1. ACOs as a Business Model for Louisiana Rural Healthcare Facilities Lynn Barr-CEO, Caravan Health

2. Part 1: MACRA, MIPS and ACOS
Part 2: ACOs and Shared Savings
Part 3: Case Study/Results
The healthcare industry is moving from Fee-for-Service to Value-based Payments.
CMS is driving this change through highly-complex programs.
Providers need expert help to qualify, participate, and succeed. .
| Proprietary & Confidential, Not for Distribution

3. Helping Providers Navigate the Challenges of Value-Based Payments
About Caravan Health
Helping Providers Navigate the Challenges of Value-Based Payments
Medicare ACOs
MACRA
CPC+
Commercial ACOs
Founded in 2013
40 Accountable Care Organizations
>14,000 Providers
>1,000,000 Patient Lives
2015 Results (cms.data.gov)
97% Quality Scores
257% National Average of Shared Savings
| Proprietary & Confidential, Not for Distribution

4. MACRA , MIPS and ACOs

5. Physician Fee Schedule Increases Will Not Keep Pace With Inflation
2015 and earlier
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026 and later
Fee
Fee Schedule Updates
0.75
0.5
0.5
0.5
0.5
QAPMCF*
0.25
N-QAPMCF* .
Source: CMS
| Proprietary & Confidential, Not for Distribution

6. MACRA: Medicare Access and CHIP Reauthorization Act
Passed with bipartisan support; signed into law in April Repealed the Sustainable Growth Rate Formula which linked Medicare annual payment adjustment for physician services to GDP growth. Established the Quality Payment Program (QPP). Clinicians who participate in Medicare Part B choose how to participate based on practice size, specialty, location, or patient population.
Qualifying Advanced Alternative Payment Models (QAPMs)
Merit-based Incentive Payment System (MIPS)
MIPS-APM
Incentives for taking risk, but also may pay large penalties; MIPS exempt
Requires quality reporting and >50% EMR adoption
Limited to 5% upward adjustment
Example: Track 2 or 3 ACO
Most complex MIPS reporting
Lowest scoring MIPS option
Potential for up to 9% adjustment, not likely to exceed 5%
Least complex MIPS reporting
Highest scoring MIPS option
Potential shared savings with no downside risk
Potential for up to 37% adjustment, not likely to exceed 20%
Example: Track 1 ACO
| Proprietary & Confidential, Not for Distribution 6

7. MIPS Scoring MIPS Payment Adjustment
Advancing Care Information (Replaces Meaningful Use)
Quality
(Replaces PQRS)
Improvement Activities
(New)
Cost
(Replaces Value Modifier in 2018)
MIPS Payment Adjustment
| Proprietary & Confidential, Not for Distribution 7

8. MIPS Scores Drives Payments
MIPS places the final score of each clinician on a curve, and adjusts Part B payments based on their precise location as compared to others.
Everyone Else
ACOs
Dollars shift from the bottom 50% to the top 50%
The top performers get another $500 million for five years
In 2018, 30%- 40% of QPP participants will be in Track 1 ACOs who earn higher MIPS scores due to special scoring
+$500M X
| Proprietary & Confidential, Not for Distribution 8

9. MIPS-APM Participants Score Higher
MACRA LAW: Cost must be 30% of MIPS score by 2019 – average cost will mean maximum score is 85 points
MIPS-APM One MIPS score for all providers
Exempt from Cost
Automatic 100% for CPIA
Weighted Average ACI score – Stage 2 MU > 85 points
ACO Quality Scores Average 91%
Advancing Care Information
Quality
Advancing Care Information
Quality
Improvement Activities
Cost
Improvement Activities (100%)
MIPS Score
MIPS-APM Score
| Proprietary & Confidential, Not for Distribution 9

10. ACO Participation Improves MIPS Score
Practice Score – No ACO
2019 MIPS Weight
2019 MIPS Score
Same Practice but in ACO
2019 MIPS–APM Weight
2019 MIPS–APM Score
Quality
85%
30%
25.5
91%
50%
45.5
Improvement Activities
100%
15% 15
20% 20
COST 0%
Advancing Care Info.
90%
25%
22.5 27
Total 78
92.5
The very best, top-performing practices will get average MIPS scores and little or no upward adjustment if they are not in an ACO.
ACO quality scores are better due to having claims data to find missing results, six weeks to polish data and only reporting on a sample of attributed patients. ACO average quality score is 91%.
In 2019 cost will weigh 30%. ACO participants will have an average 15 point advantage.
| Proprietary & Confidential, Not for Distribution 10

