A unique vision for an ever-changing healthcare environment ACOs the Medicare Shared Savings Program And Other Healthcare Reform Payment Methods Presented by Joe Laden, President, ORVA, LLC
The Environment Patient Protection and Affordable Care Act PPACA (Obamacare) Healthcare 18% of GDP Healthcare Reform U.S Budget Crisis 2012 Election The country has run out of money
Possible Healthcare Solutions Cut Provider Fees Price Controls Rationing Universal Healthcare Medicare/Medicaid for All Capitation Reinstitute HMOs Bundled Pricing Physician Extenders (replacements)
ACO to the Rescue Accountable Care Organization Medicare 47.5 million beneficiaries 15.5% of populstion 35%-45% of medical practice Non-Medicare
ACO General Definition A partnership among health care providers to coordinate and deliver efficient care Assumes joint accountability for improving quality and slowing cost growth
ACO Definition Organization Legal Entity Provider Owned Hospital, Physician Healthcare Delivery Payment System Local
ACO Definition Care Coordinated Quality Primary Care Based
ACO Definition Accountable for... Assigned Base of patients Continuum of Care Cost Total per Capita Quality
ACO Characteristics Based on Idea That More Integration Equals Less Cost as Observed in Mayo Clinic and Kaiser Models
ACO Origin -2005 10 Physician Groups 5 Year Demonstration Kaiser Permanante HealthCare Partners Medical Group Brookings/Dartmouth 5 Group Pilot with Humana, UHC & Anthem
The Medicare ACO Authorized by section 3020 of the Patient Protection and Affordable Care Act (ACA) CMS Directed to establish a Shared Savings Program Facilitate Coordination Among Providers Solve Problem of FFS with No Coordination
ACO Participants ACO professionals (i.e., practitioners meeting the statutory definition) in Group practice arrangements, Networks of individual practices of ACO professionals, Partnerships or joint ventures arrangements between hospitals and ACO professionals, Hospitals employing ACO professionals, or
ASO Start and Application Dates
How Does Medicare ACO Work? Patients Assigned to ACO by CMS Assignment Based on Primary Care MD Specialists w/ Primary Care Considered Patients not Restricted to ACO ACO Knows Probable Patients Historical 3 Year Beneficiary Cost Known Providers Paid Normal FFS Rates Providers Need Not be in ACO Patients Can Leave ACO
How Does Medicare ACO Work? Must commit to three years At End of Year Costs to Medicare Calculated for Assigned Patients Costs Compared to Historical If Costs Are Lower, ACO receives portion of savings (Shared Savings)
How Does Medicare ACO Work? Minimum Savings Rate (MSR) will be established below which no savings will be shared Minimum Loss Rate (MLR) above which the ACO will share losses ACO can request claim data on its patients
But Wait!!! Savings mean the ACO providers received less fees than they would have if there had been no ACO for the Medicare patient assigned. And, the ACO entity, not the providers receive the shared savings reward from Medicare
One Sided Model Shared savings for first period with no losses. This model will have smaller populations and more possible variation Sharing rate up to 50% of savings based on performance measures
One Sided Model Maximum % of Shared Savings 50% Minimum Savings rate 2% to 3.9% depending on number of beneficiaries Shared Savings Cap 10% No Shared Losses Cap
Two Sided Model Shared savings for first period with losses possible if Minimum Loss Ratio is exceeded. Quality Metrics taken into account Federally Qualified Health Center (FQHC) and Rural Health Clinic (RHC) inclusion will increase potential shared savings
Two Sided Model Maximum % of Shared Savings 60% Minimum Savings rate 2% Shared Savings Cap 15% Shared Losses Cap 5% in year 1 7.5% in year 2 10% in year 3
Example 2 Sided Historical cost per beneficiary = $10,000 Minimum Savings Rate 2% = $200 Shared savings cap 15% = $1,500 Shared losses cap 7.5% = $750 ($10,750) Shared savings 60% > 2% Assume ACO saves $450 per beneficiary Shared savings = 60% of ($450-$200) =$150
Example 2 Sided Assume ACO has 10,000 Medicare Beneficiaries Total shared savings = $1.5 million Risk - $750 per beneficiary = $7.5 million
How Can Savings Be Achieved? - I Primary Care Extends Hours, Reducing ER Visits. Care Is Coordinated via Improved Communications and EMR Eliminate Duplicate Services Eliminate Unnecessary/Marginal Test and Treatments Prescribe Lower Cost Drugs
How Can Savings Be Achieved? - II Communicate With Patients via Telephone, Email & Web Portal Rather Than FFS Visits Increase Use of Physician Extenders Increase Use of ARNPs and PAs House Calls and Nursing Home Calls by non-physicians to Check on Care Publish and Follow Clinical Pathways and Best Practices
How Can Savings Be Achieved? - III Use Care Coordinators and Nurse Managers to Closely Manage Chronic Conditions and Expensive Episodes of Care ($35pmpm, $1.1M for 5K patients) Use MD Specialty Services Sparingly Telemedicine Remote Monitoring Evaluation of Skilled Nursing Facilites MD Involvement with Rehab Facilities
Categories of Quality Patient Experience Care Coordination Patient Safety Preventative Health At Risk Population/Frail Elderly Health Will be aligned with EHR/PQRS
What Happens to HBPs Less Surgery for Anesthesiologists Fewer Imaging Services for Radiologists ER Visits Reduced Fewer Pathology Studies Fewer Patients in Hospital for Hospitalists
Will There Be an Impact on HBPs? There may be no Medicare ACO in the area. Only a fraction of Medicare patients will be in an ACO. How much surgery and other services will realistically be eliminated? Medicare is a very poor physician payer, it may be helpful to let patients go to another hospital.
