Formation of acoS May 26, 2011

1. Formation of acoSMay 26, 2011

2. Speakers • Todd I. Freeman, Larkin Hoffman (Minneapolis, MN) • Ronald Waldheger, Waldheger-Coyne (Cleveland, OH) • Sheri Dacso, Seyfarth Shaw, LLP (Houston, TX) • James Egleston, Waldheger-Coyne (Cleveland, OH)

3. PresentationOverview • Why Form an ACO • ACO Structure • Application and Approval • Shared Savings Options • Q&A

4. Why form an ACO Section Overview • History of innovation of delivery models • Newest innovation – accountability of providers • Why not form an ACO • Why form an ACO

5. History of innovation of delivery models • Objectives • Provide access • Reasonable cost • Coordinated care • Preventative care • Align incentives of providers and patients • Patient freedom of choice • Patient empowerment as educated consumers

6. History of innovation of delivery models • Past and existing models, including • Fee for service • Capitation and DRGs • Staff model HMO • Alphabet soup of IPAs, PHOs and PPOs • Cost and quality ratings

7. History of innovation of delivery models • Regulatory impediments • Anti-kickback • Physician self-referral (Stark) • Antitrust laws • HIPAA and state patient privacy laws • IRS tax exempt organization rules

8. Newest innovation – accountability of providers to align incentives • Private market – ACO-type arrangements with private payors • Affordable Care Act created shared savings plan for eligible ACOs

9. Why not form an ACO? • Costs of establishing are staggering • No guarantee of acceptance in shared savings plan or FTC antitrust waiver • No guarantee of any shared savings • May have to absorb shared loss • Non-appealable CMS discretion to deny payment of shared savings • Economics presume existing excess care and inefficiencies in delivery system

10. Then why form an ACO? • Dynamics in your market • Waivers of legal and regulatory impediments • Improved patient care and revenue • Increase, or avoid losing, market share • Early involvement • Likely to be required to participate in ACOs in the future Resources: http://www.aaaccountablecare.org/resources/

11. ACOStructure Section Overview • What are ACOs? • Legal Structure • ACO Ownership • Governance • Leadership

12. What are ACOs? • A formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers via the Medicare Shared Savings Program ("MSSP").

13. Legal Structure • Any legal structure accepted by State Law • Federal EIN • Proof of existence

14. Who Can Own The ACO? • Does not need to be an existing Medicare provider • Must have a TIN and be enrolled in Medicare program • Existing structure must meet criteria of regulations

15. Governance • “Shared Governance” • Every participant has a voice • Transparent • Accountable

16. Governance • 75% must be composed of ACO providers • Must include at least one (1) Medicare beneficiary • Distinct from Boards of participating ACO providers

17. Leadership • CMS Proposed requirements • Intended to foster goals such as legislation of clinical and financial management, with due regard to antitrust considerations

18. Application and Approval Process Section Overview • Minimum eligibility requirements • Processes and Structure • Content and Documentation • Regular Approval Route • Applicant Certifications • Fraud and Abuse Protections • Pioneer Program

19. GETTING STARTED • CMS will require ACOs to submit with its application, materials that describe the ACO’s leadership and management structure as well as its clinical and administrative systems.

20. MINIMUM ELIGIBILITY REQUIREMENTS TO BE AN ACO • Minimum eligibility requirements that generally include: • a legal structure and governance as required by the proposed rules. • a sufficient number of primary care physicians to have an assigned beneficiary population of at least 5,000. • assessment of whether it is required to obtain a mandatory review from the antitrust enforcement agencies.

21. PROCESSES AND STRUCTURES NECSSARY TO OPERATE AN ACO • Quality Assurance and Process Improvement Committee • Evidence-Based Medical Practice or Clinical Guidelines • HIT/EHR Infrastructure • Compliance Plan • Patient-Centeredness • Stakeholder Partnerships

22. STANDARD APPLICATIONS – CONTENT AND DOCUMENTATION • Antitrust Agencies Letter (If applicable) • Repayment Mechanism • Leadership and Management Structure • ACO Participation Documents • Quality Assurance and Process Improvement • ACO Organizational Materials • Medical Director and CMS Liaison • Disciplinary Processes • Compliance Plan • Beneficiary Communication • Description of Distribution of Shared Savings • Patient-Centeredness

23. REGULAR APPROVAL ROUTE – DOCUMENTS • Content: Patient Centered Criteria • Documentation of how the ACO applicant will meet patient centered care criteria • Content: Health Needs Evaluation • Documentation of the ACO’s “needs assessment” processes for evaluating the needs of its Medicare population, including consideration of diversity and a plan that addresses the needs of those persons

24. ADDITIONAL REQUIREMENTS • Individual Care Plans • Required to have systems in place to identify high-risk individuals and processes to develop individual care plans for targeted patient populations • Plans must: • be tailored to the beneficiary’s health and psychosocial needs • account for beneficiary preferences and values • identify community and other resources to support the beneficiary in following the plan

