1. OPERATIONS OF ACOS – PART 1 JUNE 2, 2011

2. Speakers Christopher E. Ezold Esq, The Ezold Law Firm (Bala Cynwyd, PA) Todd I. Freeman, Larkin Hoffman (Minneapolis, MN) Adam J. Tutaj, Esq., Meissner Tierney Fisher & Nichols S.C. (Milwaukee, WI)

3. Presentation Overview 1.Administration 2.Quality measures 3.Quantity measures 4.Q&A

4. Administration Section Overview Information Sharing Beneficiaries Privacy

5. Information Sharing Preface – the beneficiary pool is a moving target: – each ACO will have a beneficiary population assigned to it, which beneficiaries may move in and out of the pool; – A beneficiary may obtain care outside the ACO; and – Beneficiaries are assigned retroactively by CMS for the purposes of its calculations regarding shared savings payable to the ACO An ACO will not know for certain if a particular beneficiary is included in CMS’ calculations

6. The Information Problem – ACO’s must be accountable for the quality, cost and overall care of Medicare beneficiaries assigned to the ACO. – Each ACO requires access to information necessary to monitor and evaluate the quality, cost and overall care provided. – This information is necessary for an ACO to ensure it will meet the stringent requirements of the proposed regulations.

7. Two Issues How will an ACO monitor care of its beneficiary pool to ensure it meets the requirements of the regulations, including 63 quality measures, and How will an ACO monitor care of individual beneficiaries to ensure care is appropriate?

8. Issue One – Data to Evaluate Compliance with ACO Requirements – In order to assist ACOs, CMS envisions providing: aggregate level data on the entire potential beneficiary pool of the pool’s use of health services, and beneficiary specific data. – The data provided by CMS would be combined by the ACO with its own data to allow it to evaluate how health services are being utilized, where coordination needs to be increased, how the incidence of utilization compares to the ACO’s required benchmarks and national averages and trends, etc.

9. Issue One – Data to Evaluate Compliance with ACO Requirements – CMS envisions providing financial data as well, including: Number of patients seen and/or assigned, per capita expenditures, risk score, total assigned beneficiary expenditures, savings amounts and annual performance payment numbers quality performance scores and benchmarks aggregate metrics on the assigned population including risk, incidences of hospitalization, chronic disease subpopulations, etc.; and ER visits, doctor visits, discharges etc.

10. Issue One – Data to Evaluate Compliance with ACO Requirements – CMS envisions providing this data early on in the process as well as annually. – Initial Provision of Data: At the start of the first performance year, CMS proposes to disclose the name, DOB, gender and HIC number of the beneficiaries in the historically assigned population. CMS envisions that the ACO will use this information to determine whether specific individuals would have benefited from greater efficiencies (i.e. did a missed appointment result in an ER visit?).

11. Issue One – Data to Evaluate Compliance with ACO Requirements As beneficiaries are assigned retrospectively, CMS is concerned that this information could be used to eliminate high-risk beneficiaries from care. CMS will continue to look at this issue, and ACO’s should be aware of this as a prohibited use of data.

12. Issue Two: Use of Data To Provide Care for Individual Beneficiaries – Compliance with federal coordination of care requirements, includes: the establishment and use of health information technology (HIT), – electronic health records (EHR), and – an electronic health information exchange (HIE) » ACOs that are comprised of multiple providers will need the HIE to allow their EHR systems to communicate with each other Compliance also may require the use of remote monitoring of patients, telehealth and predictive modeling, according to the proposal.

13. Issue Two: Use of Data To Provide Care for Individual Beneficiaries – The proposed regulations require that 50 percent of primary care providers in an ACO be ‘meaningful users’ of electronic health records by year two of the program. – The HIT requirements are significant, and require a very high level of integration of data entry and accessibility. EHR systems with this capability have been estimated to be 4-5 years away from readiness. HIE systems cannot be designed until the EHR systems are designed.

14. Issue Two: Use of Data To Provide Care for Individual Beneficiaries PROBLEM: Patient Identity Integrity; has implications for efficiency, access to medical records and ability to get paid. – CMS may provide personally identifiable information CMS will not provide ‘real time’ information (i.e. when a patient is admitted, etc.) – This MIGHT be achievable through local/regional information sharing programs outside of CMS involvement. – It MIGHT be available on a monthly or quarterly basis.

