Karl A. Thallner, Jr., Esquire Proposed ACO Rule: How Will It Affect Academic Medical Centers? This roundtable discussion is brought to you by the Teaching Hospitals and Academic Medical Centers Practice Group Wednesday, May 25, 2011  12:00-1:00 pm Eastern Presenters Max M. Reynolds, Esquire Deputy General Counsel University of California, Oakland, CA Steven J. Bernstein, MD, MPH Professor, Department of Internal Medicine University of Michigan, Ann Arbor, MI Moderator Karl A. Thallner, Jr., Esquire Partner Reed Smith LLP, Philadelphia, PA 1

Proposed Medicare Shared Savings Program Overview & Effect on AMCs Max Reynolds University of California 2

The Bottom Line . . . . 3 3

Overview of SSP Significant compliance obligations and costs. Limited opportunity to earn SSP payments. Financial liability for uncontrollable risks. Additional Issues to Consider 4 4

Compliance Obligations (Sources) Regulations (once final) SSP Application SSP Participation Agreement 5 5

Compliance Obligations (ACO Structure) General Rule: Distinct legal entity 75%+ board representation by participating health care providers/suppliers. Medicare beneficiary on board (no COI) TIN required . . . .but not Medicare enrollment Exception: (No new entity required) All participating providers and suppliers already in a single pre-existing legal entity. 6 6

Compliance Obligations (Clinical) CMO: Full-time, board certified, CA licensed. QAPI: Must address cost-effectiveness. Remediate poor performers. Evidence-Based Clinical Guidelines. Particularly for conditions with savings potential. Process to monitor, evaluate, provide feedback to, remediate, and expel practitioners. Sufficient EHR to support monitor/evaluation. 7 7

Compliance Obligations (Clinical) 50%+ of PCPs must qualify as “meaningful users” of certified EHR by start of PY2. Report on 65+ quality measures annually. Will expand in future years. Minimum attainment levels. Reporting Claims, PQRS/GPRO Reporting Tool, CAHPS Survey CMS Audits 8 8

Compliance Obligations (Clinical) Evaluate health needs of ACO population and develop a plan to address those needs. High-Risk Individuals Process to identify. Process to develop “individualized health plan.” Clear mechanisms to ensure coordination of care inside and outside ACO. Public disclosure of ACO information. 9 9

Compliance Obligations (Administrative) Designated Compliance officer (not legal counsel) who reports to ACO governing body. Mechanism for ACO employees, contractors and PSP to report suspected problems to ACO. Mandatory compliance training for all ACO employees and ACO PSP. Requirement to inform law enforcement of suspected violations of law. 10 10

Compliance Obligations (Administrative) Possible antitrust review. Subject to future CMS rule changes re SSP. 11 11

Compliance Obligations (Disclosure) Mandatory signage and background materials for patients regarding SSP. Prior CMS approval of any “marketing material.” 12 12

Compliance Obligations (Summary) 13 13

Overview of SSP Significant compliance obligations and costs. Limited opportunity to earn SSP payments. Financial liability for uncontrollable risks. Additional Issues to Consider 14 14

Ltd. Opp. For SSP Payments Many Hurdles In Order To Qualify for Payment If You Qualify, Payment Is Limited 15 15

Ltd. Opp. For SSP Payments (Hurdle 1) Must Generate Significant Savings (PY MFFSPCE) < (98% of ACO Benchmark). Only savings below 98% of Benchmark are shared. In some cases must be below 96% of Benchmark. 16 16

Ltd. Opp. For SSP Payments (Hurdle 2) Limited Ability To “Manage” Patient Care Crucial Point 1: No advance knowledge as to which patients affect calculation of your Actual PCMFFSE. Crucial Point 2: Beneficiary is free to get care outside ACO, and it will affect your PCMFFSE. Disincentive To Refer Hospital Patients To Academic Hospitals (IME Payment). 17 17

