icd-10 informs lessons for macra in this issue about costs ...what's on your mind: medicare...

Volume 7, Number 10 October 2016

Published by Health Policy Publishing, LLC ● 209-577-4888 ● www.AccountableCareNews.com

ICD-10 Informs Lessons for MACRA About Costs of Change by Ray Desrochers

he headlines came fast and furious in 2014 and 2015, when ICD-10 compliance dates were announced and the measure was ultimately put in place on Oct. 1, 2015. Insurers—with 70,000 ways to classify ailments

under the massive expansion—faced an estimated $2 billion to $3 billion price tag to handle ICD-10 implementation.1

With nerves on the brink and health plan resources pushed to their limits, it became apparent that the complex integration and technology challenges for all parties were going to impede the claims paying process, creating serious, even if temporary, cash-flow issues for providers and health systems. Ultimately, after some concerns voiced by the American Medical Association, the Centers for Medicare & Medicaid Services (CMS) agreed to a grace period, staving off any further ICD-10 delays.

Sound familiar? It should.

CMS's latest initiative, passed by both houses of Congress in 2015 by an overwhelming, bipartisan majority, is the Medicare Access and Children’s Health Insurance Reauthorization Act (MACRA). Once again, health plans and providers must prepare for the costs and administrative burdens involved in implementing a new standard—and quickly.

Recently, there has been a flurry of comments about the headaches its complexity is causing and hints of a potential delay from CMS; however, on Oct. 14, CMS issued its final rule, giving clinicians the opportunity to determine the pace at which they want to transition from fee-for-service to value-based care by choosing advanced alternative payment models (APMs) or the Merit-based Incentive Payment System (MIPS).

MACRA Is Disruptive, Clinicians Must Get Up to Speed by Claire B. Cruse “We marvel not simply at the passage of this bill, but what we marvel at is that it took so many years to pass it.”

–President Lyndon B. Johnson, July 30, 1965.1

hange in healthcare has often been difficult to implement. Even back in the 1930s, when President Franklin D. Roosevelt was championing social insurance reform, he was resigned to the fact that healthcare would have to wait. It wasn’t until 30 years later that a bill expanding health insurance—in the form of Medicare and Medicaid—actually passed.2

One of the main barriers over those years of debate was physician opposition. Like the healthcare system, medical education and training have been slow to change. For 100 years, medical students have generally been taught the same way: two years of anatomy and pathophysiology followed by two years of clinical, hospital-based (for the most part) training. All the while, technologies, practice settings and care models have changed around them.3

Today, many physicians understand that in order to successfully practice medicine in the future, they may need to develop new skills. They will likely need to do more than learn new medical procedures and health technologies. Interpersonal and communication skills and an understanding of how to use health information technology (IT) and electronic health records (EHRs) will likely become increasingly important. But even more critical to the future practice of medicine might be managerial experience—the kind of managerial experience that prepares physicians for leadership, strategy planning and financial management.

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In This Issue 1 ICD-10 Informs Lessons

for MACRA About Costs of Change

1 MACRA Is Disruptive, Clinicians Must Get Up to Speed

2 What's on Your Mind: Medicare Shared Savings ACOs vs. New Generation ACOs

5 New Study Shows Medical Groups That Take on Risk Show Success in Quality, Care Management

9 Thought Leaders’ Corner: What Are the Ingredients for the Success of an ACO?

10 Industry News

12 Catching Up With… David Muhlestein, Ph.D., J.D., MHA, M.S.

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In This Issue


2 Accountable Care News October 2016


Accountable Care News October, 2016 – Volume 7, Issue 10 ISSN 2166-2770 (Electronic) ISSN 2166-2738 (Print) National Advisory Board Peter Boland, PhD President, Boland Healthcare, Berkeley, CA

Emily D. Brower, MBA Vice President, Population Health Atrius Health, Newton, MA

Lawrence P. Casalino, MD, PhD, MPH Livingston Farrand Associate Professor of Public Health, Weill Cornell Medical College, New York, NY

Wes Champion, Senior Vice President, Premier Consulting Solutions , Charlotte, NC

Charles A. Coleman, PhD, CMPH Worldwide Healthcare Solutions Senior Executive -- Providers/ACO/Bio- Surveillance/Clinical Research AMRC IBM, Research Triangle Park, NC

Don Crane, JD President and Chief Executive Officer, CAPG, Los Angeles, CA

Duane Davis, MD Vice President, Chief Medical Officer, Geisinger Health Plan, Danville, PA

William J. DeMarco, MA, CMC President and Chief Executive Officer, Pendulum Healthcare Development Corporation, Rockford, IL

Douglas A. Hastings, JD Chair Emeritus, Epstein Becker & Green, PC , Washington, DC Vince Kuraitis, JD, MBA Principal, Better Health Technologies, LLC; Author, e-CareManagement Blog Boise, ID

Michael L. Millenson President, Health Quality Advisors, LLC, Highland Park, IL

Ann Robinow President, Robinow Health Care Consulting, Minneapolis, MN

_________________________________________

Publisher Clive Riddle, President, MCOL Editor Mari Edlin Accountable Care News is published monthly by Health Policy Publishing, LLC. Newsletter publication administration is provided by MCOL. Accountable Care News 1101 Standiford Avenue, Suite C-3 Modesto, CA 95350 Phone: 209.577.4888 Fax: 209.577.3557 [email protected] www.AccountableCareNews.com

Medicare Shared Savings ACOs vs. New Generation ACOs by A. Walter Hankwitz

he results are in: Accountable care organizations (ACOs) that have stuck with the program the longest have had greater success in achieving shared savings than those participating for a shorter time period.1 The Center for

Medicare and Medicaid Services’ (CMS) spin, as portrayed in Table 1 below, was presented by Sean Cavanaugh, deputy administrator and director of Medicare at CMS, at the National Association of ACOs (NAACOS) 2016 fall conference in Washington, D.C.

