Proposed 42 CFR 425.9.

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Quality Measures

1. Patient/caregiver experience (7 measures)

2. Care coordination (16 measures)

3. Patient safety (2 measures)

4. Preventative health (9 measures)

5. At-risk population/frail elderly health (31 measures)

Reference: Proposed 42 CFR 425.10 and 76 FR 19571-19591.

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Quality Measures

Patient / Caregiver Examples– How well doctors communicate

– Helpful, courteous, respectful staff

– Getting timely care, appointments and information

– Patients’ rating of doctor

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Quality Measures

Care Coordination Examples– Hospital readmission rate within 30 days of discharge

– Hospital discharge rate -- diabetes complications

– Hospital discharge rate – congestive heart failure

– % of physicians meeting HITECH “Meaningful Use”

– % of PCPs who are electronic prescribers

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Quality Measures

Patient Safety Examples– Foreign object retained after surgery

– Falls and trauma

– Accidental puncture or laceration

– Blood Incompatibility

– Poor Glycemic Control

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Quality Measures

Preventive Health Examples– Influenza Immunization

– Pneumococcal Vaccination

– Mammography Screening

– Cholesterol Management

– Blood Pressure Measurement

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Quality Measures

At Risk Population Examples– Diabetes: Aspirin Use, Tobacco Non-Use, Foot Exam

– Heart Failure: Weight Measurement, Beta-Blockers

– Coronary Artery Disease: Oral antiplatelet therapy, cholesterol, ACE Inhibitor

– Hypertension: Blood Pressue & Plan of Care

– Frail Elderly: Osteoporosis management, INR testing

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Calculating Quality

• CMS Defines:– Minimum attainment level– Performance benchmark

• Each 5 domains is equally weighted• All measures within a domain must have a score above

minimum attainment for the domain to be scored• If ACO satisfied the quality performance standards for

one or more domains and savings, ACO may receive a proportion of shared savings.

• CMS retains audit rights

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Savings

• Track 1

– One-sided risk during first two years

– Two-sided risk during third year

– Two-sided risk thereafter

• Track 2

– Two-sided risk from start and going forward

Reference: Proposed 42 CFR 425.10 and 76 FR 19571-19591.

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Savings

Establishing Expenditure Baseline. – CMS identifies beneficiaries that would have been assigned to

the ACO in most recent 3-year period.– Adjust for health status using “CMS-Hierarchical Condition

Categories”.– Truncate per capita expenditures at 99th percentile to eliminate

large claim variations.– Expenditures would be indexed using Medicare growth rates

based on national spending growth levels (not local).– Adjustments for “minimum savings rates” to reduce random

fluxuations based on the size of the ACO – 6-Month runout period

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Savings (Continued)

• One-Sided Risk:

– ACO receives up to 50% of Savings

– Cap of 7.5%

• Two-Sided Risk:

– ACO receives up to 60% of Savings

– Cap of 10%

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ACO vs HMO Key Differences

• Patient’s Perspective: No Gatekeeper: Can still go to any Provider inside or outside of network.

• Provider’s Perspective: No Capitated Payments: payments based on quality and savings

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Oregon’s Coordinated Care Organizations*

* Based on Proposed Legislation, HB 3650

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Oregon “Coordinated Care Organizations” – Big Picture• CCOs are a legislative concept passed by Oregon

Special Joint Legislative Committee (HB 3650).• Intent is to creates a new and integrated health care

delivery system for the Oregon Health Plan• Replace current system of managed care orgainizations• Federal waiver to address “dual eligibles” (Medicare /

Medicaid).• Coordinates / integrates care among physical health,

mental health, chemical dependency and dental health providers.

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Oregon CCOs – Big Picture

• “Global Budget” for each CCO.

• Significant rulemaking required; in the interim, the authority “shall renew” the contracts of prepaid managed care health services organizations

• In any area of the state where CCO not certified, OHA continues to contract with managed care organization

• OHA may amend current contracts to allow prepaid managed care health services organizations that meet the criteria to become CCOs.