Ltd. Opp. For SSP Payments (Hurdle 3) Grounds For Denying SSP Failure to report on all 65+ clinical metrics. Must follow prescribed format. 10%+ error rate on audit of quality score. Failure to meet minimum attainment level. Failure of 50%+ of ACO PCPs to qualify as meaningful EHR users by start of PY2. 18 18

Ltd. Opp. For SSP Payments (Hurdle 4) Only Limited Portion of Savings Is Shared Maximum Sharing Rate is 52.5% to 65% Track 1 or 2 Performance on Quality Metrics RHC/FQHC Bonus Payment Cap (10% Benchmark Amount) 7.5% PY1-2 in Track 1. 25% Withhold (subject to forfeiture). 19 19

Overview of SSP Significant compliance obligations and costs. Limited opportunity to earn SSP payments. Financial liability for uncontrollable risks. Additional Issues to Consider 20 20

Liability For Uncontrollable Risks 21 21

Liability For Uncontrollable Risks At Risk for Increased Costs (PY MFFSPCE) > (102% of ACO Benchmark). Only losses above 102% of Benchmark are shared. 22 22

Liability For Uncontrollable Risks Limited Ability To “Manage” Costs Crucial Point 1: No advance knowledge as to which patients affect calculation of your Actual PCMFFSE. Crucial Point 2: Beneficiary is free to get care outside ACO, and it will affect your PCMFFSE. IME payments become a burden to Academic Hospitals. 23 23

Liability For Uncontrollable Risks Only Limited Portion of Savings Is Shared Minimum Loss Sharing Rate is 35%-47.5%. Performance on Quality Metrics RHC/FQHC Bonus Loss Liability Cap (10% Benchmark Amount) Losses apply against withhold and carry forward. Could subject ACO to state regulation as health insurer. 24 24

Overview of SSP Significant compliance obligations and costs. Limited opportunity to earn SSP payments. Financial liability for uncontrollable risks. Additional Issues to Consider 25 25

Additional Issues to Consider Attribution Primary care vs. specialty Prospective vs. retrospective Stability of assigned / attributed population Cost adjustments Risk: CMS expects average population risk scores to be stable Geography: keeps in but what if differential increase vs. national Quality Measures Increasing from 32 in PGP Demo Project to 65 in one year! Many measures outside Physician Organization experience Many measures not tested and with limited previous use 26 26 26

Quality Measures Domain # items Comment Patient Experience 7 Consumer Assessment of Healthcare Providers and Systems (CAHPS) Survey  Care Coordination 16 Post-discharge; Medication Reconciliation; Ambulatory Sensitive Conditions Admissions; Meaningful Use  Patient Safety 2 Hospital acquired condition (2 composites = 23 measures)  Preventive Health 9 Vaccination; Screening (cancer, BP, depression); Tobacco; Weight; Cholesterol  At-Risk Population/ Frail Elderly Health 31 (Coronary Artery Disease, Chronic Obstructive Pulmonary Disorder, Diabetes, Heart Failure and Hypertension) + 2 composite “all-or-nothing” measures + Elderly (falls, osteoporosis management, anticoagulation management) 27 27

Overview of SSP Significant compliance obligations and costs. Limited opportunity to earn SSP payments. Financial liability for uncontrollable risks. Additional Issues to Consider 28 28

Do You Really Want to Do This? 29 29

Questions? 30 30

Proposed ACO Rule: How Will It Affect Academic Medical Centers Proposed ACO Rule: How Will It Affect Academic Medical Centers? © 2011 is published by the American Health Lawyers Association. All rights reserved. No part of this publication may be reproduced in any form except by prior written permission from the publisher. Printed in the United States of America. Any views or advice offered in this publication are those of its authors and should not be construed as the position of the American Health Lawyers Association. “This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is provided with the understanding that the publisher is not engaged in rendering legal or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought”—from a declaration of the American Bar Association 31