Although the percentages released are skewed by not counting ACOs that dropped out after the first or second year in the denominator for the final calculations, review of the table reveals that ACOs are learning and actually executing new processes and techniques leading towards their achievement of the triple aim and garnering shared savings payments, according to CMS. At the same conference, Pat Conway, M.D., deputy administrator for innovation and quality and chief medical officer at CMS, said that CMS is learning as well.2 Based on what appears to be a progressively positive track record of both the Pioneer and Medicare Shared Savings Program (MSSP), CMS rolled out the new Next Generation ACO (NGACO), effective January 2016, citing it builds on the best attributes of its ACO predecessors. He reported that NGACO Model Principles include:3

• Using prospective attribution. • Creating a financial model for long-term stability (smooth cash flow,

improved investment capability). • Rewarding quality. • Offering benefit enhancements that improve patient experience and protect

freedom of choice. • Allowing beneficiaries to choose to remain aligned with an ACO.

How do these principles compare and contrast with the NGACOs’ predecessors? A comparative analysis of these and other key factors follows: Prospective attribution. MSSP tracks 1 and 2 utilize preliminary prospective assignment with retrospective reconciliation. For the 12-month, rolling, quarterly reports provided throughout the year, CMS includes all preliminary, prospectively assigned beneficiaries and then uses retrospective assignment for financial reconciliation.

What's on Your Mind

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October 2016 Accountable Care News 3

© 2016, Health Policy Publishing, LLC. All rights reserved. No reproduction or electronic forwarding without permission. page 3

“An MSSP ACO with a score lower than the 30th percentile in any domain will be ineligible for any shared savings; an MSSP ACO with a score at the 90th percentile or higher will be eligible for 100% of their 50% share of savings.”

“CMS is modifying its MSSP ACO formula in 2017, to increasingly weight it toward the MSSP ACO’s regional average.”

Medicare Shared Savings ACOs vs. New Generation ACOs.…continued from page 2 For these tracks, CMS uses a two-step process to assign beneficiaries: In the first step, CMS assigns the beneficiary to an ACO if the beneficiary receives the plurality (defined using allowable cost, not volume) of their primary care services from a primary care provider (primary care physician, nurse practitioner, certified nurse specialist, physician assistant or ACO professional providing services at a federally qualified health center/rural health center). In the second step, which only considers beneficiaries who did not receive any primary care services from a PCP, these beneficiaries are assigned to an ACO if they receive the plurality of primary care services from ACO professionals in an ACO. MSSP track 3 utilizes a similar evaluation of where beneficiaries must receive the plurality of primary care services, but assigns beneficiaries prospectively for reports, quality reporting and financial reconciliation. An NGACO utilizes prospective beneficiary alignment, using a two-stage alignment methodology. First, CMS analyzes claims for beneficiaries who received care from NGACO providers to determine the percentage of each beneficiary’s outpatient evaluation & management (E&M) services delivered by NGACO providers in select primary care specialties. Beneficiaries with such NGACO services comprising a plurality of their total care are aligned with an NGACO for the subsequent year. The second stage analysis focuses on beneficiaries with less than 10% of their E&M services delivered by NGACO PCPs to determine whether NGACO providers in select subspecialties were central to the beneficiary’s care, which could result in alignment for the subsequent year. Financial model for long-term stability. CMS uses financial model formulas for the MSSP ACO benchmark that significantly differ from those they use for NGACO. Within each model, the formulas differ from year to year. In a nutshell, CMS currently uses a three-year, risk-adjusted, historical average cost weighted towards national averages to create the MSSP ACO’s benchmark for an aggregate average of four distinct payment categories. An aggregate average is then adjusted for attributed beneficiary count to establish the financial target. CMS is modifying its MSSP ACO formula in 2017, to increasingly weight it toward the MSSP ACO’s regional average. For the MSSP Track 1 and 2 ACOs, CMS retrospectively recalculates the benchmark after the performance year concludes, determined by the number of beneficiaries that are actually attributed to the ACO based on their plurality of primary care services. For Track 3 ACOs, CMS does not recalculate the benchmark after the performance year concludes; it uses the prospective benchmark initially created based on an NGACO’s prospectively assigned beneficiaries.

For an NGACO, CMS uses a formula that, like the MSSP Track 3 ACO, establishes a prospective benchmark prior to the start of each performance year based on hybrid of one year of historical costs of prospectively assigned beneficiaries, weighted by regional costs for an aggregate average of two distinct payment categories. The NGACO prospective benchmark is established by determining the ACO’s historic baseline expenditures, applying the regional projected trend, risk adjustment using the CMS Hierarchical Condition Category (HCC) model,4 and then applying a “discount” that is derived from one quality adjustment and two efficiency adjustments.