15. Issue Two: Use of Data To Provide Care for Individual Beneficiaries Information regarding beneficiary use of substance abuse programs would NOT be provided. ACOs would have to explain how it intends to use the data Data would be provided ONLY for beneficiaries that – Have visited a PCP during the performance year, and – Not opted out. Medicare Part A, B and D data would be provided ACOs would have to sign a Data Usage Agreement (DUA) with CMS, which would be a REQUIREMENT to participation in the Shared Savings Program.

16. NOTICE TO BENEFICIARIES Two notice issues: Beneficiaries MUST be given notice that: – a beneficiary may be assigned to an ACO, and – a beneficiary’s PHI may be disclosed by CMS to the ACO, and by and between ACO providers.

17. Practical limitations A beneficiary is only assigned retrospectively to an ACO, so it will be impossible to provide accurate notice beforehand. – ACO providers will be required to post signs in their offices and make CMS-approved literature to all patients. This literature would advise beneficiaries that they may be assigned to an ACO, and that their PHI may be shared.

18. Notice to beneficiaries PROBLEM: The literature may be confusing to some beneficiaries, and staff may not be able to accurately convey necessary information. – SUGGESTION: Guidelines on what staff should and can say to beneficiaries will have to be created to avoid confusion and potential violation of CMS requirements.

19. Beneficiary opt-out – CMS is proposing to require ACOs to notify beneficiaries on their first visit to a provider that the ACO will be able to obtain claims data if the beneficiary does not object. if the beneficiary opts out, an email address or telephone number could be provided to them to use to opt out. ACOs would also have to notify beneficiaries if they are no longer participating in the Shared Savings Program or are no longer ACOs.

20. Beneficiary opt-out Although the opt-out applies to the data sharing portion of the ACO program, it does not affect the patient’s assignment to the ACO or the use of the patient’s data for purposes such as: – calculating ACO benchmarks, – per capita costs, – quality performance or – performance year per capita expenditures.

21. Beneficiary opt-out Unfortunately, if a significant number of patients opt- out, the ACO may find itself in a dilemma in fully evaluating the care received by its beneficiaries, but will nevertheless still be held accountable for that care. This requirement exists despite CMS’ acknowledgement that legal authority under privacy regulations exists allowing ACO’s and their member organizations to share this data – CMS has proposed the opt-out model in the spirit of keeping the patient informed.

22. Beneficiary opt-out As opting out might interfere with information sharing and an ACO’s ability to accurately track costs and services, there have been requests to CMS to allow ACO’s to exclude these patients from services, or to exclude them from calculations determining whether the ACO will receive shared savings.

23. PRIVACY RULES Depending on its business structure, an ACO either will be part of a covered entity or will be a business associate of the participating covered entities. In either case, – the proposed regulations depend heavily on the ability of these entities to exchange PHI for certain healthcare operation purposes.

24. Aggregated data on beneficiary use of healthcare services – Identification of Historically Assigned Beneficiaries – Data which includes: Name, date of birth, gender and Medicare ID for historically ACO-assigned patients.

25. Sharing Beneficiary-Identifiable Medicare Parts A, B, and D Claims Data – For Medicare Parts A and B, the data elements that will be provided are: procedure code, diagnosis code, beneficiary ID, date of birth, gender, if applicable, date of death, claim ID, from and thru dates of service, provider or supplier ID, and the claim payment type.

26. Sharing Beneficiary-Identifiable Medicare Parts A, B, and D Claims Data – The Medicare Part D data includes: beneficiary ID, prescriber ID, drug service date, drug product service ID, and indication if the drug is on the formulary.

27. Protected Health Information All of this information is protected health information (PHI) under the Health Insurance Portability and Accountability Act and its regulations (HIPAA). – In any ACO that is comprised of an association of providers, contracts between all providers will have to exist that require compliance with HIPAA standards.

