ACOs – Past, Present and Future January 14, 2016 // 1:55 P.M. – 2:45 P.M. EST

Kent Thompson Matt Fadel TODAY’S PRESENTERS Kent Thompson Manager, DHG Healthcare Matt Fadel Manager, DHG Healthcare

SESSION GOALS AND OBJECTIVES Understand Current MSSP Structure and History Identify the history of the MSSP program and the current infrastructure. Results of the current program Overview of the results of the programs released by CMS for 2014. Understand the Components of Clinical Integration Using your clinically integrated network to demonstrate value in the market

History & Current Infrastructure 2014 ACO Results Agenda MSSP Fundamentals History & Current Infrastructure 2014 ACO Results Components of Clinical Integration Source: MLN Webinar 4/8/14 www.cms.gov/NPC

MSSP Fundamentals

What is an ACO? Group of doctors, hospitals, and other health care providers Come together voluntarily Provide coordinated high quality care to Medicare patients Goal – ensure patients get the right care at the right time Avoid unnecessary duplication of services Successful ACO Delivers high-quality care Spends health care dollars more wisely Share in savings achieved for the Medicare program ACO Programs Medicare Shared Savings Program (MSSP) Pioneer ACO Model Next Generation ACO Model Comprehensive End-Stage Renal Disease Care Model

Statutory Requirements By statute, ACOs must meet the following eligibility criteria: Agree to participate in the program for at least a 3-year period Have a sufficient number of primary care professionals for assignment of at least 5,000 beneficiaries Have a formal legal structure to receive and distribute payments Have a mechanism for shared governance and a leadership and management structure that includes clinical and administrative systems Shall provide information regarding the ACO professionals as the Secretary determines necessary Define Processes to: Promote evidenced-based medicine Promote patient engagement Report quality and cost measures Coordinate care Demonstrate it meets patient-centeredness criteria Source: MLN Webinar 4/8/14 www.cms.gov/NPC

Fundamentals of the MSSP Program Explanation Of How MSSP Works And Are Structured. DESIGN ELEMENT ONE-SIDED MODEL TWO-SIDED MODEL Sharing Rate Up to 50% based on quality performance Up to 60% based on quality performance Minimum Savings Rate (MSR) Varies by number of assigned beneficiaries 2% Shared Savings Method First dollar sharing once MSR is met or exceeded Maximum Sharing Cap Total shared savings payments cannot exceed 10% of benchmark Total shared savings payments cannot exceed 15% of benchmark Minimum Loss Rate None ACO repays share of all losses if expenditures are more than 2% higher than benchmark Shared Loss Rate One minus final sharing rate applied once minimum loss rate is met; loss rate is capped at 60% Maximum Loss Cap Losses capped at 5%, 7.5%, 10% in years 1, 2, 3, respectively SHARED SAVINGS PAYMENT CYCLE Health Care Advisory Board, 2012

Fundamentals of the MSSP Program 33 Total number of quality measures 4 Domains of quality measures 25% Percentage of quality score composed by each domain Patient, Caregiver Experience of Care 8 Measures All based on CAHPS Scores Patient Safety/ Care Coordination 10 Measures EHR capabilities weighted twice as much as other categories At-Risk Population 7 Measures Focused on diabetes, hypertension, ischemic vascular disease, heart failure, coronary artery disease, depression Preventive Health 8 Measures Include a variety of screenings, measurements, immunizations Health Care Advisory Board, 2012

History and Current Infrastructure

Medicare Shared Savings Program Background Shared Savings Program Web site Mandated by Section 3022 of the Affordable Care Act Established a Shared Savings Program (SSP) using Accountable Care Organizations (ACOs) Medicare Shared Savings Program must be established by January 1, 2012 Notice of proposed rulemaking issued March 31, 2011 CMS sought and received over 1,300 comments on the proposal Issued Final Rule November 2011 Source: MLN Webinar 4/8/14 www.cms.gov/NPC

Medicare Shared Savings Programs Now an annual enrollment process Another 121 ACOs started 1/1/16 Total Medicare beneficiaries – 8.9 million 477 ACOS over 49 states and District of Columbia 64 ACOs are risk bearing Increased interest in performance-based risk (22 in Tracks 2 & 3) 21 ACOs accepted as Next Generation ACOs West Virginia 7 ACOs with service areas including WV ACO address – Virginia (3), Maryland (3), Massachusetts (1)