It might be anticipated by CMS that the migration of benchmarks from ACO-specific, historical costs to regional costs will enable long-term stability of ACOs by allowing low-cost ACOs to prosper and realize shared savings resulting from bench-marks that would otherwise penalize them. However, an unintended consequence might be that groups of disparate providers in communities with limited or no ACO presence might determine that their creation of an ACO may be a no-win for them, even a significant costly loss when considering the cost of infrastructure required to create, implement and operate an ACO. Quality rewards. MSSP ACOs and NGACOs must all report on and/or meet performance thresholds for 34 quality measures across four domains of patient/caregiver experience, care coordination/patient safety, preventive health and at-risk population. Many measures are pay for reporting initially, but then they transition to pay for performance in later years. Scores for these measures are used as an integral component of the reconciliation calculation administered for determining the amount of monies, if any, that CMS will distribute to an ACO as its share of savings. For MSSP ACOs, CMS uses a sliding scale based on aggregate ACO quality scores, in which an ACO can receive anywhere from 0% to 100% of the monies saved beyond the ACO threshold to determine the amounts of money to distribute to the ACO (minus sequester). An MSSP ACO with a score lower than the 30th percentile in any domain will be ineligible for any shared savings; an MSSP ACO with a score at the 90th percentile or higher will be eligible for 100% of their 50% share of savings. For NGACOs, CMS uses a methodology that applies the quality score as a credit of one percentage point toward a deduction to the benchmark. NGACOs with a comparative quality rating of 100% will receive the entire one percentage point deduction; the one percentage point credit will fractionally decrease proportionately to an NGACO’s quality score. Benefit enhancements. CMS, by law, is not allowed to impose any change to the Medicare beneficiary benefit structure that may impede beneficiary access or cost of care without congressional approval. CMS may, however, impose changes that enhance beneficiary access or cost of care within the confines or regulations implementing the Affordable Care Act (ACA). Within this context, CMS allows a beneficiary benefit enhancement in the MSSP Track 3 ACO effective 2017, and four in the NGACO effective this year. (continued on page 4)



Medicare Shared Savings ACOs vs. New Generation ACOs.…continued from page 3 These benefit enhancements are:

• A skilled nursing facility (SNF), three-day, rule waiver is permitted for MSSP Track 3 ACOs effective 2017, and NGACOs effective this year. Specifically, this waives the requirement that a prospectively assigned beneficiary have a three-day, inpatient hospital stay prior to Medicare-covered, post-hospital extended care service. This pertains solely to services furnished by an eligible SNF (having a quality rating of three stars or greater) that has entered into a written agreement to partner with an ACO for purposes of this waiver. This same waiver is also permitted for an NGACO this year by providing additional information, such as an implementation plan, description of the use of the waiver and self-monitoring, and documented authorization by the governing body is first submitted to and approved by CMS.

• A telehealth waiver is permitted for NGACOs effective this year. Specifically, this waives the requirement that beneficiaries be located in a rural area and at a specified type of originating site when telehealth services are provided by NGACO providers/suppliers or preferred providers to prospectively assigned beneficiaries in specific facilities or at their residence. This waiver is available by providing additional information, such as an implementation plan, description of the use of the waiver and self-monitoring, and documented authorization by the governing body is first submitted to and approved by CMS.

• A homebound waiver is permitted for NGACOs this year. Specifically, this waiver permits "incident to" claims for home visits to non-homebound, prospectively assigned beneficiaries by licensed clinicians under the general supervision of NGACO providers/suppliers or preferred providers following discharge from an inpatient facility. This benefit is limited to no more than one visit in the first 10 days following discharge and no more than one visit in the subsequent 20 days post-discharge. This waiver is available by providing CMS additional information, such as an implementation plan, description of the use of the waiver and self-monitoring, and documented authorization by the governing body is first submitted to and approved by CMS.

• A coordinated care reward is permitted for NGACOs this year. Specifically, this allows CMS to directly incentivize a prospectively assigned beneficiary up to $50 per year ($25 is available semi-annually) for obtaining a plurality of their care from an NGACO’s network providers/suppliers or preferred providers.

Beneficiary alignment choice. Beginning in 2017, MSSP Track 3 and NGACO beneficiaries may attest that their main doctor is participating in a performance-based, risk track ACO and be assigned to that ACO. Beneficiaries who die during the performance year remain, along with all attributed costs incurred, on the assigned beneficiary list. It’s without doubt that some MSSP ACOs and their predecessors have generated lots of creative ideas and initiatives towards health delivery/payment reform striving to achieve the triple aim. According to a recent Health Affairs Blog, “a full accounting that includes not only the savings achieved by a small number of organizations, but also the money that Medicare paid in bonuses to ACOs and the cost of running the program, shows that the overall impact to the Medicare program in 2015 was actually a net loss of at least $216 million. Furthermore, net per capita savings, a more meaningful number than total savings, show a loss to taxpayers from every new cohort of ACOs enrolling since 2013.”5 The question remains, “What works and where do we go from here?” Perhaps some of the initiatives, whether they are the next derivative of ACO, Merit-Based Incentive Payment System (MIPS), alternative payment model (APM), bundled payments or whatever concoction CMS and the Centers for Medicare & Medicaid Innovation (CMMI) is throwing at the wall, will prove to align incentives by saving CMS (and the taxpayer) total costs of care while aptly rewarding providers for achieving the triple aim. For certain, the solution lies not in theory propagated from the policy wonk minds of those researching/teaching in our fine government supported institutions of higher learning, but rather from the practical, realistic minds of those who are on the ground, sweating in the trenches, actually experiencing and paying out of their own pockets for what works—and fails.

1 Joszt L. “5 Takeaways From the NAACOS Fall 2016 Conference.” AJMC.com. Sept 30, 2016. 2 Ibid. 3 “Next Generation ACO Model.” CMS. March 17, 2015. 4 Evans MA. “Evaluation of the CMS-HCC Risk Adjustment Model.” The Centers for Medicare & Medicaid Services' Office of Research, Development and Information. March 2011.

5 O’Shea J. “By Spinning Early Results, CMS May Be Undermining Payment Reform.” Health Affairs Blog. Oct. 7, 2016.

A. Walter Hankwitz is president of Highlands Health Management.

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“In 2013, 68% of total patient revenue in the 33 groups was from fee-for-service arrangements, while 32% was from risk arrangements.”

