Accountable Care Organizations Initial Thoughts…Next steps

1. Accountable Care OrganizationsInitial Thoughts…Next steps Response to the CMS Proposed Regulations- March 2011

2. Medicare ACOs • CMS program beginning January 2012, with shared savings/shared risk opportunities. • Requires integration across providers and care settings • Demands genuine focus on quality and care coordination • Offers framework for providers to be in charge • Long awaited rule released March 31. • BUT, the proposed rule includes heavy administrative and operational requirements- greater than expected.

3. Assignment of Beneficiaries • Assigned based on “plurality” of primary care services with a PCP in an ACO. • Based on allowed charges, not a simple count of services. • Assigned retrospectively for calculating savings. • CMS will provide list of beneficiaries prospectively. • PCPs can only participate in 1 ACO.

4. Quality Measures and Reporting • 65 quality measures, 5 domains • Patient Safety • Patient/Caregiver experience • Preventive Health • Care Coordination • At-risk population/Frail elderly • To be eligible for shared savings • Report in Year 1 • Years 2 and 3, meet threshold levels and earn performance points.

5. Shared Savings • Meet all minimum quality performance standards. • Achieve spending less than benchmark. • Savings greater than minimum savings requirement.

6. Shared Savings • Two types • One-sided- • Savings only for 2 years • Capped at 7.5% of benchmark • Share 50% of savings over minimum up to cap • Weighted by quality score • Year 3 move to upside/downside model • Two-sided • Savings or losses • Savings capped at 10% of benchmark • Share 60% of savings over minimum up to cap • Weighted by quality score • Losses capped at 5% Year 1, 7.5% Year 2, 10% Year 3.

7. Concerns – Initial ACO Regulations • Technology • 50% of PCP’s in ACO must meet “Meaningful Use” Criteria for an EHR • ACO’s Need to aggregate patient data from different provider systems (HIE) and have analytical skills to mine, review and act on the data (Data Informatics) Not a cheap or Quick Implementation and we are not there • Beneficiary Limitation • Beneficiaries can seek care outside an ACO where they are assigned • Not clear on if CMS will allow for beneficiary inducements to keep them in network No Stick….No Carrot…No Nothing

8. Concerns – Initial ACO Regulations • Legal Issues • CMS has addressed various legal issues involving how ACO’s can operate and not run afoul of the Physician Self-Referral Law, Federal Anti-Kickback Statute by outlining proposals where ACO’s can share cost savings OK but if you want to do things different you must get a ruling • CMS has not addressed anything related to malpractice protection. Since one of the main goals on an ACO is to cut out unnecessary care, participating in an ACO could conceivably put a practitioner attempting to practice a different style of medicine from the community at risk of malpractice Go ahead…stick your neck out, it won’t hurt

9. Concerns – Initial ACO Regulations • Financial • Costs are large to start an ACO • Financial returns are measured by CMS after the fact based upon their risk adjusted data • Initial Shared Savings limited (greater opportunities if downside risk shared) • Initial results for Physician Group Project on which ACO’s are based has had mixed results and negligible savings (approx. $300 per member) with some groups having no savings after large cost expenditures. This is complicated stuff…… At this point, are the limited financial gains worth the large start up costs and regulatory risk?

10. Concerns – Initial ACO Regulations • PCPs can only participate in 1 ACO. What if it’s not yours? • 50% of participating PCPs must hit meaningful use by end of 2012. • Can’t add new physicians to ACO during Agreement period. • Must be prepared to accept potential losses by Year 3. • Degree of transparency/admin burden required. • Patient notification and opt-out • Quality measures reporting is onerous and must be met to share in any savings.

11. Health Care Trends The USA and the Deficit Crisis – the current state cannot continue as Medicare and Medicaid are the main drivers of current and future deficits • Democrats pushing for CMS appointed body to essentially ration care from central government • Republications pushing for voucher type system to slow the growth of care and push decisions to beneficiaries The Landscape is rapidly changing to move towards tighter cost controls – ACO’s or no ACO’s

12. Health Care Trends (Continued) • The era of unchecked Fee For Service is Ending • Bundled Payments • ACO’s • Limited Provider Networks • Increased Medical Management • High Deductible Health Plans • Quality Measurements are going to be an increasing part of the picture • Health Grades • Physician Quality Reporting Initiatives (PQRI) • Move towards population management and disease management

13. Key Strategies to Get in Place before an ACO… Put 1st things 1st • Relationship / Linkage with Primary Care Physicians • Information Technology • Investing in Electronic Health Records Technology • PCP’s • Specialists • Hospitals • Linking providers through a Health Information Exchange (HIE) within system or as part of a larger regional entity (likely) • Reviewing Current Quality Measures and Developing Clinical Pathways • Monitor Provider performance to pathways through system reports • Develop Relationship with Neighboring Referral Facilities and begin groundwork to discuss relationship to link through technology and, if it makes sense works towards becoming an ACO • Rethink how you define growth • New revenue will equal better outcomes vs. one more surgery/MRI. • New physicians added based on their quality/cost effectiveness, not availability and volume