The ACO Conundrum: Positioning your ASC for Success

1. The ACO Conundrum: Positioning your ASC for Success Bruce Maller BSM Consulting

2. Learning Objectives Review key provisions of the Affordable Care Act (ACA). Clarify how and why ACOs differ from similar initiatives from the mid to late 1990’s. Describe the role of ACOs in the new health care environment. Discuss how ACOs might impact ophthalmology. Provide practical suggestions to enhance your market position. • 1. • 2. • 3. • 4. • 5.

3. Key Provisions of the ACAThat Went into Effect in 2013 Reduction in contribution limits on flexible spending accounts to $2.5K per year Deduction limit for unreimbursed medical expenses increased from 7.5% to 10% of adjusted gross income Medicare Part A payroll tax increased from 1.45% to 2.35% of pay for wages earned above $250K for taxpayers that are married and filing jointly New 3.8% investment income tax for high income taxpayers

4. Key Provisions of the ACAThat Are Going into Effect in 2014 Expanded Medicaid coverage Individual mandate Guaranteed availability of insurance Implementation of Health Insurance Benefit Exchanges (for individual and small employers) Employer coverage mandates (with certain exceptions for small employers)

5. Historical Perspectives • 1990’s: Market-based consolidation, fear of loss of patient access, new and innovative contracting models, i.e. IPAs, PHOs, IDNs, etc. Growth in Medicare Advantage plans, increase in Federal subsidies, consumer push for provider choice, fee-for-service payment model adopted by most plans and payers. • 2000’s:

6. What’s different now? • Impact of recession • Challenges to federal and state budgets • Impact of baby boomers • Increasing cost of health care Economic Constraints: • Affordable Care Act (ACA): •  Medicare Shared Savings Program (MSSP), Accountable Care Organizations (ACOs) •  Innovation Center and Pioneer ACOs Legislative Initiative:

7. What is anAccountable Care Organization? (ACO) • An ACO is a network • of doctors and hospitals • that share responsibility • for patient care. • Analogous to a T.V. manufacturer that contracts with suppliers to build sets. • ACOs are designed • under the framework of • the Medicare Shared Savings Program (MSSP). • The challenge is to prove that the overall health care product works better • and costs less.

8. MSSP and Innovation Center • MSSP • Final rule published on 11/12/11 • Program goals: • Promote accountability for care of FFS beneficiaries • Requires coordination of care • Encourage investment in infrastructure • ACOs are the vehicle to achieve program goals Innovation Center Pioneer ACOs developed to test new models of care and payment Program commenced 1/1/12 with 32 participants Will be testing new reimbursement methods Participants assigned a minimum of 15,000 Medicare beneficiaries (5,000 for rural areas)

9. Why were ACOs included in the ACA? • Medicare is a prime target in deficit reduction efforts. • Due to baby boomers coming of age, Medicare costs are expected to soar in the coming decades. • ACOs are being designed to “test” if sharing of health care information and resources, while also focusing on meeting quality standards, can result in cost savings.

10. How will an ACO work? ACOs are being formed by providers (hospital systems and physicians) Medicare beneficiaries are being assigned to an ACO based on who their doctor is. If the doctor is part of an ACO, that patient will be automatically included. Patients can choose to opt out. Patients are free to see any provider (in or out of the ACO). ACOs will be measured based on quality performance indicators.

11. What has happened since late 2011? • CMS requires a minimum of 15,000 Medicare beneficiaries assigned to each of the Pioneer ACOs and 5,000 minimum Medicare beneficiaries for the standard ACOs. The numbers listed above are estimates from CMS at the time of approval for each group of ACOs and do not represent current statistics.

12. Where is the action? Source: Centers for Medicare and Medicaid Services.

13. Current Market Activity • In some markets Physician Participation Agreements (PPAs) are already on the street with ACOs asking for commitment from physicians. • Most don’t say anything about how the earned savings will be shared. • Most don’t specify anything about the quality measures or how those will be determined. • Most don’t specify the role of each medical specialty in the development of the quality measures that will affect that specialty.

14. Early Conclusions About Market Activity Activity is variable by state. There is a breadth of market activity which is noteworthy. There is a fair amount of rural, as well as urban/ suburban activity.

15. Why is provider activity so robust in a“zero sum” environment? Belief on the part of many that the days of FFS medicine are numbered Desire to acquire leverage with payers Desire to advance “first mover” market position

16. Likely ACO Strategies • Use network as leverage • in negotiations with commercial payers. • Opportunity to • participate in expansion • of Medicaid program. • Market “network” product direct to consumers and thereby gain market share. • Attempt to • aggregate providers • to achieve better care coordination and lower cost.

17. How will payers react? They will not sit back and wait for this to play out. Several have already signaled they plan to change how they pay doctors. More aggressively exploring capitation and bundled payment options for providers. Many will license/market “back office” services, as well as product design and development services.

18. Examples of Payer/ACO Collaboration • Aurora Health Care of WI (with 1.2M lives treated) partnerships with Aetna and Anthem BC/BS to offer products wrapped around ACO network • BC/BS of NE and Methodist Health System • Horizon BC/BS of NJ and Optimus Healthcare • BC/BS of TN and the Methodist Le Bonheur Healthcare • BC/BS of CA, Dominican Hospital, and Physician’s Medical Group of Santa Cruz County

19. What does this mean to Ophthalmology? ?

20. What are the implicationsfor Ophthalmology? • It is hard to know. • Impact will be market specific. • Large integrated systems more likely to succeed. • Ophthalmologists will seek out more sustainable practice models. • This will likely involve some consolidation. • New reimbursement models are already in play between a number of health plans and providers.

21. What should you do? • Do not overreact, but instead get educated. • Have a seat at the table. • Assess personal and professional goals. • Consider how these changes are likely to impact your practice and ASC. • Continue to focus on building efficiencies. • Get better at tracking and measuring. • Focus on building your cash pay service offering.

22. Ask yourself what health care purchasers really want from you? • Demonstrate you can deliver “value” to • their patients. • Willingness to accept or share financial risk. • Willingness and ability • to cover all aspects of • vision and medical/surgical eye care. • Ability to measure and provide relevant data.

23. What will it take to achieve these goals? • Means to control cost throughout the continuum of care. • Contractual relationships with other providers committed to the same goals. • Systems to measure and manage care. • Ability to measure and manage utilization of care. • Willingness to manage out “over utilizers”. • Physician leaders willing to think and act differently.

24. What should you do? • Look at the lists of ACOs approved by Medicare as those lists are issued. • Begin to gather data you can use to demonstrate you can deliver quality care at a lower cost. • Involvement in an ASC is one very demonstrable way to do this. • Consider working with other ophthalmic groups to present a united front to the ACO to negotiate your involvement relative to distribution of shared savings and the development of quality measures. • Ophthalmology represents $1 in $12 (8%) of Medicare expenditures so you can make a difference under these programs.

25. What do Kodak, Blockbuster, and Borders have in common?

26. Any Questions?