New Study Shows Medical Groups That Take on Risk Show Success in Quality, Care Management by Laura Fegraus

he American Journal of Managed Care recently published research conducted by faculty at Brandeis University on the prevalence and magnitude of capitation and other alternative payment contracts among organized physician groups. The study found medical groups that received a high portion of revenue from risk contracts reported

substantially more progress implementing advanced programs to avoid hospitalizations and provide care management. It also found that these groups placed greater emphasis on quality and patient experience in their physician compensation models and were able to focus on patient outcomes over physician productivity. “Risk Contracting and Operational Capabilities in Large Medical Groups During National Healthcare Reform”1 was supported by a grant from The Commonwealth Fund. The project was conducted in collaboration with the Council of Accountable Physician Practices (CAPP), a consortium of America’s leading multispecialty medical groups.2 CAPP launched a partnership with Brandeis researchers Robert Mechanic and Darren Zinner in 2011, to conduct a longitudinal study to explore the payment models used by CAPP-affiliated medical groups. The common goal was to measure participation in alternative payment contracts by multispecialty medical groups, understand the approaches to physician compensation utilized by these groups and document the implementation of programs to improve quality and manage spending. “This is the only published analysis we know of that provides details about the contracting practices of organized medical groups across their full range of payors,” says Rob Mechanic, the lead Brandeis researcher on the study. “This allows us to better assess the relationship between contracting structures and organizational practices that are likely to improve performance.” The researchers sent questionnaires to physician executives at 22 CAPP groups and 11 member groups of the Group Practice Improvement Network. All respondents represented large, organized multi-specialty medical groups. The survey asked for information about quality and cost management programs, risk contracting, physician compensation changes and other organizational characteristics. The unique feature about this survey is that it asked for self-reported data on both public and private payor sources. Similar studies have previously only examined contracts representing a subset of a group’s revenue.

Findings on Revenue Streams In 2013, 68% of total patient revenue in the 33 groups was from fee-for-service arrangements, while 32% was from risk arrangements. The study then divided the groups into three categories based on the percentage of total patient revenue

coming from risk-type contracts. It is notable that the top third of the groups (the risk-based cohort) received three-quarters of their revenue from alternative payment models, including 45% from global capitation. Between the survey’s first round in 2011 and second round in 2013, nine groups reported increased risk contract revenue (about 15 percentage points on average), while 20 reported little change. (Four groups did not report

information for both years). The groups with the biggest changes in risk contracting generally did so through a mix of the new Medicare Shared Savings and Pioneer Accountable Care programs and commercial arrangements.

Relationships between Payment Arrangements and Group Characteristics The questionnaire asked for self-reported data on physician compensation and progress in implementing information tools and quality and cost management programs. It found that, on average, 52% of primary care compensation in the groups with the highest level of risk contracting was based on salary and panel size, and 33% based on relative-value units. Risk-based groups tied a much larger proportion of primary care, pay to performance on quality, efficiency or patient satisfaction. Although all the groups in the study operated on electronic medical records, with 80% reporting full implementation, risk-based groups were more likely to report implementation of decision support tools and clinical guideline reminders. Finally, the survey asked the groups to report their progress on 14 types of quality and cost management programs. Although researchers did not compare quality rankings of the surveyed groups with national baselines, the risk-based groups reported more advanced implementation of performance management strategies and were more likely to have physician financial incentives in place for improved quality and patient experience. Groups with substantial revenue from risk contracts also reported more advanced implementation of programs to reduce avoidable hospitalizations.

Reflecting on Study Results In CAPP’s opinion, these findings are clear evidence that risk-based, payment models allow physicians and medical groups to focus on patients and their needs, not just on a bottom line. Yet, despite the demonstrated value of risk-based, payment models, 70% of responding groups said that payer willingness or ability to offer viable risk contracts was a somewhat or very important challenge.

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New Study Shows Medical Groups That Take on Risk Show Success in Quality.…continued from page 5

Mechanic considers this critical to understanding why payment reform has been relatively gradual. “These are exceptionally capable medical groups,” he says, “but there are good reasons why not all of them are rushing to expand risk contracting. “The opportunity to enter commercial risk contracts is very market dependent. It’s highly variable. Some markets are hotbeds but in many places, the major payors are sticking with fee-for-service,” he says. Only about 40% of the groups joined one of Medicare’s accountable care organization (ACO) initiatives during its first two years. “The low-cost groups didn’t think taking risk for spending based on their historical costs offered much upside,” Mechanic says, “but they might be more interested as CMS moves the program towards regional pricing.” Mechanic predicts that future rounds of this survey would show a slow and steady movement toward alternative payment models. “Taking on risk is not easy or straightforward. You need to be an organization committed to improving care and managing resources care with front-line physicians that buy into that culture,” he says. As an example of how risk contracting enables organizations to focus on improvement, Mechanic points to the differences in information management infrastructure and performance improvement initiatives at groups that have taken on substantial risk, as compared to groups in the study that have taken on less risk. Mechanic says that it’s important to consider how contracting incentives at the medical group level are translated to individual physicians. The groups with a high proportion of risk contracts also reported physician compensation models that tended to emphasize quality over productivity. “There is no perfect compensation model,” he says, “but risk-based groups are trying to align organizational and individual physician incentives.” While this study provides a unique view of medical group payment arrangements, it is not a representative profile of the American healthcare system. The organizations targeted for the survey were larger and more integrated than typical medical groups. “The fact that many of these well-organized groups are taking a gradual approach to payment reform is an indication that we have to be realistic about the pace of change,” Mechanic says. Another major challenge is balancing risk contracts and fee-for-service arrangements simultaneously. “If one system says volume and another says value, it’s much harder to align incentives and deliver quality care,” he adds. Mechanic is not optimistic that the upcoming Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) program, which fundamentally changes the way physicians will be paid for caring for Medicare beneficiaries, will lead to significant uptake of risk arrangements in the short run. He predicts that some systems will move from upside-only to two-sided, ACO arrangements, but that others will drop out if they are required to take on downside risk. The CAPP member groups believe there are five key health system characteristics that represent true accountability in healthcare:

1. Robust information technology. 2. Quality measurement. 3. Care coordination. 4. Physician leadership. 5. Value-based payment.