11. Every Point Adjusts Income (In 2 Years)
ECs BELOW performance threshold have negative adjustment
ECs ABOVE performance threshold have positive adjustment
Up to 10% More for Exceptional Performance Bonuses for PY
If the performance threshold is 70 and results are linear, the Exceptional Threshold is 77.5 and the Full Negative Adjustment Threshold is 17.5
Each point earns more of potential adjustment. Maximum of 7% in 2019 and 9% in If many ECs fail, scaling factor will be applied up to 3 x base adjustment.
Payment Adjustment Factors
Performance Threshold
MIPS Score
Full Negative Adjustment:
0-25% of Performance Threshold 70
100
Additional Performance Threshold = 25th percentile above Performance Threshold
Up to 10% additional adjustment for PY
All below threshold adjust -7% for 2019, -9% for 2020 and beyond
| Proprietary & Confidential, Not for Distribution 11

12. Perfect MIPS-APM Score is Best Result
MIPS Strategy
For Participant with $100,000 in 2015 Billing
Estimated 10 Year Inflation Adjusted Total Revenue
Estimated Inflation Adjusted Change in Revenue by 2025
Physician Compare
Grade after 2018
Pay Penalty
$835,745
26% Down F
Average MIPS (or Exempt)
$907,000
18% Down
C (or Listed as Exempt)
Perfect MIPS
Average Cost
$931,874
14% Down B
Qualified APM
$947,725
12.9% Down
APM Score
Average MIPS-APM
$978,610
6.6% Down A
Perfect MIPS-APM
$1,083,345
7.5% Up
| Proprietary & Confidential, Not for Distribution 12

13. MIPS-APM Participants Report Less
All eligible clinicians report all categories except Advancing Care Information (which exempts hospital-based physicians)
Cost is claims-based and does not require reporting
MIPS-APM
All TINs report ACI except TINs that only include hospital-based physicians
Only PCPs (and specialists that act like PCPs) report quality on a subset of patients attributed to ACO for primary care
Advancing Care Info.
PCPs
Specialists
Quality
PCPs
Specialists
Hospital-Based
Advancing Care Info.
PCPs
Specialists
Quality
PCPs
Improv. Act.
PCPs
Specialists
Hospital-Based
LeeAnn- MIPS Overview 4-
Cost (Claims only)
PCPs
Specialists
Hospital-Based
| Proprietary & Confidential, Not for Distribution 13

14. ACOs and Shared Savings

15. Basics of ACOs
Established by the Affordable Care Act to facilitate coordination and cooperation among providers to improve the quality of care for Medicare Fee-For-Service (FFS) beneficiaries and reduce unnecessary costs.
ACOs are groups of Medicare providers that work together to coordinate care for the Medicare fee-for-service patients they serve. The goal is to deliver seamless, high-quality care for these beneficiaries, rather than the fragmented care that often results from a fee-for-service payment system.
Eligible providers, hospitals and suppliers may participate in the Shared Savings Program by creating or participating in an Accountable Care Organization (ACO).As of January 2017, ACOs serving about 9 million beneficiaries participate in the Shared Savings Program.1
Provides opportunities to learn to effectively manage population health while avoiding unnecessary penalties.
1 Centers for Medicare and Medicaid, Fast Facts
| Proprietary & Confidential, Not for Distribution 15

16. Forming an ACO Eligible entities
Must serve at least 5,000 Medicare fee-for-service patients.
Eligible entities
ACO professionals in group practice arrangements
Networks of individual practices of ACO professionals
Partnerships or joint venture arrangements between hospitals and ACO professionals
Hospitals employing ACO professionals
Federally qualified health centers
Rural health clinics
Agree to participate for at least 3 years, meet other program requirements such as a governing body, processes to promote evidence-based medicine, promote patient engagement, internally report on quality and cost measures and coordinate care.
Multiple models (physician-led, hospital-led); if an ACO is formed by more than one provider, then the ACO must be a separate legal entity.
| Proprietary & Confidential, Not for Distribution 16

17. Medicare Shared Savings Program
The Medicare Shared Savings Program rewards ACOs that lower their growth in health care costs while meeting performance standards on quality of care and putting patients first. To participate, eligible providers must form or join a Medicare ACO, then the ACO must apply to CMS.
Application Process Deadlines
Estimated Application Process Deadlines
Now – March 2018
April 2018
May 1–31
Jul 1–31
2018
December
2018
January 1, 2019
Develop strategy.
Engage Physicians.
Recruit independents.
Seat Initial Board.
Approve Pre-Participation Waivers.
Form corporation, obtain EIN and open bank account.
Notice of Intent to Apply submission period.
Application submission period.
Application approval or denial decision.
Begin first ACO performance year.
| Proprietary & Confidential, Not for Distribution 17

