ACOs: The Final Rule and New Opportunities 1 Presenters John M. - - PowerPoint PPT Presentation

ACOs: The Final Rule and New Opportunities

November 2011

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Presenters

John M. Kirsner, Esq. is a health care partner at Squire Sanders, focusing

his practice on payor/provider issues, provider alignment and integration, and health care antitrust analysis. He moderated the 2011 University of Miami ACO Forum, which received national coverage from C-SPAN.

Paul Lee is senior partner and founder of Strategic Health Care in Washington,

D.C. where he advises clients on strategies and federal opportunities. He is a former senior staffer in the U.S. Senate, a hospital association executive and has led Strategic Health Care for 17 years.

Marian Lowe is a partner at Strategic Health Care in the Washington, D.C.

• ffice, where she advises clients on Medicare policy and strategy, particularly in

identifying opportunities for hospitals and ambulatory providers to take advantage of changes in federal reimbursement policies. 2

Peter A. Pavarini, Esq. is chair of the Squire Sanders multidisciplinary Health

Reform Task Force, focusing his practice on representation of hospitals and other health care providers, particularly on integration models and ACO development. He serves on the board of the American Health Lawyers Association.

Presentation Outline

• Overview
• Structure

– Beneficiary assignment – New opportunities for rural and small community providers to create or join ACOs – ACO organization and governance – FTC/DOJ Antitrust – OIG waivers for gainsharing and other collaborations

• Function

– Quality reporting – Electronic data exchange

• Funding

– Advanced funding of ACO start-up costs – Improvements to the shared savings rate

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OVERVIEW

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Overview: ACO Background

• Proposed rule published March 31, 2011

– CMS received 1200 formal comments

• Final rule published October 20, 2011
• Basic ACO concept remains the same

– Voluntary group of providers and hospitals – ACO participants assume some degree of financial risk and the opportunity to share in savings from patient outcomes – Aim is to provide better, more coordinated care for beneficiaries while controlling cost growth

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Major Changes in the Final Rule

• Allows one-sided risk models to

participate in shared savings earlier

– Both risk models start sharing from the first dollar

• Reduces number of quality measures

by half

– 33 measures in 4 domains

• Provides opportunities for ACOs to

receive advanced payments

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Major Changes in the Final Rule

• More flexibility in agreement period

timelines

• Expands eligibility to include FQHCs

and RHCs

• Changes beneficiary assignment

process to a two step process

• Extends pay for reporting period into

years 2 and 3

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Interaction with other programs

• No dual participation in ACO and
• ther shared savings.

– Also cannot be a participant in the independence at home medical practice pilot program

• Anticipates providers will participate in

HIT incentives, PQRI, VBP, and other programs.

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STRUCTURE

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New Beneficiary Alignment Process

• New: Two-step assignment process based on:

– Beneficiary’s use of primary care services from a primary care physician, or – Beneficiary’s use of primary care services from any

• ther ACO professional
• New: Preliminary prospective assignment process

with reconciliation after each performance year

• Uses physicians’ TIN and associated NPIs to

attribute claims

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FQHCs and Rural and Small Community Providers

• The final rule allows FQHCs and RHCs

to form and participate in an ACO

– Required to provide a list of physicians who directly provide primary care services in their facility – Beneficiaries will be assigned based on utilization of their services

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Separate Legal Entity

• Proposed Rule: Requirement that ACO be governed by a separate legal
• entity. (The exception – entities that already have an existing legal entity

recognized and authorized to govern and distribute shared savings under State law.)

– In or out in the Final Rule? IN. – Help or Hindrance? Hindrance. Existing systems may have some body empowered to facilitate shared decision-making (a dusty PHO, for example), but it may not have the power to undertake lofty oversight requirements, such as quality enhancement and cost-effectiveness.

• The Good: There is an exception (but realistically, few existing entities will

qualify for it)

• The Bad: Creation of a new entity is costly; maintenance of multiple boards

is complicated; payer relationships with existing board may be compromised

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Control of Governing Body

• Proposed Rule: Requirement that each ACO participant have a seat on,

and proportionate control of, the governing body.

– In or out in the Final Rule? OUT. – Help or Hindrance? Help. Forced proportionate control may have run afoul of State corporation laws, and left room for abuse by individual interests. But a “voice” for all participants is still mandatory.

• The Good: CMS’ efforts to allow ACOs flexibility in their governing bodies

will be welcomed.

• The Bad: Boards will be on their own to make sure they don’t take license

with the freedom. They’ll be left to deal with their own power struggles, while preventing collusion and conflicts of interest.

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Representation on Governing Body

• Proposed Rule: ACO participants must have at least 75% control of

governing body; one board member must be a Medicare beneficiary representative served by the ACO.