The Brandeis research demonstrates how these pillars must work in concert with one another to achieve high-quality health outcomes and patient-centered care. As CAPP is committed to supporting research that seeks to understand the continued national movement towards accountability, a third round of this survey is currently in the field. Results are expected in early 2017. The first round of survey findings is available here.

1 Mechanic RE, Zinner D. “Risk Contracting and Operational Capabilities in Large Medical Groups During National Healthcare Reform.” American Journal of Managed Care. June 17, 2016;22(6):441-446.

2 “What is CAPP?” Council of Accountable Care Physicians website.

Laura Fegraus is executive director, Council of Accountable Physician Practices (CAPP). She can be reached at [email protected].

MACRA Is Disruptive, Clinicians Must Get Up to Speed.…continued from page 1

New healthcare laws such as the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) makes this kind of expertise necessary. Today, one fundamental question is facing health systems and other stakeholders as they prepare for the first performance period under MACRA: How disruptive can it really be? Disruptive, and that’s by design. Many healthcare stakeholders already see this. In an online survey of 61 executives,4 who are leaders or key decision-makers of value-based care initiatives at hospital/health systems and health plans, Deloitte found that many executives believe MACRA is poised to disrupt relationships and in some cases, the way their business operates on a fundamental level:

• Nearly half (45%) of health system executives and 33% of health plan executives say that MACRA will be very disruptive to relationships between health systems and physicians.

• Four in 10 health system executives and health plan executives believe that MACRA will be very disruptive to their organization’s financial model.

• Half of health system executives and 83% of health plan executives say that they agree or strongly agree that MACRA will drive physicians to join larger organizations or networks. (continued on page 7)



MACRA Is Disruptive, Clinicians Must Get Up to Speed.…continued from page 6

While they agree that the law will be disruptive, health system and health plan executives disagree on how MACRA will affect their bottom lines. Half of health plan executives believe that MACRA will improve their margins, while the majority (72%) of health system executives believe MACRA will hurt their total margins. Thirty-eight percent of health system executives expect total margin losses of greater than 3%. Most organizations are familiar with some of MACRA’s components and requirements, and most are beginning to prepare. Some are speeding up their plans for value-based, care payment arrangements. One in three health system executives and health plan executives says that they will speed up their plans for value-based, payment arrangements due to MACRA. MACRA’s impact will likely be seen in many aspects of healthcare:

• It emphasizes increasing reliance on EHR systems, advancing interoperability and increasing outcomes-driven, decision making.

• It allows clinicians participating in many of the current payment and delivery models, such as those affecting certain Medicare Shared Savings Program accountable care organizations (ACOs) and Next Generation ACOs and Comprehensive Primary Care Plus (CPC+) participants, to qualify for incentive payments as Advanced Alternative Payment Models (APMs), starting in 2019 (based on 2017 performance).

• It also aligns the Merit-Based Incentive Payment System (MIPS) with those models, helping to ensure that clinicians can report on similar quality, resource use and health IT measures across the board.

Options for Physicians to Phase Into Reporting Under MACRA Much work remains to be done to get clinicians—the ones who MACRA will likely affect most directly—up to speed on its changes. The online survey,5 fielded from April to May, 2016, also sheds light on physicians’ awareness of MACRA, their perspectives on its implications and their readiness for change. One of its main findings is that many physicians are unaware of MACRA. Fifty percent say they have never heard of the law, and 32% recognize it by name but are not familiar with its requirements. In addition, many physicians do not view favorably the actions that MACRA will require them to take. For example, 74% of surveyed physicians believe that performance reporting is burdensome, and 79% do not support tying

compensation to quality. Congress and the Centers for Medicare & Medicaid Services (CMS) are trying to limit the burden on physicians—especially small-group and independent physicians. A small number of groups is exempt from reporting altogether (through the minimum patient and revenue thresholds). In the final rule released on Oct. 14, 2016, CMS finalized new options for clinicians to phase into reporting under MACRA; however, clinicians who opt to not participate at all in 2017 will be subject to a negative 4% payment adjustment. MACRA is expected to drive care delivery and payment reform across the U.S. healthcare system for the foreseeable future. It has the potential to be a game-changer at all levels of the system. Already, the law is igniting strategic discussions around new care, payment and delivery models. But as the survey results show, healthcare stakeholders—health systems, payers, CMS, Congress and others—should consider working with physicians to prepare for the law’s changes. Congress passed MACRA with unprecedented bipartisan legislative and stakeholder support. While change in healthcare has traditionally been slow to start, the timeline for stakeholders to prepare for MACRA reporting and compliance is short, and there is much to do.

1 De Lew N. “Medicare: 35 Years of Service.” Health Care Financing Review. 2000;22:75-103. 2 Ibid. 3 “Preparing the Doctor of the Future.” Deloitte Center for Health Solutions. 2016. 4 “MACRA: Disrupting the Health Care System at Every Level.” Deloitte. 2015. 5 Ibid.

This publication contains general information only and Deloitte is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business. Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this publication. As used in this document, “Deloitte” means Deloitte LLP and its subsidiaries. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting. Copyright © 2016 Deloitte Development LLC. All rights reserved. Claire B. Cruse, MPH, is a health policy manager for the Deloitte Center for Health Solutions, Deloitte Services LLP, in Washington, DC. She can be reached at [email protected].



“ICD-10 and MACRA are assuredly (and quite honestly) just two blips in a continued march toward reform, but what often occurs is shortsightedness: trying to solve one issue at a time instead of taking the strategic and broader view.”

“Similarly with MACRA, CMS is leading the charge to curb spending by holding medical professionals accountable for patient outcomes with precise quality (and not unnecessary) care.”