Next Generation ACO Model New ACO Model 21 ACOs participating in 2016 Next Generation ACO Model Significant experience in coordinating care for patient populations through initiatives, including MSSP and Pioneer ACO Model CMS partners with ACOs with experience in care coordination of patient populations and provider groups ready to assume higher levels of financial risk and reward (up to 100% risk) Ties to goals of tying traditional or fee-for-service Medicare payments to alternative payments (ie. ACOs) 2016 – 30% 2018 – 50%

Current MSSP participants and new applicants Next Generation ACO Current MSSP participants and new applicants Two application rounds: 2015 & 2106 Three one year performance periods with two additional one-year extensions Smoothing cash flow through alternative payment mechanisms Discount rather than MSR Quality, Regional and National Efficiency components

ACO Investment Model (AIM) Developed in response to stakeholder concerns that some ACOs lack access to funding needed to invest in an infrastructure to implement such a program successfully Encourages formation of ACOs in areas where there are low concentration of current programs Focus on rural areas Upfront payments and per beneficiary payments 41 participating ACOs (2 existing and 39 selected for 2016 start Serve a combined 394,000 beneficiaries nationwide 25 include a Critical Access Hospital or IPPS hospital with fewer than 100 beds Represent 34 states (including West Virginia)

ACO Investment Model (AIM) AIM class starting in 2016 Current MSSP participants can join from 2012, 2013 and 2014 classes Three payment streams for 2016 class: An upfront, fixed payment:  Each ACO receives a fixed payment of $250,000. An upfront, variable payment:  Each ACO receives a payment of $36 per beneficiary based on the number of its preliminarily, prospectively-assigned beneficiaries. A monthly payment of varying amount depending on the size of the ACO:  Each ACO receives a monthly payment of $8 per beneficiary based on the number of its preliminarily, prospectively-assigned beneficiaries for up to 24 months. During the selection process, the ACO Investment Model will target new ACOs serving rural areas, areas of low ACO penetration and existing ACOs committed to moving to higher risk tracks.

ACO Investment Model (AIM) Who can participate? For ACOs starting in 2016, an ACO will be eligible to participate in AIM if it is eligible to participate in MSSP and satisfies the following requirements: Has 10,000 or fewer preliminarily, prospectively-assigned beneficiaries Does not include a hospital as an ACO participant or an ACO provider/supplier unless the hospital is: Critical Access Hospital (CAH) or; Inpatient Prospective Payment System (IPPS) hospital with 100 or fewer beds Can’t be owned or operated in whole or in part by a health plan

ACO Investment Model (AIM) AIM Payment Example Participation begins in January 2016 6,000 Assigned Beneficiaries Upfront, fixed payment $ 250,000 Upfront, variable payment 216,000 Monthly payment ($48,000/month) 1,152,000 Total payments over 24 months $ 1,618,000

ACO Investment Model (AIM) Do I repay the upfront payments? CMS will recover the payments from shared savings as long as you are in the program. If you don’t earn enough to cover the costs and you don’t enter a second program, CMS will not pursue recovery. What if the payments are more than I save? CMS won’t pursue amounts in excess of the earned shared savings. What if I leave the program early? CMS will pursue full recovery of payments if you leave the program early.

2014 ACO Results

2014 ACO Financial Results In 2014, MSSP and Pioneers generated $926M of savings with $423M returned in savings MSSP ACOs: In 2014, generated $806M in savings with shared savings of $341M, compared to 2013 savings of $705M and shared savings of $315M. Savings to Medicare Trust Fund of $465M ($390M in 2013). Pioneers: In 2014, generated total model savings of $120M compared to $96M in 2013 and $88M in 2012. 11 of 15 ACOs qualified for shared savings of $82M. 3 ACOs paid CMS $9M in shared losses Source: CMS 8/25/15.

Overall higher average performance: 2014 ACO Quality Results Overall higher average performance: MSSP ACOs Improved in 27 out of 33 measures, with quality improvement shown in: Patients’ ratings of clinicians’ communication, Beneficiaries’ rating of their doctor Screening for tobacco and cessation Screening for high blood pressure Electronic Health Record Use Achieved higher average performance on 18 of 22 Group Practice Reporting Option measures. Source: CMS 8/25/15. .

Overall higher average performance: 2014 ACO Quality Results Overall higher average performance: Pioneers Mean quality score increased to 87.2 from 85.2 in prior year. Showed improvements in 28 of 33 quality measures and experienced average improvements of 3.6% across all quality measures compared to prior year. Strong improvement in these areas: Medication reconciliation (70% to 84%) Screening for clinical depression and follow-up plan (50% to 60%) Qualification for an electronic health record incentive payment (77% to 86%) Improved average performance score for patient and caregiver experience in 5 of 7 measures compared to prior year. Source: CMS 8/25/15. .