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CCO Organizational Requirements

Oregon Health Authority to adopt by rule criteria for CCO.

• CCO may be a single corporate structure or a network of providers organized through contractual relationships.

• CCO must either be:

(1) community-based organization; or

(2) statewide organization with community-based participation in governance; or

(3) any combination of the two.

• “Community” means groups within geographic area served by CCO & includes groups by age, ethnicity, race, economic status or other characteristic that may impact health care delivery

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Governance Structure Must Include:

1. Consumers of CCO Services;

2. Persons that Share in the Financial Risk of the CCO;

3. Major “Components” of health care delivery system; and

4. Community at large.

CCO must convene a community advisory council, including community and county government representatives to “ensure” health care needs are being met

CCO Organizational Requirements

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CCO Global Budget• Each CCO will have a fixed, global budget -- a total amount

established prospectively by OHA to deliver care to all CCO members;

• OHA to develop global budgeting process;

• Legislative Fiscal Office not quantify fiscal impact yet; news reports of savings in the second year of around $500 million in total funds;

• OHA to adopt a rule with safeguards to protect against underutilization & service denials

• Members and providers may appeal denials under contested case hearings

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CCO Payment MechanismsOHA to “Encourage” CCO reimbursement (within the CCO

system) methodologies:

1. Reimburse on outcomes and quality;

2. Hold providers responsible for efficiency;

3. Reward good performance;

4. Limit medical cost inflation;

5. Promote prevention, person-centered care such as use of primary care homes;

6. No reimbursement of never events;

7. Transitional provisions for rural hospitals.

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Network Issues• Members required to use CCO if available

• Members have a choice of providers within network

• Should Include providers of specialty care

• A “health care entity” may not unreasonably refuse to contract with an organization seeking to form CCO if participation necessary to qualify as CCO

• A health care entity that unreasonably refuses to contract with a CCO may not receive fee-for-service reimbursement from the authority for health services that are available through CCO

• Providers may participate in multiple CCOs

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CCO Quality Measures

• OHA to develop outcome and quality measures

• Must include ambulatory care, inpatient care, chemical dependency and mental health treatment, oral health care and other services

• Must include demographic variables including race and ethnicity

• Incorporate measures into contracts to “hold the organizations accountable for performance and customer satisfaction”

• Information must be published, including quality measures, costs, outcomes, and other information necessary to evaluate value of CCO

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List of Qualifications & Aspirations

• Members have relationship with a stable team of providers responsible for comprehensive care provided;

• Supportive and therapeutic needs of each member are addressed in a holistic fashion using patient centered primary care homes and individualized care plans;

• Transitional care when entering and leaving an acute care or long term care facility;

• Members receive navigational assistance through certified health care interpreters, community health workers, and personal health navigators;

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• Services geographically located as close to where members reside as possible;

• CCO uses health information technology to link services and providers across the continuum of care;

• CCO prioritized working with members who have high health care needs, multiple chronic conditions, mental illness or chemical dependency;

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• Providers work together to develop best practices for care and service to reduce waste and improve the health and well-being of members;

• Educated about the “integrated approach”

• Emphasize prevention, healthy lifestyle choices, evidence-based practices, shared decision-making

• Each member must be encouraged to be an “active partner” in directing the member’s health care and services;

• Members family should receive timely, complete and accurate information to participate in care and to have family knowledge, values, and cultural backgrounds respected

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• Members must have access to competent advocates and assistance that is “culturally appropriate”

• Must implement patient centered primary care homes & require providers to communicate and coordinate using electronic health information technology

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Other

• Antitrust: Intent to use State Action Doctrine to provide immunity from federal anti-trust laws;

• Study defensive medicine and make recommendations regarding caps on medical liability damages

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Discussion ….. Please Share Your Ideas!