ICD-10 Informs Lessons for MACRA About Costs of Change.…continued from page 1

Interestingly, while on their face ICD-10 and MACRA are seemingly unrelated, there are striking parallels and lessons that should have been learned from the former’s implementation. And regardless of what the perceived impact is with either, health plans owe it to their members to “future proof” the infrastructure supporting and enabling their core administrative processes. With healthcare reform regulations and changes repeatedly hitting the shores of insurers like high tide on a beach, the time is now to “batten down the hatches” with the right technology that both fortifies systems and provides the agility to make necessary changes as rapidly as market forces demand.

Looking at some of the characteristics and repercussions the industry experienced with ICD-10, MACRA sends many similar signals:

The government is leading the charge on healthcare reform. It almost sounds shocking that the government could be out in front on the specifics of sweeping changes, but that’s exactly what happened with ICD-10. One of the key motivations behind ICD-10’s implementation was a move toward beneficial specificity in medical payments, ably supported by

advancing technology. Even with the outlandish codes for ailments such as “other contact with shark,” a non-billable and non-specific code, CMS’s data-driven initiatives were designed to eliminate wasteful spending by being more precise. Similarly with MACRA, CMS is leading the charge to curb spending by holding medical professionals accountable for patient outcomes with precise quality (and not unnecessary) care. Both initiatives introduce increased unavoidable complexity, which requires modern technology infrastructure.

Insurers’ habit of applying “Band-Aids” to handle complexity will haunt them. It was the cry of healthcare’s Y2K when ICD-10 was announced. Insurers were forced to shell out millions to incorporate the new codes into their claims processing systems. With many health plans using 30-year-old systems to manage internal processes, it should not have come as a shock that these systems served as roadblocks.

MACRA poses a different challenge, but one that demands many of the same considerations. Core administration systems lacking the ability to handle quality-driven, payment models can stand in the way of modernization just as implementing thousands of new ailment classifications did. The quality measures promised by the government as part of MACRA have yet to be formally introduced, meaning that more implications will take place later this year.

Critical automation takes one step forward, then one step back. Ask any health plan’s executive team, and it will say that automating key administrative processes is one of its top goals. But in many cases the necessary transformation is done piecemeal, which causes additional headaches and delays the potential benefits of true change. Each time a significant new reform or update lands, some health plans choose to apply a Band-Aid method to automate. Then the next initiative arrives, and the challenges occur all over again. This approach has proven to be inadequate many times over, and different action is clearly called for. The age of technology is all about agility and scalability and utilizing technology to take advantage of available market opportunities. The bottom line is that for years, healthcare reform has been about complex change and moving very quickly. But for many, it’s been about complex change with costly challenges to move quickly. The “with costly challenges” portion of that model is unnecessary if health plans “future proof” their systems and processes. ICD-10 and MACRA are assuredly (and quite honestly) just two blips in a continued march toward reform, but what often occurs is shortsightedness: trying to solve one issue at a time instead of taking the strategic and broader view. Not everything can be a seamless transition but if done right ahead of time, many health plans could get ahead of the regulatory curve, save a lot of money and provide better healthcare in partnership with their providers, all resulting in better outcomes and greater member satisfaction.

1 “Implementing ICD-10—How Much Will it Cost?” ICD10monitor. Accessed Oct. 10, 2016. Ray Desrochers is executive vice president of HealthEdge.

Mari Edlin, a graduate of Stanford University and a long-time San Francisco Bay Area freelance writer specializing in healthcare, serves as editor of

Accountable Care News. Please submit ideas for bylined articles, opinion pieces and case studies to Mari at [email protected].



Each month, we ask a panel of industry experts to discuss a topic of interest to the accountable care community. Q. What Are the Ingredients for Success of an ACO?

Accountable Care Organizations (ACOs) have seen exponential growth since they were introduced through the Affordable Care Act as a means to achieve the triple aim of improving patient satisfaction, improving quality of care and holding down costs. ACOs were developed to provide coordinated care with ACOs sharing medical and financial responsibility for the care of their patients. Components of successful ACOs include sound leadership, provider cohesion, a focus on community and patient engagement and the effective use of data. As existing ACOs mature and new ACOs are formed, they should consider these ingredients to assure their viability and success:

• ACOs are subject to many regulatory, financial and patient care obligations that make ACOs complex organizations to form and manage. To effectively manage an ACO, leadership should have the multidisciplinary skills and experience to be comfortable with the different aspects of ACO operations.

• The doctors and hospitals that form ACOs are accountable collectively for the quality, cost and overall care of their patients. Relationships between these traditionally independent groups need to be fostered to allow them to work toward common objectives.

• Community and patient engagement is critical for ACO programs designed to improve patient safely, teach life skills and provide community support and education to be accepted and successful.

• Collecting and managing data is a central component for a successful ACO. Providers must have accurate and up-to-date information to allow for individualized care.

Focusing on these elements will enhance patient care and satisfaction, improve quality and deliver the financial results and patient retention needed for a successful ACO.

David M. Kaufman Partner Healthcare Practice Group Freeborn & Peters LLP Chicago, Ill.

If you peel away the complexities associated with ACOs, including the myriad details required to measure quality and determine reimbursements, you are left with the outcomes ACOs seek to achieve—promote the health of individuals, empower them to care for themselves, improve the quality of care and lower costs. To make these ideals a reality requires the trifecta of people, processes and technology and a fanatical focus on the population the ACO serves. A laser focus on population health is paramount. First, ACOs must identify their population. Demographic analysis and tools such as geo-mapping enable you to understand the population and proactively address issues, such as high-crime, exercise, healthy dining options and other factors that impact wellness. Creating a medical home with the patient at the center then becomes key. For many, the National Committee for Quality Assurance’s (NCQA) patient-centered medical home is an effective model, and it’s increasingly included in contracts with providers. Secondly, you must understand your population’s needs. Who was too sick to pick up their prescriptions or couldn’t pay for them? Who was admitted to the emergency room without your knowledge? It’s imperative to understand what is needed in order to provide assistance. Finally, you must be able to connect with your providers and population to promote an ACO’s goals. Technology plays a huge role in these efforts. Information has to flow freely between care managers and doctors, and siloes must be eliminated. It’s a tall order—after all many struggle with interoperability—but tech-savvy ACOs are already thriving.