Components of Clinical Integration

The Tipping Point – Volume to Value

Physician Alignment Vehicle Required to Attack Numerous Programs Hospital Acquired Conditions Bundled Payments Value-based purchasing Readmissions Oncology Care Model MSSP Rewards and/or penalties are linked to each program Workflow changes for CMS programs will directly impact on other patient populations. CMS Programs Scope of services and requirements are already defined Complicated CMS programs are just the beginning of payer programs. An aligned physician base can help respond to CMS requirements and prepare for incoming commercial payer programs

CINs: Definition A Clinically Integrated Network (CIN) is a selective partnership of physicians collaborating with hospitals to deliver evidence-based care, improve quality, efficiency, and coordination of care, and demonstrate value to the market. Clinically Integrated Network Payors and Employers $ Contracts Participation Agreement Participation Agreement CI Entity Private Practice Physicians Health System and Employed Physicians Distribution of Funds $ $ WHAT IT’S NOT Physician employment Hospital-led initiative Mechanism to gain negotiating leverage over payors

Components of a CIN Clinically Integrated Network Infrastructure & Funding Distribution of Funds Contracting Information Technology Physician Leadership Structure & Governance Participation Criteria Performance Objectives Clinically Integrated Network

Structure & Governance Overview: Other than an employment-only model, a CIN usually is structured as a joint venture or subsidiary Physician Hospital Organization, or an Independent Practice Association (IPA). IPA Joint Venture PHO Health System Participating Physicians Payors / Employers PHO XX% Health System Subsidiary PHO Health System Participating Physicians Health System Participating Physicians IPA Subsidiary Participating Agreement 100% 100% Participating Agreement Payors / Employers Payors / Employers

Infrastructure & Funding Overview: The CIN is a separate business entity with a distinct identity, mission, and vision, dedicated leadership and staff, sustainable sources of revenue, and participating provider agreements with physicians that create potential value for both physicians and payors. Sources of Revenue The CIN will need to offset costs of building the network (Infrastructure) and eventually provide returns through various revenue sources depending on the maturity of the network. Reporting Incentives and Membership Fees Self Funded Health Plan Payor Contracts Maturity of CIN Low High Value Incentive Program Pay-for-Performance Employer Contracts

Participation Criteria Overview: Member physicians or groups that satisfy certain guidelines and criteria must sign an agreement outlining the expectations and requirements for participation in the CI program. Sample Participation Criteria Participating Physicians Clinical Integration Legal Agreement (Independent & Employed) Physician Leadership Information Technology Adoption Quality Improvement Contracting Requirements Active member of “Hospital” Medical Staff Participate in educational programs Complete orientation program Provide leadership and oversight over defined operations Utilize professional and office email Access to high-speed internet Implement the preferred health information technology Share clinical information / data Develop, implement, and monitor clinical protocols Review member physician performance Develop / implement corrective action plans and process improvement initiatives Participate in jointly negotiated contracts

Examples of Performance Improvement Performance Objectives Overview: CINs identify metrics and targets designed to meaningfully impact the clinical practice of all network physicians, and to align their conduct with hospital initiatives, so as to improve quality and demonstrate value across the entire continuum of care. Examples of Performance Improvement Element Description Examples Variance & Cost Reduction Minimize variable physician performance not related to patient characteristics Minimize orthopedics supply chain cost Staffing and productivity opportunities Unnecessary Care Reduction Reduce avoidable, unproductive and duplicative services Prostate cancer screenings for elderly patients Reduce Readmissions Clinical Restructuring Ensure treatment in most optimal setting with most appropriate level of provider Early step down from an IP to SNF bed Partnerships with a local retail clinic to offer non-urgent care System Optimization Shift focus to upstream, preventative care with emphasis on CI Disease-based medical homes Patient engagement strategies using telehealth Source: Sg2 Analysis

Physician Leadership Overview: Health systems must empower physicians to have an influence on the future direction of the network. This will help integrate physicians’ clinical expertise into hospital operations and increase cooperation and credibility of the CI network. CIN Share in network governance IT Quality Care Redesign Membership Finance Medicine Primary Care Neurosciences Lead and participate on sub-committees supported by CIN or Health System personnel Heart and Vascular Surgery Women & Children

