Senior Living, Accountable Care Organizations, and the

New Medicare

May 8, 2013

The Problem: Costs 17.3%  of  US  GDP  spent  on  health  care  in  2009  1.1%  increase  over  2008’s  16.2%  -­‐-­‐  the  largest  one-­‐year  increase  since  1960  

17.9%  of  US  GDP  in  2010      The  country  closest  to  the  U.S.  in  health  care  expenditures  is  Germany,  where  health  care  costs  are  11.1%  of  GDP

Medicare Costs

Total  Medicare  spending  is  projected  to  increase  from  $523  billion  in  2010  to  $932  billion  by  2020.    

From  2010  to  2030,  Medicare  enrollment  is  projected  to  increase  from  47  million  to  79  million.  

2010 CMS Actuarial Report on the Financial Outlook for Medicaid Expenditures  are  projected  to  increase  at  an  average  annual  rate  of  8.3%  and  to  reach  $840.4  billion  by  FY  2019.  

Average  enrollment  is  projected  to  increase  at  an  average  annual  rate  of  4.5%  over  the  next  10  years  and  to  reach  78  million  in  FY  2019.  

Cost Drivers Poor  health  of  Americans    Unnecessary  procedures  Fee  for  service  structure  Inefficient  treatment  of  chronic  disease    Payment  systems  don’t  reward  quality  and  efficiency  

Programs  don’t  keep  high  uXlizers  in  beZer  health  Programs  don’t    deal  with  end  of  life  costs  Pharma  costs    Technology  costs  

The Problems: Quality The  United  States  ranks  dead  last  of  Britain,  Canada,  Germany,  

Netherlands,  Australia  and  New  Zealand  —  2012  Commonwealth  Fund  

The  United  States  is,  at  best,  average  in  comparison  to  European  health  care  systems  —  Urban  Ins7tute  2012  

The  United  States  is  no  beZer,  and  in  some  cases,  worse  than  its  largest  trading  partners  —  Business  Roundtable  2010  

World Rankings

What to do?

COMPLETELY CHANGE THE INCENTIVES IN THE AMERICAN HEALTHCARE SYSTEM

THIS IS THE NEW MEDICARE

That is… Improve  health  of  Americans    Eliminate  unnecessary  procedures  Move  away  from  fee  for  service  structure  Efficient  treatment  of  chronic  disease    Payment  systems  rewards  quality  and  efficiency  Programs  keep  high  uXlizers  in  beZer  health  Programs  deal  with  end  of  life  costs  Pharma  costs  kept  under  control    Technology  costs  kept  under  control  

This isn’t “Obamacare” “The steps that I think are most promising are

really about changing payment methods to reward providers for better health outcomes”.

January 21, 2013, Mark B. McClellan, Financial Times

Institute for Healthcare Improvement THE TRIPLE AIM Improving the U.S. health care system

requires simultaneous pursuit of three aims: improving the experience of care, improving the health of populations, and reducing per capita costs of health care

Example: The Medicare Shared Savings Program (“MSSP”) Authorized by the Affordable Care Act The Centers for Medicare & Medicaid Services (CMS) is

responsible for implementation Rules finalized October 20, 2011 Eligible providers, hospitals, and suppliers may

participate in the MSSP by creating or participating in an Accountable Care Organization (ACO).

Designed to implement the Triple Aim

ACOs Accountable Care Organizations (ACOs) are groups of

doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high quality care to their Medicare patients.

The goal of coordinated care is to ensure that patients, especially the chronically ill, get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.

When an ACO succeeds both in both delivering high-quality care and spending health care dollars more wisely, it will share in the savings it achieves for the Medicare program.

Organization-Form and Function

An ACO is a legal entity that is recognized and authorized under applicable State, Federal or Tribal law, is identified by a Taxpayer Identification Number, and is formed by one or more ACO participants

Receives and Distributes Shared Savings Repays Shared Losses Establishes, reports and ensures provider

compliance with health care quality criteria Fulfills other ACO functions

Organization- Governance An ACO must maintain an identifiable

governing body with the authority to execute the functions of the ACO

Governing body members have a fiduciary duty to the ACO

Must be unique to the ACO if comprised of different ACO participants

Must include a Medicare beneficiary 75% control of the governing body must be

held by ACO participants

Organization- Participants ACO Participants are individuals or groups of

ACO providers/suppliers that are identified by a Medicare enrolled TIN and that are in the approved list of providers

Clinical management and oversight must be managed by a senior level medical director who is a physician

Each ACO participant must demonstrate a meaningful commitment to the ACO mission (either financial or human investment)

Application and Agreement To participate in the Shared Savings Program,

an ACO must apply to CMS Application must inform CMS how the ACO

plans to deliver high quality care and lower costs

If accepted, the ACO must enter into an agreement with CMS to participate for at least 3 years

ACOs must accept responsibility for at least 5,000 Medicare beneficiaries

Beneficiary Assignment CMS assigns based on “plurality of primary care services”: Plurality: a greater proportion of primary care services, measured in

terms of allowed charges, but can be less than a majority of services

Step 1: Assigned if the beneficiary receives the plurality of her

primary care services from primary care physicians within the ACO. Primary care physicians designations: internal medicine, general practice, family practice, and geriatric medicine.