Linda Lockwood Solutions Director and Service Line Owner Health Services Computer Task Group (CTG) Buffalo, N.Y.

Thought Leaders’ Corner



The evolution to a high-performing ACO—or what we call “ACO 2.0”—is a necessary step for health systems to respond to the market’s demand that risk be assumed by hospitals, physicians, post-acute care (PAC) providers and allied health professionals. Following are three key considerations for the transition to an ACO 2.0 that effectively manage financial and clinical risk for larger, more complex populations: • Assessment. A bad risk-bearing contract is much worse than no contract at all, so ACOs need an understanding

of whether local payers are driving the ACO 2.0 evolution and if market economics (utilization, enrollment, rates) are sufficient to justify risk, as well as which bundled payment programs to participate in and in what order. Providers also need to consider whether finances are adequate to fund downside risk and if a partner is necessary to raise the capital required for an ACO 2.0 transition.

• Organization. Since it’s better to have a few of the right players in the front row than lots of players in the back row, providers should pick their partners carefully. This requires an understanding of how their high-performing networks will be defined, constructed and incentivized to share risk. Providers also need to consider how to select appropriate partners to create a limited network of high-value providers to achieve optimal savings and quality.

• Implementation. Execution is everything. Having physician leaders driving the ACO 2.0 evolution and systems in place to measure and monitor savings and outcomes is essential. ACOs need to consider how utilization, outcomes and patient experience will be measured and improved systematically, as well as identify how and where savings can be optimized in the scope of the populations under contract in areas that don’t crumble the system’s financial position in a primarily fee-for-service market (e.g., PAC, pharmacy spend). ACO leadership should also address how to handle underperforming providers and adverse selection in patient populations.

Dennis Butts, Jr. Director Navigant Healthcare Chicago, Ill.

Primary Care Physicians Can Better Manage Total Cost of Care for Accountable Care Populations SAN MATEO, Calif.—(Business Wire)—Primary care physicians (PCPs) can more effectively manage the total cost of care when managing the healthcare needs of a covered population, says Cave Consulting Group (CCGroup), which reached this conclusion after evaluating the performance of several health plan accountable care and value-based reimbursement programs. “On average, PCPs are involved in treating 57% of all prevalent medical condition episodes of care. This means patients are self-referring to specialists 43% of the time,” says Douglas G. Cave, president of Croup. “For those medical conditions with significant practice variations, PCPs are involved in treating only 40% of the patient episodes of care. Examples of medical conditions with significant practice variations are low back pain, degenerative joint disease, headaches, derangement of knee, hernias, and ischemic heart disease.”

Of the 40% of patient episodes seen by PCPs with significant practice variations, PCPs referred 35% of these episodes to specialists. Therefore, PCPs are “solely involved” in treating only about one in four medi-cal condition episodes with significant practice variations. “For the 35% of episodes referred to specialists by PCPs, we observe that only 50% of the specialists are practicing efficiently and effectively. This finding implies that PCPs may refer to specialists based on criteria other than efficiency and effectiveness,” Cave says. “Under accountable care, PCPs need to become more active participants in treating medical conditions with significant practice variations. PCPs need to be informed of the medical conditions and services with the most practice patterns variation. For these conditions, PCP involvement needs to be increased from the current 40% of patient episodes to at least the 90% level,” he says. “Then, quantitative clinical pathways should be developed that define the appropriate time for a specialist referral. When a referral is appropriate, PCPs need to refer to efficiently and effectively practicing specialists. In this manner, PCPs can more effectively manage the total cost of care of a covered population.”

Thought Leaders’ Corner

Industry News



Blue Shield of California expands ACO network in Southern California by Matthew Yi Upland, Calif.–Blue Shield of California has expanded its Accountable Care Organization (ACO) network in Southern California through a new collaboration with PrimeCare Medical Network, Inc., the Inland Empire’s largest network of independently contracted physicians, and San Antonio Regional Hospital, which has been serving area residents for more than 100 years. The collaboration will provide enhanced care coordination for local residents, making it easier to share important health information across the healthcare system so that providers involved in a patient’s care support the same treatment plan. Blue Shield’s newest ACO helps transition the region’s healthcare system from one that reimburses for quantity of services to one that rewards the quality of patients’ health outcomes, while seeking to make care more affordable. The network will serve more than 13,000 people. “A shared clinical strategy with health care providers is the foundation of our ACO program and an integral part of our ongoing effort to connect Californians with quality care in a cost-effective way,” says Kristen Miranda, senior vice president of strategic partnerships and innovation, Blue Shield of California. PrimeCare is a healthcare delivery network serving more than 187,000 people in the Inland Empire. PrimeCare primary care physicians and specialists have been serving patients since 1994. San Antonio Regional Hospital is an acute-care hospital that has been serving the community for more than a century and treats more than 200,000 patients each year. The hospital system includes its main campus in Upland that will soon open a new 52-bed emergency department and patient tower with private rooms to continue its legacy of serving the needs of a growing region. The system also includes medical plazas in Eastvale, Rancho Cucamonga and Fontana.

Blue Shield of California (continued) From its first ACO in 2010, Blue Shield’s network now includes 37 ACOs, serving about 340,000 people. In the program’s first five years, Blue Shield and its ACO participants achieved more than $325 million in estimated healthcare savings.