– In or out in the Final Rule? IN. – Help or Hindrance? Help – depending on your capacity for creativity. CMS emphasized “provider-driven” governance, while leaving the door open for participation by non-Medicare enrolled entities (e.g., health plans).

• The Good: CMS expressly declined to require that voting rights or

representation be assigned, in certain percentages, to certain provider types within the controlling 75%.

• The Bad: Again, it may mean “start over” for certain integrated system

governing bodies that had hoped to qualify, as-is. (But the Rule leaves an

• pening even for these systems, who can still qualify by describing for

CMS how they will include ACO participants in innovative ways.)

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Governance

• Proposed Rule: The Proposed Rule was long on proposing how an ACO

governing body should look; short on describing how it should work. – Additional guidance on specific responsibilities and processes are IN the Final Rule. Governing body must:

• Have authority to execute the functions of an ACO;
• Hold management accountable for ACO’s activities;
• Have a transparent governing process;
• Have a conflicts of interest policy;
• Have a fiduciary duty to the ACO;
• Provide for meaningful participation in governing body by ACO

participants.

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Governance, Continued

• Help or Hindrance? Theoretically, a help. Practically, a hindrance.

Though CMS gave more direction as to desired outcomes, the Agency still largely punted as to real solutions for integration at arms’ length, leaving this task to “innovative” systems.

• The Good: Flexibility is the watchword.
• The Bad: The “make it up as you go along” approach will test the patience

and comfort of participants. While applauding its allowance of flexibility, CMS has expressly declined to approve bright-line mechanisms that would ease integration. For example, in the Final Rule, the Agency refuses to deem 501(c)(3) organizations as meeting governance requirements.

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Antitrust – Overview

• The DOJ/FTC Final Statement of Antitrust Policy Regarding ACOs differs

from the Proposed Policy (issued in March) in two major respects: – The entire final policy (except sections regarding voluntary expedited review) applies to all provider collaborations that are eligible and intend (or have been approved) to participate in the Medicare Shared Savings Program. – No more mandatory antitrust review as a condition of entry into the Shared Savings Program.

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Antitrust – ACO Joint Negotiations

• Proposed Statement: The agencies will not challenge as “per se” illegal

ACO joint negotiations with private insurers in commercial markets, but will apply a “rule of reason” analysis in analyzing a potential antitrust violation, under certain conditions: (1) compliance with CMS eligibility criteria, and (2) use of the same governance and leadership structures and clinical and administrative processes in Medicare and commercial markets.

• In or Out of the Final Statement? IN… but the Agencies promise to take

a hard look at quality metrics of ACOs approved by CMS, to see if the CMS eligibility criteria truly equate to bona fide efficiencies.

• The Good: FTC & DOJ confirm that they are on the same page with CMS,

as far as determining what constitutes clinical integration.

• The Bad: FTC & DOJ stop short of deferring to CMS’ judgment, entirely,

yet still refuse to set forth their own guidelines for “clinical integration” sufficient to satisfy review. The potential still exists for different agencies to take different views of true clinical integration.

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Antitrust – ACO Safety Zone

• Proposed Statement: The FTC and DOJ have proposed a formal ACO

safety zone where the Agencies will not, absent extraordinary circumstances, challenge the ACO. The bright line rule states that each physician specialty in the ACO must not exceed 30 percent of the primary service area (PSA) where the ACO participates.

• In or Out of the Final Statement? IN.

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Antitrust – Safety Zone, Continued

• The Good: Unlike the safety zone for physician networks found in the

Health Care Statements, the ACO safety zone does not differ based on whether physicians or other providers are exclusive or non-exclusive to the

• ACO. An ACO will not lose its safety zone status if it later exceeds 30

percent market share solely because it attracts more patients. Plus, the 30% market share limit is for “common services” (you can exceed it if the service isn’t a common one), and there are more exceptions for non- exclusive rural providers and dominant participants. The Agencies will still let these ACOs in the zone, under certain circumstances.

• The Bad: Any hospital or ambulatory surgery center (“ASC”) participating

in an ACO must be non-exclusive to the ACO to fall within the safety zone, regardless of its PSA share. Moreover, with so many opportunities to qualify for safety zone status, Agencies will have more time to scrutinize those that don’t. ACOs falling outside the safety zone must be particularly aware of conduct that could draw Agency scrutiny (for example, improper exchange of competitively sensitive information, and exclusive contracts with ACO providers).

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Antitrust – Optional Expedited 90-Day Review

• Proposed Rule: Mandatory antitrust review for certain collaborations as a

prerequisite for entry into the Medicare Shared Savings Program (“MSSP”).