Step 2: If a beneficiary has not had a primary care service

furnished by any primary care physician. Then assignment is made based on receipt of a plurality of her primary care services from physicians and certain non-physician practitioners (nurse practitioners, clinical nurse specialists, and physician assistants) within the ACO.

Beneficiary Assignment Assignment, Reconciliation, and Data Sharing At the beginning of the performance year, beneficiaries are

preliminarily assigned to ACOs (prospectively) based on the most recent available data. However, final assignment, for the purposes of determining an ACO’s quality and financial performance, is made at the end of the performance year (retrospectively).

At the start of each agreement period, the performance year and quarterly thereafter, CMS will provide the ACO with a list of preliminarily assigned beneficiaries and aggregate beneficiary level data regarding this population.

Preliminary prospective assignment allows ACOs to develop care plans and quality initiatives with some knowledge regarding the beneficiaries for whom they will ultimately be held accountable.

The final retrospective reconciliation allows CMS to assess an ACO’s performance based on where beneficiaries have chosen to receive services during the performance year.

Shared Savings Calculation

Track 1: “One Sided” risk model; that is, ACO shares program savings, but is not at risk for program losses

Track 2: “Two Sided” risk model; ACO

shares (more) program savings, but is also at risk for program losses

Eventually: ALL ACOS WILL BE TRACK 2

Shared Savings Calculation Step 1: Establish Benchmarks for each

Performance Year of Agreement Period The benchmark is most recent 3 years of

per-beneficiary expenditures for Medicare Fee For Services Part A and B, adjusted for risk

Benchmark is a surrogate measure of what Medicare Fee for Service would have paid in the absence of the ACO

Shared Savings Calculation

Step 1 (cont.) Benchmarks are risk adjusted for the

Medicare population served based on CMS’ experience with Medicare Managed Care

Benchmark will also account for the national growth rate for Medicare FFS expenditures

Shared Savings Calculation

Step 2: Compare Performance to the Benchmark to Determine Shared Savings

To account for normal variation, CMS will establish a Minimum Savings Rate (“MSR”) that must be achieved in order for an ACO to share savings

Similarly, for Track 2 ACOs, a Minimum Loss Rate (“MLR”) is established

Shared Savings Calculation

Step 2 (cont.) Track 1 ACOs: The MSR varies with the size

of the ACO population (the smaller the size, the larger the MSR) The range is from 2% to 3.9%

Track 2 ACOs: The MSR and MLR are set

at a flat 2%

Shared Savings Calculation

Step 2 (cont.) For each Performance Year, if actual

expenditures are less than the ACO benchmark and exceed MSR, the ACO is eligible for shared savings

For Track 2; if actual expenditures are greater than the ACO benchmark and exceed MLR, a loss is incurred

Shared Savings Calculation

Step 3: Determining Sharing Rate and Shared Savings

If an ACO achieves savings AND meets quality standards (next):

Track 1: Sharing rate up to 50%, quality dependent (payment limit=10% of benchmark)

Track 2: Up to 60%, quality dependent (payment limit= 15% of benchmark)

Shared Savings Calculation

Step 3 (cont.) Track 2 Shared Losses ACOs are liable for up to 60% of losses Actual amount varies based on quality SO, ACOs that provide high quality share

less loss Loss sharing limited to 5% of benchmark

(Y1), 7.5% (Y2) and 10% (Y3)

Quality Measures Before an ACO can share savings, it must

demonstrate quality performance 33 measures for quality performance Span 4 quality domains: 1.  Patient Experience of Care 2.  Care Coordination/Patient Safety 3.  Preventative Health 4.  At-Risk Population

Quality Measures Measured by:

Web interface Patient experience (care surveys) CMS’ Claims and Administrative Data

Minimum attainment level: 30th percentile of the national performance benchmark

Maximum points: 90th percentile Corrective Action Required for failure to hit

minimum attainment on 70% of measures

It’s real

Since passage of the Affordable Care Act, more than 250 Accountable Care Organizations have been established

106 new ACOs were announced in January In total, Medicare ACOs will serve more than

4 million beneficiaries nationwide

Senior Care’s Role Evolving Partner as opposed to Participant Hospital costs are a key driver of overall

beneficiary costs Inroads are being made by senior care providers to provide post hospital care and rehabilitation services

Is there potentially a greater role in enhancing the consumer experience? In promoting overall health?

Assisted Living’s role Advantages -  Consumer focused -  Promotes wellness -  Routine screening -  Less costly than

other care settings

Challenges -  State regulations -  Dealing with partners -  Investment

-  Technology -  Training

-  Touching Medicare

ACOs: tip of the iceberg Value  based  payment  for  physicians  in  2015  Hospital  acquired  condiXons  payment  adjustments  in  2015  Value  based  purchasing  for  hospitals  2013  Readmits  reducXons  in  2012    

AND  WE  HAVEN’T  EVEN  TALKED  ABOUT  PRIVATE  INSURANCE  

Questions? Thank you! Michael R. Crowe Brown McCarroll, LLP 111 Congress, Suite 1400 Austin, Texas 78701 512-702-5737 mcrowe@brownmccarroll.com