UC Partners With UnitedHealth Group to Increase Access to Medical Data University of California (UC) physicians and researchers will have access to one of the largest medical databases of patient records in the country, under a recent agreement with UnitedHealth Group, Inc. The patient records will be used to better UC physicians’ and researchers’ understanding of medical data. Both entities will also create an accountable care organization, which is a joint group to better cooperate and control healthcare. John D. Stobo, executive vice president of UC Health, says in a statement that the partnership with UnitedHealth aligns with the university’s strategy to deliver cost-effective, higher-quality healthcare. OptumLabs, a research center created by UnitedHealth and Mayo Clinic, will create an office in San Francisco early next year to help UC physicians and researchers access its database, which has medical records for more than 50 million people but does not include patients’ identities. Robert Falkenberg, chief executive officer of UnitedHealthcare of California, says in a statement that the program will integrate both value and effectiveness into its clinical practices in California. “This collaboration combines UnitedHealthcare’s care provider network and UC Health with Optum’s capabilities to advance patient care into a national model for integration,” Falkenberg says. OptumLabs also plans to sponsor an internship program for the students to be trained on analyzing medical data. UnitedHealth will donate $1 million to UC Health to support the university’s efforts on training its students on data analysis, according to a press release.

Catching Up With David Muhlestein.…continued from page 12 Accountable Care News: What advantages will be accrued by ACOs by incorporating regional spending into the benchmarking methodology in the Next Generation model?

David Muhlestein: The benchmark used in the original ACO program was based on the concept of doing better than yourself, adjusted for national spending, year over year. The regional benchmark encourages people to do better than their regional peers. Because different parts of the country see different growth rates in healthcare costs, this will allow high performers in high-growth markets to receive bonus payments for doing better than their market.

Regional benchmarks also will make it so that organizations that were historically underperforming will have a higher bar to reach to receive savings.

For the Next Generation ACO model, the benchmark is based on historical spending and adjusted by regional growth trends. This will allow ACOs to have a better idea of the benchmark they must beat and will also allow them to simply improve better than their peers to qualify for shared savings.

Industry News

12


Catching Up with …

Accountable Care News: How have accountable care organizations (ACOs) changed since their initiation? David Muhlestein: Becoming an ACO requires healthcare providers to be paid differently than they have before under some form of an alternative payment model (APM). Originally, much ACO activity was driven by health insurance companies (commercial payers and Medicare) as they sought to change incentives so providers would provide better care to covered patients. As time has progressed, the focus has begun to shift from payment reform—paying differently for care—to delivery reform, providing care differently to patients. With this delivery focus, payment models have begun to be less important as ACOs must figure out the delivery of care from the provider perspective. This has led to a more provider-centric view of ACOs and more work around improving care delivery, creating appropriate partnerships among providers and improving the management of complex patients.

Accountable Care News: How do ACOs support the move toward value-based care? David Muhlestein: ACOs represent the heart of value-based care. At their core, they consist of providers that accept financial responsibility for the cost and quality outcomes of a defined population. Under this model, an ACO succeeds when costs decrease and quality improves, which give strong incentives to change how healthcare is delivered. A principal driver of the change toward value-based care comes when providers start to change the process of how they deliver care, and ACOs often serve as the vehicle where that happens. Importantly, providers start to change their approach to managing populations by identifying complex patients and helping them through the care delivery process. The only way value-based care can be successful is by changing how medicine is practiced, and the ACO model will be the method through which much of that change happens.

Accountable Care News: To what do you attribute the higher quality outcomes and increased financial savings of ACOs in the Medicare Shared Savings Program as reported in August? David Muhlestein: The two largest factors that predicted the performance of ACOs in the Shared Savings Program were the financial benchmark and time in the program. The financial benchmark makes sense; using a race analogy, it is easier to improve on a ten-minute mile (a high benchmark) than a four-minute mile (a low benchmark). The benchmarks, though, have always been a mix of high and low levels. What has changed is the time that ACOs have been in the program, and it turns out that the longer organizations have been in the Shared Savings Program, the more likely they are to see meaningful savings and qualify for bonus payments. This is because the necessary changes that an organization must make to be successful requires time, and it is positive to see that those that have been working on this for longer are, in reality, seeing better results.

Accountable Care News: What do physicians need to be successful in ACOs? David Muhlestein: The key to being successful in an ACO is relatively simple: Figure out how to appropriately care for patients and avoid high-cost services. From a physician’s perspective, this will require identifying the core needs of his/her population and identifying interventions that can address these needs. These could range from helping diabetics change their diets to improving statin therapy for those with heart disease. Physicians must also recognize what they can and cannot do, which will require them to partner and create meaningful relationships with other providers on the care continuum that will help them better manage their populations, for example by partnering with behavioral health providers who have a strong ability to intervene with some very high-cost patients. Physicians must also learn and adopt technology that will help them track their patients. Each practice, however, must determine what the appropriate technology is for them.

David Muhlestein, Ph.D., J.D., MHA, M.S., is vice president of research for Leavitt Partners, a healthcare intelligence business based in Salt Lake City, Utah. He directs the study of accountable care organizations through the LP Center for Accountable Care Intelligence and leads the firm’s quantitative evaluation of healthcare markets. He is an expert in using policy analysis, predictive modeling and applied analytics to understand the evolving healthcare landscape.

• Adjunct Assistant Professor, The Dartmouth Institute, Geisel School of Medicine, Dartmouth College

• Visiting Fellow, Accountable Care Learning Collaborative • Ph.D., health services management and policy; master of healthcare

administration degree; master of science degree, public health; and J.D., all from The Ohio State University

• B.A. degree, philosophy, Brigham Young University


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