• In or Out? OUT. This provision is no longer a provision of the MSSP, but

newly formed ACOs may request an expedited 90-day review for additional antitrust guidance.

• The Good: No mandatory review is all good.
• The Bad: With the mandate for preliminary review stricken, organizations

can expect increased enforcement activity from the Agencies. Indeed, the Final Statement promises increased vigilance in this capacity.

• The benefits of the expedited review are obvious, but come with a

significant production burden. ACOs must ask themselves whether, given extensive existing Agency guidance on clinically integrated models, the benefits outweigh the costs.

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Waivers of Fraud and Abuse Laws

• As amended by PPACA, Section 1899(f) of the Act authorizes HHS to

waive the Stark Law, the Anti-Kickback Statute, the Civil Monetary Penalties and certain other laws as necessary to carry out the MSSP.

• Interim Final Rule (“IFR”) on the waivers of these laws was released on

October 20, 2011.

• No regulatory language; just guidance.
• Agencies refuse to describe acceptable arrangements.
• The IFR broadens the scope of the waivers established under the

Proposed Rule.

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Waivers – IFR Overview

• Purpose of changes in the IFR was to respond to criticism that the

Proposed Rule was not expansive enough while ensuring that ACOs do not permit fraud and abuse of federal health care programs.

• Theme throughout IFR: “flexibility, adaptability, and innovation.”
• Each waiver remains subject to stringent criteria.

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Adopted Proposed Rule Waivers

• Proposed Rule: Contained no waivers for the start up and operating

expenses of an ACO.

• Proposed waivers included:

– Shared savings distributions. – Compliance with the physician self-referral law (“Stark Law”).

• IFR’s retains both of these waivers.

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Adopted IFR Waivers

• Adds new waivers for start up costs and operating expenses (limited to
• nly “bona fide” ACO investments):

– ACO pre-participation, covers costs such as hiring staff, IT, consultant support, capital investments and even incentives to attract PCPs. – ACO participation, covers costs that “reasonably relate” to the purposes of the

• MSSP. While not specified by the agencies, these costs most likely include staff

salaries, and rent.

• Also adds a patient incentive waiver for beneficiary inducements to

encourage preventive care and compliance with treatment regimens.

– Although not cited in the IFR preamble, this waiver should probably be read in conjunction with the OIG’s 2002 Special Advisory titled, “Offering Gifts and Other Inducements to Beneficiaries.” – While more expensive gifts may be permitted, gifts or inducements must generally be “inexpensive” (i.e., having a retail value of no more than $10 individually, and no more than $50 in the aggregate annually per patient)

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FUNCTION

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Beneficiary Information

• Beneficiary can opt out of data sharing – can be

done by ACO rather than at point-of-care

• CMS will require review of any ACO marketing

and will guard against ‘misleading’ beneficiaries about their rights or financial obligations.

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Sharing Beneficiary Identification and Claims Data

• CMS will share aggregate reports with an

ACO at the start of the agreement period and each subsequent quarter

• CMS will also share individual data on

prospectively assigned beneficiaries

– ACO must follow HIPAA guidelines and certify that data will be used to improve health or reduce cost growth

• ACOs notify beneficiaries quarterly and offer

them the opportunity to decline in data sharing

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Changes to Quality Reporting

• Decrease from 65 to 33 measures
• Four domains
• Longer phase in period

– Year 1: Pay-for-reporting – Year 2: Combination of pay-for-reporting and performance on 25 of the 33 measures – Year 3: Reporting and performance on 32 of the 33 measures

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Patient experience Care coordination and patient safety Preventive health At-risk populations

Electronic Health Records

• Final rule eliminates the EHR condition
• f participation but encourages ACOs

to develop EHR infrastructure

• EHR utilization will be a quality

measure

– Performance score related to EHRs will be given twice the weight of other quality measures

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FUNDING

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CALCULATING the expenditure benchmark

• Will rely on 3 years of historical data of estimated ACO

participants

• ONLY uses Medicare A&B
• Risk-adjusted using CMS-HCC model
• Trended forward to performance year using absolute

growth in national per capita expenditures for Medicare A&B

• Excludes IME and DSH payments
• Separate expenditure categories for ESRD, disabled,

aged dual-eligible and aged non-dual eligible beneficiaries

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UPDATING benchmark during performance period

• Trend forward each year using national average increase

in per capita expenditures under Medicare A&B

• Updated using fixed dollar amount rather than percentage

increase May be easier for low spending/low-growth areas to demonstrate savings over time

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Shared savings program overview