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Perspectives….(Big Picture)

Kathleen Sebelius“The Affordable Care Act is putting patients and their

doctors in control of their health care,” said HHS Secretary Kathleen Sebelius. “For too long, it has been too difficult for health care providers to work together to coordinate and improve the care their patients receive. That has real consequences: patients have gaps in their care, receive duplicative care, or are at increased risk of suffering from medical mistakes. Accountable Care Organizations will improve coordination and communication among doctors and hospitals, improve the quality of the care their patients receive, and help lower costs.”

Reference: http://www.hhs.gov/news/press/2011pres/03/20110331a.html

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Perspectives….(Big Picture)Michael F. Cannon, Director of Health Policy Studies at the Cato

Institute

“Medicare's idea of encouragement is this: If doctors and hospitals invest substantial resources to form an ACO, and better care coordination reduces the amount they bill Medicare, then the ACO will get to keep part of the savings.

"Here's a flash for the policy wonks pushing ACOs," writes industry expert Robert Laszewski. "They only work if the provider gets paid less for the same patient population. Why would they be dumb enough to voluntarily accept that outcome?“”

Reference: Michael F. Cannon, “ACO Debacle Exposes Obamacare's Fatal Conceit (Guest Opinion)”, Kaiser Health News, June 3, 2011. http://www.kaiserhealthnews.org/Columns/2011/June/060311cannon.aspx

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Will Private Industry Follow CMS’ lead?

• Hospital DRG reimbursement started out as a CMS payment policy.

• Physician PPS started out as CMS payment policy.

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Several National Health Plans Have Announced Commercial ACOs …..…

Cigna Aetna Humana United Healthcare Anthem Blue Cross Blue Shield

… Will Oregon Health Plans Follow?

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Perspectives…..(Risk Models)

American Medical Association:

“The AMA urges CMS to provide a payment option that includes shared savings only (“one-sided risk”) without the mandatory shared loss provision. We believe an option allowing ACOs to receive shared savings, without the down-side risk, will encourage participation by a greater variety of physician practices.”

Reference: AMA letter to Donald Berwick, June 3, 2011.

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Perspectives ….(Complexity)

American Medical Group Association: Without dramatic changes to the proposed rule, it is our considered

opinion that ACOs will be unsuccessful from inception and that the best opportunity for health care delivery reform in decades, and its potential for attendant improvements in care for millions of Americans, may be lost….

Determining attractiveness of ACO participation is a function of the sum of all of the requirements and conditions of participation measured against the likelihood of financial benefit, assessed in the context of meshing program and institutional goals. CMS has created a design specification encompassing onerously complex application and participation requirements coupled with unbalanced risk/reward criteria, that disadvantages ACO entities.

Reference: AMGA letter to Donald Berwick, June 6, 2011.

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Perspectives…..OR & WA

Oregon Association of Hospitals and Health Systems:“Our key concern is that the proposed rules places

handicaps on low cost states like Oregon that have a track record of providing care to Medicare beneficiaries at costs lower than the national average. This proposed rule sets a lower expenditure benchmark for low-cost regions like ours which will limit the achievable shared savings and increase the risk of exceeding the benchmark. We propose a methodology which would be equitable to states like Oregon and would not penalize them for historically keeping Medicare costs down. We suggest that CMS develop a “low-cost state reward multiplier.”

Reference: OAHHS letter to Donald Berwick, June 3, 2011.

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Perspectives … OR & WA

Washington State Hospital Association We are concerned that many providers in Washington State have

already taken significant steps to reduce cost and unnecessary services. Many providers in our state have lower utilization rates, when adjusted for acuity, than their counterparts in other areas of the country. These more efficient, less costly providers should not be disadvantaged when calculating shared savings payments. It is potentially more difficult for providers with lower overall costs per beneficiary to achieve significant savings in upcoming time periods.

CMS should create a shared savings model that also incentivizes more efficient, less costly providers to become an ACO. If the shared savings model does not take lower baseline spending into consideration, more efficient providers may not participate

Reference: WSHA letter to Donald Berwick, December 3, 2010.