Information Technology Overview: CINs use an IT-dependent performance improvement architecture with data-based mechanisms and processes to monitor and track utilization, quality, and efficiency of resource use to demonstrate value. Digitize critical information on an individual within each care site View health-related data via a customizable user interface within an enterprise Exchange health-related data within and between enterprises Derive value and intelligence to improve care quality and outcomes and to curb costs Deliver clinical and patient information to enhance patient care experiences and practitioner effectiveness Advanced Clinical Decision Support Clinical care value Process/ behavioral change Health Analytics Health Information Exchange (Private) Healthcare Portals or Registries (Clinicians and Patients) Intermediate Electronic Medical Records IT Optimization Source: IBM Center for Applied Insights Maturity over time

Distribution of Funds $ Overview: The CIN establishes an organized plan to link performance on defined gradients to eligibility for incentive payments. Hospital / System Payors & Employers Cost Savings Efficiency Gains P4P Contracts Shared Savings Increased Rates Hospital Specialty Location Equal distribution Performance targets Educational event attendance Submission of Data Adoption of IT platform Individual Activity/ Outcomes % Local Network Performance Clinical Integration Network Global Network Performance $

Contracting Overview: A CIN may utilize a wide range of contracts to achieve improved cooperation for better quality services and demonstrated value.

Proposed DEVELOP Phase Committee Structure CIN Board Meeting Monthly STEERING COMMITTEE Oversee network development within the local market, approve subcommittee outputs, and link communication between the committees and key stakeholders FINANCE Identify contracting opportunities, evaluate the employee health plan as a revenue source, and project financial implications of the network NETWORK STRUCTURE Create clinical strategy focused on continuously improving quality, coordination, safety, and patient experience. COMMUNICATION AND EDUCATION Engage the broader medical staff to understand goals of both employed and private practice physicians within network development INFORMATION TECHNOLOGY Determine the IT needs, assess current capabilities, and fill identified gaps in order to ensure the network can track results and demonstrate value Quality Monthly, 1.5 Hr. Mtgs INFORMATION TECHNOLOGY Monthly, 1.5 Hr. Mtgs FINANCE Monthly, 1.5 Hr. Mtgs Membership and Credentialing Bi-Weekly, 1.5 Hr. Mtgs Physician (Chair) 2 Physicians CMO 1-2 additional PCH Administrators Physician (Chair) 2 Physicians CIO CMO / CMIO CFO Physician (Chair) 2 Physicians CFO VP Bus. Dev. Physician (Chair) 2 Physicians CMO Sales Marketing

CIN Lessons Learned Client #1: Lessons Learned • CIN can be used to establish a competitive advantage and market leverage • A consistent communication plan must be used with the health system, physician group(s), and physician-led committees Client #4: Lessons Learned • Participation criteria should align with the priorities of the health system, physicians, and the community • Allow physicians to define quality and lead quality-based initiatives Client #2: Lessons Learned • Determine the necessary level of organizational and market readiness for the network prior to implementation • Physician engagement drives the pace of implementation Client #5: Lessons Learned • CI implementation requires a common vision, education, and communication across a broad constituency • Academic Medical Centers must transition to a model more closely aligned with primary care Client #3: Lessons Learned • Minimize the amount of complexity in the distribution methodology • Metrics for awarding and distributing funds must be meaningful to the physicians and flexible over time Client #6: Lessons Learned • Involving physicians early in the visioning process is key to gaining medical staff buy-in • Pace of tolerable change is unique to each market

Why Are Large-Scale Networks Forming? 1 ACCESS TO PATIENTS Geography Payer Contracts Marketing Secure referral markets Coordination of patients New market growth / penetration Enhance value with comprehensive services Mitigate reimbursement rate pressure Large “buyers” Leverage brand & reputation Local presence with big market access Strength & expertise through scale 2 SHARE COSTS & CAPABILITIES Information Technology Skilled / Scarce Resources Platform to build population health analytics Expand Data over continuum of care Clinicians (recruitment & outreach) Leadership & oversight Care management teams Payer & population health expertise 3 STANDARDIZE Operational Clinical Finance Promote best practice adoption Accelerate innovation Benchmark & measure Consolidate duplicative services Drive patient care coordination Enhance quality Improve each organization’s cost structure

Questions? Kent Thompson Matt Fadel Manager Manager DHG Healthcare Winston-Salem, NC P: 336.688.2494 Matt Fadel Manager DHG Healthcare Hudson, OH P: 440.724.6320