18. Risk-Sharing Models for ACOs
One-Sided Risk Model
Two-Sided Risk Models
Track 1
Track 1+
Track 2
Track 3
91% of ACOs (430)
New for 2019
1% of ACOs (6)
8% of ACOs (36)
Up to 50% maximum upside
Up to 60% maximum upside
Up to 75% maximum upside
No risk of loss
30% maximum downside
40% -60% maximum downside
40% - 75% maximum downside
Initial three year commitment with option to renew for a second three year period
Initial three year commitment; can advance into higher tracks, but cannot go into lower tracks for subsequent agreement periods
| Proprietary & Confidential, Not for Distribution 18

19. Benefits of Track 1 MIPS-APM
Clinical and Community
Financial Performance
Provide coordinated, proactive care for our community
Engage patients with important wellness visits and preventative care services like mammograms and colonoscopies
Receive claims data from CMS and use it to predict and prevent disease progression
Strengthen local providers’ reputation and income
Sustain a strong local health care system, preventing out-migration
Sustain existing fee-for-service reimbursement and avoid unnecessary downside risk
Grow wellness revenues by $500 to $1,000 annually per Medicare patient
Maximize MACRA bonuses and quality scores with the least amount of effort
Protect employed and community physicians from MACRA penalties
Earn additional financial incentives for improving quality and lowering costs
Receive infrastructure and support to succeed under value-based reimbursement models
| Proprietary & Confidential, Not for Distribution 19

20. ACOs Enable and Fully Qualify Clinically Integrated Networks
ACO/CIN
Physician Leadership
Participation Criteria
Performance Improvement
Information Technology
Payor Contracting
Legal Entity and Waivers
Flow of Funds
| Proprietary & Confidential, Not for Distribution 20

21. The Hospital as the ACO Convener
Why?
How?
Protect the income and reputation of your community clinicians
Protect your referral network from joining a competing ACO that is free and shares savings to providers
Aledade: Charges cost + 40% shared savings
Collaborative Health Systems: Charges cost + 50% of shared savings
Others?
Population Health is a surprisingly good business model for hospitals
Utilize waivers of Stark, Anti-Kickback Stature, Patient Inducement, and Anti-trust
Hospital forms ACO and loans costs to ACO
Physicians participate at no cost
If shared savings, loans are repaid, hospital keeps 20% plus their share of savings, independents get the rest
If no shared savings, loan is forgiven
| Proprietary & Confidential, Not for Distribution

22. ACO Practice Transformation
ACO Staff Support
Practice Improvement
Strategic and Financial Support
ACO Formation, Application and Licensing
Data and Analytics
Quality Reporting and Improvement
Care Coordination
ACO Governance and Administration
Patient
Satisfaction
Education .
| Proprietary & Confidential, Not for Distribution 22

23. Driving Change Using Fee For Service
Population Health Nurse
Wellness Visits ($118/yr)
Chronic Care Management ($45-$90/mo)
Advanced Care Planning ($86/yr)
Behavioral Health Integration ($126/mo)
Cognitive Assessment & Planning ($238/yr)
| Proprietary & Confidential, Not for Distribution 23

24. Results/Case Study

25. Caravan Health Creates Results
Revenue
Quality
Shared Savings
MIPS
Caravan Health ACOs increased net revenue between $1.5M and up to $29M per hospital.
Within one year of ACO participation, Caravan Health hospitals increased their overall quality score by 15%.
All Caravan Health ACO participants are in the top 20% of all providers in the country under MIPS and are expected to get an upward adjustment of Part B payments in 2019.
Caravan Health ACOs earned 2.57x Shared Savings above national average.
| Proprietary & Confidential, Not for Distribution

26. How Did We Compare to Others?
Total Yearly Expenditures per Assigned Beneficiary
$10,136
$10,200
$10,148
$10,100
$10,046
$10,052
$10,000
$10,072
$10,037
$9,900
$9,800
$9,750
$9,703
$9,700
$9,757
$9,657
$9,600
$9,500
$9,400
Silverfox: Original graph left to side of slide for data comparison
$9,339
ACO PERFORMANCE
$9,300
$9,200
BY2013
BY2014
BY2015*
PY2016
CaravanHealth
CaravanHealth Adjusted Benchmark
All MSSP ACOs
All MSSP Adjusted Benchmark
National FFS
*Performance Year (PY) for 2015 ACO starters
| Proprietary & Confidential, Not for Distribution 26