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Perspectives…(Assignment)

American Medical Association:

“The AMA urges CMS to adopt a more flexible approach to beneficiary assignment to an ACO….We urge that instead of retrospective attribution, CMS should adopt a prospective approach that allows patients to volunteer to be part of the ACO and permits the ACOs to know up-front those beneficiaries for whom the ACO will be responsible.”


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Perspectives …(Assignment)

American Medical AssociationConsequently, CMS should seek to maximize the extent to

which an ACO is held accountable only for those patients who voluntarily choose its physicians to provide or manage their care, and who are willing to allow the ACO to access data about the patients’ services. It should also seek to minimize or eliminate the use of statistical attribution methodologies, particularly retrospective attribution, after care has already been delivered. At a minimum, CMS should create one payment option that allows beneficiaries to elect participation in an ACO and makes ACO-related payments based only on the beneficiaries who make that election.


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Perspectives ……(Governance)America’s Health Insurance Plans:“The proposed rule limits the role that health plans and other non-

provider stakeholders can play in the formation and governance of ACOs. We question the practicality of CMS prescribing such an arbitrary governance standard. CMS’ focus should be ensuring that an ACOhas a demonstrated ability to treat individuals, improve population health, and create programs and perform outreach to reduce unnecessary care. To that end, ACOs should have the maximum amount of flexibility to create governing bodies that best meet their individual needs and help them achieve the intended goals of the MSSP, and should not be subject to a “one-size fits-all approach to governance which would prohibit the establishment of potentially effective alternatives.”

Reference: AHIP letter to Donald Berwick, June 6, 2011.

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Perspectives …(Governance)

American Medical Group Association

Drop the requirement to have beneficiaries on the governing body, as this is unduly intrusive into the operations and organization of a private business, is impossible for many under state law, and a heavy burden for most.

Reference: AMGA letter to Donald Berwick, June 6, 2011.

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America’s Health Insurance Plans“ACOs could have an incentive, and through the aggregation

of market power an enhanced ability, to obtain shared savings payments by reducing Medicare expenditures to achieve “savings” under the MSSP and compensate for the reduced expenditures by charging higher rates and possibly reducing quality of care in the private market. This is not the intent of the ACA or the MSSP. Thus, the MSSP should require reporting by ACOs to determine whether such cost shifting is occurring, and any MSSP participants that engage in cost shifting should be terminated from the MSSP, or at a minimum, have their shared savings payments reduced by the amount of the cost shift.”

Perspectives ……(Cost Shifting)

Reference: AHIP letter to Donald Berwick, June 6, 2011.

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You are an attorney in private practice approached by each of the following wanting to know: “There was a news article about ACOs. Should I be doing something?”

• Physician Group• Hospital• Health Plan• Director of State’s Medicaid Program• Chair of State Workers Benefits Board• Physical Therapy Practice• Self-Funded ERISA Plan

www.schwabe.com


• Chiropractor

• National Dental Practice

• Naturopath

• OIG Investigator


www.schwabe.com



You are an attorney in private practice approached by each of the following wanting to know: “Is it a good idea for me to form or join an ACO or CCO?”

• Small Group, 3 Physician Primary Care Practice

• Specialty 5 Physician Orthopedic Surgeons

• Large Multispecialty Physician Clinic 150 physicians, including primary care, dominant in a geographic area

www.schwabe.com


General Advice Hypotheticals• Large multispecialty clinic, 150 physicians, no-primary care

• Large Single Specialty Group of 50 Radiologists

• Large Hospital in Urban Area, many employed physicians

• Large Hospital in Urban Area, no/limited employed physicians

• Only Hospital in rural county, no employed physicians

• Staff-Model HMO-style Health Plan

• PPO Health Plan – Network only

www.schwabe.com


Peter D. RicoySchwabe, Williamson, & Wyatt, PC

1211 SW 5th, Suite 1900Portland, OR 97204

Email: [email protected]: 503-796-2973.

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