25. ADDITIONAL REQUIREMENTS • Repayment Mechanism • Applicant must submit documentation of an appropriate repayment mechanism to cover any losses, such as reinsurance, an escrow, a surety bond, or a line of credit

26. APPLICANT CERTIFICATIONS • ACO officers or directors must certify that the applicant meets certain requirements: • Legitimate Legal entity: recognized under state law • Accountability: participant is willing to report to CMS on the quality, cost, and overall care of the Medicare fee-for-service beneficiaries assigned to the ACO • Compliance with ACO Agreement: agree to terms of three-year agreement • Accuracy of Information Submitted: agree that all information submitted is truthful, complete, and accurate

27. FRAUD AND ABUSE PROTECTIONS • Compliance Plan • Designated compliance officer • Not legal counsel to the ACO and who reports directly to the ACO’s governing body • Mechanisms for identifying and addressing compliance problems related to he ACO’s operation and performance • Methods for employees or contractors to report suspected concerns related to the ACO • Compliance training for employees and contractors • Requirements for reporting suspected violations to appropriate law enforcement agencies

28. REGULAR APPROVAL ROUTE • CMS must approve or deny before end of calendar year; not sure what the first deadline will be • Approval effective for three years with a 60-day notice termination provision

29. ISSUES WITH REGULAR APPROVAL ROUTE • Comments to CMS, to date, do not include anything about application and approval process • Comment period ends June 6th, 2011

30. EXPEDITED APPLICATIONS • Available through the Center for Medicare and Medicaid Innovation (Innovation Center) through a special program called the “Pioneer Program” • Allows health groups that already have experience coordinating care for patients among physicians and hospitals to immediately apply to become an ACO • Could be up and running by Fall 2011, as opposed to having to wait until 2012

31. THE PIONEER PROGRAM • The Innovation Center is interested in testing alternative payment models that • Include escalating levels of financial accountability through successive performance periods during the Participation Agreement • Provide a transition from fee-for-service to population- based payment by the third performance period • Generate Medicare savings

32. THE PIONEER PROGRAM • General Description: • designed for health care organizations and providers that are already experienced in coordinating care for patients • accelerates period of time for providers to move from a shared savings to a population-based payment model • designed to work in coordination with private payers by aligning provider incentives

33. PIONEER PROGRAM • Payment Models • First two years: shared savings payment policy with generally higher levels of shared savings and risk • Year three: eligible to move a substantial portion of their payments to a population-based model if can show savings using above model over first two years

34. THE PIONEER PROGRAM • Applicants are expected to have extensive experience with systematic care improvement efforts, and either already have, or be prepared to enter payment arrangements that include financial accountability and performance incentives

35. THE PIONEER PROGRAM • Letters of Intent are due June 10th, 2011.   • Applications received from organizations that have not submitted a letter of intent will not be considered. • Letters of intent will only be used for planning purposes and will not be binding. • Applications must be postmarked on or before July 18th 2011.  CMS reserves the right to request additional information from applicants in order to assess their applications.

36. Shared Savings Options Section Overview • Shared Savings Payment • Two Risk Models • Program Overview

37. Shared Savings Payments • Comparison of average costs 3 most recent years prior to the beginning of the ACO against a year in which the ACO agreement is in effect • Achieve the “minimum savings rate” • Participate in the “sharing rate” • Maximum percentage (“sharing cap”) • 65 Quality Measures

38. Two Risk Models ONE-SIDED MODEL • ACO shares in savings, not losses (first two years) • Up to 50% beyond the threshold • Becomes a 2-sided model in year 3

39. Two Risk Models TWO-SIDED MODEL • Shares in savings and losses immediately • Up to 60% of savings beyond threshold • Liable for losses beyond 2% and up to • 5% of benchmark, year 1 • 7.5% in year 2, 10% in year 3 • Liability cap at 35% upon perfect score • FQHC or RHC included, qualify for additional shared savings

40. CMS Table

41. Offset Future Losses • Withhold of Shared Savings • 25 percent withhold in order to offset any future losses under the two-sided model. • Must complete all three years to recoup the 25-percent withhold

42. 65 Quality Standards • Five standard domains – • Patient care giver experience • Care coordination • Patient safety • Preventive health • At risk population/ frail elderly health Scoring and measurement concepts. Each of the five domains will be equally weighted in determining an ACO's overall quality performance score.

43. UpcomingWebinars Operations of ACOs – Part 1 June 2, 2011 Operations of ACOs – Part 2 June 23, 2011 Understanding Regulations of ACOs July 14, 2011 For more information and to register, visitwww.aaacountablecare.org

44. ForMore Information Todd Freeman Larkin Hoffman 952-896-3236 tfreeman@larkinhoffman.com Ron Waldheger Waldheger Coyne (440) 835-0600 ronw@healthlaw.com Jim Egleston Waldheger-Coyne jime@healthlaw.com (440) 835-0600 Sheri Dacso Seyfarth Shaw, LLP 713-238-1810 sdacso@seyfarth.com AAACO Website www.aaacountablecare.org