27. 2016 Caravan Health ACO Preliminary Results
Projected Savings and Losses
Projected Shared Savings
Beneficiaries
Savings per Beneficiary
Shared Savings per Beneficiary 1
$10,670,487
$5,335,243
12,122
$880
$400 2
$7,348,727
$3,674,363
13,018
$565
$282 3
$5,247,899
$2,623,949
10,893
$482
$241 4
$4,086,807
$2,043,404
10,012
$408
$204 5
$3,668,965
$1,834,482
15,303
$240
$120 6
$3,018,470
$1,509,235
9,405
$321
$160 7
$2,273,492
$1,136,746
5,271
$431
$216 8
$2,217,864
13,233
$167.60 9
$1,612,997
9,578
$168.41 10
$1,453,786
14,544
$99.96 11
$1,422,149
8,315
$171.03 12
$1,077,165
6,157
$174.95 13
$696,171
13,380
$52.03 14
$693,927
11,478
$60.46 15
($769,525)
10,989
($70.03) 16
($1,078,800)
8,182
($131.85) 17
($1,126,201)
19,621
($57.40) 18
($1,144,699)
4,912
($233.04) 19
($1,428,235)
6,905
($206.84) 20
($2,291,442)
6,584
($348.03) 21
($3,255,365)
18,240
($179.30) 22
($3,331,775)
11,062
($301.19) 23
($3,536,579)
9,053
($390.65)
Totals
$27,493,284
$18,157,423
248,357
Average Savings Per ACO (Year 1)
$1,195,360
Savings per Beneficiary (All ACOs)
$110.70
Shared Savings per Beneficiary (If Savings Earned)
$238.84
Average Shared Savings
$2,593,918

28. NP/PA Visits
PCP Visits
CT Scans
Specialist Visits
Psych IP
Primary Care Services
MRI Events
ED Visits
IP Discharges
Short Term IP
ED Leading to Hospitalizations
IP Rehab
SNF Discharges
CHF Discharges
Long Term Stay
COPD Discharges
SNF Days
RHC/FQHC Visits
Bacterial Pneumonia Discharges

29. Hospitals Thrive in ACOs
Formed in 2016, the Magnolia- Evergreen ACO includes seven rural Critical Access and PPS hospitals.
Four hospitals in Washington
Three hospitals in Mississippi
One large independent primary care practice in Mississippi
All independent and unaffiliated; joined together to create 5000 attributed Medicare lives.
Tri-State Memorial
Washington
25-bed Critical Access Hospital
12 primary care providers
16 specialty providers
Neshoba County
Mississippi
48 acute beds
160-bed Skilled Nursing Facility
2 rural health clinics with 10 doctors and 7 nurse practitioners
Inflation and Demographics Adjusted Benchmark (2015)
Adjusted Benchmark
(2016)
Adjusted Benchmark vs 2016
Total IP Cost PPPY (2015)
Total IP Cost PPPY
IP Cost vs 2016
$10,692
$9791
-$901 (-8.4%)
$3443
$2832
-17.7%
Total SNF Cost PPPY
(2015)
Total SNF Cost vs 2016
ER Visits per Thousand Beneficiaries (2015)
ER Visits per Thousand Beneficiaries (2016)
ER Visits per Thousand Beneficiaries vs 2016
$1157
$896
-22.6%
941
817
-13.2%
Projected Savings/Losses
-$10,992,709.74
| Proprietary & Confidential, Not for Distribution
| Proprietary & Confidential, Not for Distribution

30. Case Study: Magnolia-Evergreen 2016 Impact on Financial Performance
Local hospital revenue went up 7% while saving 8.4% per beneficiary
Net patient revenue went up $30 million while saving Medicare $11 million
Inpatient revenue increased $13 million while saving Medicare $7 million
 Rural Hospitals Total
2016 MSSP Results
2015
2016
Change
Difference
Gross Inpatient Revenue
$376,843,601
$389,878,287
3.5%
$13,034,686
-17.7%
($7,403,986)
IP Discharges
17,105
16,919
-1.1%
(186)
IP Acute Days
18,111
17,330
-4.3%
(781)
Gross Outpatient Revenue
$681,440,146
$752,828,401
10.5%
$71,388,255
OP Visits
312,427
348,619
11.6%
36,192
ED Visits
94,160
90,479
-3.9%
(3,681)
-13.2%
Clinic Visits
250,338
259,335
3.6%
8,997
Net Patient Revenue
$423,477,195
$453,319,677 7%
$29,842,482
-8.4%
($10,992,710)

31. In Summary Value-based Payment is Here to Stay
In 2018, more than half of all providers will participate in these programs.
Now is the Time to Take Action
Today, providers can earn value-based incentives while receiving fee-for-service payment without downside risk. Resources and support are available to lessen your upfront and ongoing costs.
Avoid Penalties
Hospital-based physicians are not excluded from MACRA and most are expected to penalized if not part of either a large organization or an ACO.
Strengthen Provider Reputation
Quality data will be displayed on Physician Compare in 2018.
Maximize Value-based Reimbursement
Get >10% upward adjustment of Part B payments. As a Track 1 ACO, earn Exceptional Performance bonuses through MIPS-APM special scoring that boosts score by at least 15 points.
| Proprietary & Confidential, Not for Distribution 31

32. www.CaravanHealth.com info@CaravanHealth.com 916.542.4582
Thank You