How Will Savings Be Shared? Hospital Owned ACO Employed MDs Non-employed MDs Primary Care Owned ACO Primary Care Owners Outside Specialists Hospitals, ASC, Nursing Homes, etc.
Problems with Hospitals Sharing Sharing with doctors may run afoul of anti-trust and Stark Laws Entities not a part of the ACO may not have an incentive to cooperate
Potential ACO Problems - I Large financial losses probable in initial years Participation may be low due to the large upfront investment necessary ACOs may try to shift Medicare losses to private payers Entitles not a part of the ACO may not have an incentive to cooperate
Potential ACO Problems - II ACO must have EMR implemented system wide A comprehensive IT structure is needed for quality and other reporting Uncertain rewards, concept unproven Less than half of demo ACO achieved more than 2% savings after 5 years
Potential ACO Problems - III Each year s savings is next year s benchmark for minimum savings Referral patterns will be disrupted Patients are not personally involved in helping save costs
Hospital ACOs and HBPs Will the Hospital Share with HBPs? Did the HBPs Help Produce Savings? Hospitals Already Contract With HBPs If Hospitals Expect Overall Services to Be Reduced, Will Hospitals Want to Reduce Stipends to HPBs?
Primary Care ACOs and HBPs Would They Share With HPBs? Would They Share with Hospitals and Other Facilities?
Pioneer ACO Started January 1 2012 32 ACOs Selected 18 States 860,000 Patients Assigned 1.1 Billion to be saved over 5 Years Represents 1% of Medicare Budget Closest: Franciscan of Indianapolis
Pioneer ACO Must have a least 15,000 beneficiaries First two years higher level of risk and shared savings Year three can transition to population based and full risk Required to negotiate outcomes-based arrangements with non-medicare payers
Pioneer ACO Franciscan Alliance 8 Area Hospitals 22,000 Medicare Patients 700 MDs 180 Employed Agreements with Non-employed MDs Alliance with WellPoint (Anthem) 11 Other Hospitals May be added Pledged to Expand Outside Medicare
Advanced Payment ACO CMS Response to Medical Groups Designed to help small entities start up Three types of advance payment Must have no inpatient facilities Must be under $50 million in revenue May be a low volume rural hospital May enter only in April or July 2012
Payments Advanced Payment ACO Upfront Fixed Upfront variable based on number of beneficiaries Monthly payment per beneficiary Advance payments will be recouped from shared savings but not beyond savings, if any
Could Specialists Form An ACO? A Few Million in Startup Costs Need Contracts With Primary Care To Handle At Least 5,000 Medicare Patients ACO Owners Would be Rewarded with Savings from Hospitals and Specialists Outside the ACO
The Fallout From Threat of ACOs Hospitals Rushing to Employ Primary Care MDs, If Not Already Employed Formation Of Integrated Networks Multiple Hospitals and Large Medical Groups Implementation of EMRs by Hospitals and primary Care
The Fallout From Threat of ACOs Hospital Systems Merging Hospital Systems Forming Alliances Hospital Systems Adding Hospitals, ASC, Home Health, DME, Nursing Homes Hospitals Branching Out Geographically
Why Are ACOs a Threat to Hospitals? Shows the Government is Serious About Reducing Costs The Lion s Share of the Healthcare Dollar Goes to Hospitals Hospitals Have Huge, Expensive Infrastructure That Will Be Hard to Dismantle as Reinbursement Declines
Why Are ACOs a Threat to Hospitals? ACOs Are Only One Part of Government Healthcare Reform That Will Reduce Hospital Reimbursement Competitors May Establish an ACO First Non-Government ACOs May Be a Larger Threat than Medicare ACOs CMS May Eventually Convert all FFS to Capitated ACOs
ACOs Can Be Opportunity for Hospitals Hospital-Based ACO Can Profit From Reduction In Services of Providers Outside the ACO (HBPs, other facilities) Hospitals Can Gain Market Share By Capturing Medicare Beneficiaries via Well-run ACO
ACOs Can Be Opportunity for Hospitals Hospitals Can Use ACO Fear as a Method to Acquire Physician Practices with No Acquisition Cost. Hospitals Can Use ACO Fear as a Method to Acquire Weak Hospitals and ASCs. Hospitals can Establish non-medicare, Private ACOs (and have already done so)
Bundled Payments for Care Applicant specifies episode definition and pricing Retrospective Payment Bundling Discount off FFS Savings under the target can be shared Physicians and hospital can arrange for gain sharing
Bundled Payments for Care Test over 5 years Payment for episode of care Fixed payment target set for episode Providers received agreed upon discounted fee for service CMS pays bonus if under target Compensation between physician and hospital fair market value
Bundled Payments for Care Retrospective Payment Bundling Model 1 Inpatient Stay Only Model 2 Inpatient stay and post acute care Model 3 Post acute care only
Bundled Payments for Care Prospective Payment Bundling Inpatient care only Minimum discount of 3% Bundled payment paid to hospital only Hospital may share with physicians
Bundled Payments for Care-Positive Encourages communication about patient progress No incentive for unnecessary care Does not penalize providers that treat severely ill patients because all services are included in initial pricing
Bundled Payments for Care-Negative Risk that costs are not contained May reduce incentive to withhold care Problems splitting payments and rewards between hospital and MDs Payment division problems may be both legal and practical
Where is all this headed? Death of Fee for Service ACO-type entities control care Hospital systems and integrated provider and insurer systems dominate Mass health system employment of MDs Rationing Employers exit health coverage Shift from physician to non-physician providers
Discussion How will the ACO, Capitation and Bundled Payments Fit in Your Future?