Design element One-sided model (Track 1) Two-sided model (Track 2) Maximum sharing rate 50% 60 percent Quality scoring Sharing rate up to 50% based on quality performance Sharing rate up to 60% based on quality performance FQHC/RHC participation incentives None None Minimum savings rate Varies by population 2% regardless of size Minimum loss rate N/A 2% regardless of size

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Overview, continued

Design element One-sided model (yr 1&2) Two-sided model Maximum sharing cap Payment capped at 10%

• f ACO benchmark

Payment capped at 15% of ACO benchmark Shared savings First dollar after MSR met; up to 50% of savings up to cap First dollar after MSR met; up to 60% of savings up to cap Shared losses N/A First dollar shared losses once min. loss rate is exceeded. Cap on amount of losses phased in over 3 years starting at 5% and climbing to 10% in yr 3. Shared losses based

• n final sharing rate reflecting ACO

quality performance and other incentives.

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Other design changes to calculation

• No transition to 2-sided risk in Track 1
• Final rule excludes IME/DSH from

benchmark & target

• Historical benchmark expenditures adjusted

based on CMS-HCC

– Newly assigned adjusted using CMS-HCC; continuously assigned (using demographic factors CMS-HCC results in a lower risk score) – Updated benchmark adjusted relative to the risk profile of the performance year.

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One sided model

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What’s Next

• CMS expects to chose 75-150 ACO participants and

achieve $500M-$1B in first 3 years

• Additional rulemaking during the ACO 3-year

window could alter performance standards and

• ther program features.

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ACO Agreement Periods

• Applications received by January 1,

2012 will be considered for

– Term beginning April 1, 2012

• 3 years and 9 months

– Term beginning July 1, 2012

• 3 years and 6 months
• Applications reviewed on a rolling basis

for 2013 and subsequent years

– Start date is January 1 of that year – 3 year agreement period

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ACO Application Process ACO Application Process

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• ACO Application Process – CMS Proposes:
• To adopt the general requirement that ACO applications must be submitted by a published

deadline;

• To review and approve applications from eligible organizations before the end this year;
• The requisite 3-year agreement period begins on the January 1 following approval of an

application; and

• The ACO’s performance periods under the agreement will begin on January 1 of each respective

year during the agreement period.

• Application Format
• 1. Cover Letter
• 2. Application Form
• 3. Executive Summary
• 4. Rationale/Problem Statement
• 5. Proposed Program Design
• 6. Process and Outcome Improvement/Quality Assurance
• 7. Implementation Plan
• 8. Supplemental Materials/ Attachments
• For PGP Demonstration Sites – No Free Pass

SHC’s Three Level Application Support Services

Strategic Health Care has significant experience in developing successful CMS pilot/demo applications. ACO support services are designed to provide only what is necessary to submit a successful application.

• 1. In-depth Editing and Peer Review of Client Developed ACO Application
• In-depth review of Client’s application with written recommendations for correcting

weaknesses and exceeding requirements 2.Consulting Support for Client Developed ACO Application

• Support Client in developing a timeline of ACO application deliverables
• Working with and organizing Key Stakeholders to meet the deliverables
• In-depth review of Client’s application with written recommendations for correcting

weaknesses and exceeding requirements 3.Development and Writing of Client ACO Application

• Support Client in developing a timeline of ACO application deliverables
• Working with and organizing Key Stakeholders to meet the deliverables
• Writing all narrative sections
• Compiling all required attachments
• In-depth review of Client’s application with written recommendations for correcting

weaknesses and exceeding requirements

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Legal Services for Application Support

• Squire Sanders will provide legal services supporting the ACO application in the

core competency areas of governance structures, antitrust planning considerations, and application of the OIG waivers to healthcare anti-fraud and abuse laws. The amount of support will vary, in each core competency area, based on the scaled, increasing levels of support desired by the client (e.g., in depth editing; consulting support; and drafting of the application). – Governance: Review existing structure; analyze strategic options and alternatives; consider "loose" versus "tight" structures; and role of hospital, specialists, PCPs, other providers – Antitrust: Apply Agency analysis of ACO safety zone and related Agency guidance to governance models under consideration; and interface with Agencies as appropriate regarding chosen models – Waiver: Apply OIG waiver analysis to governance and operational models under consideration; consider alternative models/structures; and interface with OIG as appropriate regarding chosen governance and operational models

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Contact Information

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Strategic Health Care Squire Sanders & Dempsey

Paul Lee Senior Partner Paul.Lee@shcare.net John M. Kirsner Partner John.Kirsner@ssd.com Marian Lowe Partner Marian.Lowe@shcare.net Peter A. Pavarini Partner Peter.Pavarini@ssd.com www.strategichealthcare.net www.ssd.com