28. CMS’ Position on Disclosure of PHI in the ACO Structure CMS takes the position that disclosure of the aggregate and individual beneficiary information is allowable under HIPAA as it is for ‘health care operations’ purposes. ACOs would have to be careful that their use of the information was not for ‘marketing’ purposes – i.e. identifying beneficiaries that need procedures and then reaching out to them » use of PHI for marketing would require a release from each beneficiary involved

29. Comment The Proposed Regulations emphasize the need to comport with privacy rules by stating that ACO agreements may be terminated for improper use or disclosure of the shared claims information. – CMS has requested comment on the implications of sharing protected health information, such as Parts A, B and D claims data, with ACOs and the use of an opt-out, versus an opt-in, approach to patient consent and individual choice.

30. PUBLIC REPORTING PPACA has several new public reporting requirements that are intended to increase ‘transparancy.’ – Section 3003 makes aggregate information on physician resource use publicly available; – Section 3004 makes quality data relating to long- term care hospitals, inpatient rehabilitation facilities and hospices publicly available; – Section 3005 makes quality date for certain cancer hospitals publicly available;

31. PUBLIC REPORTING – Section 10331 requires the development of a Physician Compare website with information on physicians enrolled in Medicare and/or enrolled in the Physician Quality Reporting Initiative. – By January 1, 2013, information on quality and patient experience measures will be publicly available; – Section 10332 makes certain standardized claims data under Medicare Parts A, B and D available to entities qualified by the Secretary of DHS to evaluate quality efficiency, effectiveness and resource use.

32. CMS Proposes to Go Beyond PPACA’s Reporting Requirements Although the law (PPACA) does not require that data regarding operations and performance of an ACO be made public, CMS has decided that it is “desirable”

33. CMS Proposes to Go Beyond PPACA’s Reporting Requirements CMS has proposed to make the following ACO business information publicly available: ACO name/location; ACO primary contact; ACO organizational information, including: – ACO participant organizations – Identification of ACO participants in joint ventures between ACO professionals and hospitals; – Identification of the ACO participant representatives on the ACO governing body; and – Associated committees and committee leadership

34. CMS Proposes to Go Beyond PPACA’s Reporting Requirements CMS has proposed to make the following ACO Shared Savings information publicly available: Payments from the Shared Savings program received by the ACO; Losses payable by the ACO to the Shared Savings program; Total proportion of shared savings invested in infrastructure, care processes and other resources; and Total amounts of shared savings paid to ACO participants

35. Comment CMS wants comment on requiring the public disclosure of Quality Performance standard scores, relating to the ACO’s accountability for: – Quality; – Cost; – Overall care furnished to the beneficiary population.

36. Quality and Other Reporting Requirements Section Overview 1.Proposed Measures to Assess Quality 2.Requirements for Quality Measures 3.Quality Performance Standards 4.Incorporation of Other Reporting Requirements 5.Public Reporting 6.Aligning ACO Quality Measures

37. Proposed Measures to Assess Quality Proposed Measures to Assess the Quality of Care Furnished by an ACO – New Measures after 2012 1.First Year – Reporting Only 2.Considerations in Selecting Measures a)Use of Measures b)Scoring Methodology

38. Proposed Measures to Assess Quality 3.Proposed Quality Measures that ACOs Must Meet for Shared Savings – 65 Measures over 5 Domains a)Patient/Caregiver Experience – 7 measures b)Care Coordination – 16 measures c)Patient Safety – 2 measures d)Preventative Health – 9 measures e)At-Risk Population/Frail Elderly Health – 31 measures

39. Requirements for Quality Measures Requirements for Quality Measures Data Submission by ACOs 1.GPRO Tool 2.Certified EHR Technology

40. Quality Performance Standards Performance Scoring 1.Measure Domains and Measures Included in the Domains 2.Methodology for Calculating a Performance Score for each Measure within a Domain See next slide for Performance Level and Points

41. Quality Performance Standards Performance Scoring Performance Level Points >90-100%2 >80-90%1.85 >70-80%1.7 >60-70%1.55 >50-60%1.4 >40-50%1.25 >30-40%1.1 <30%0

42. Quality Performance Standards Performance Scoring 3.Methodology for Calculating a Performance Score for each Domain 4.The Quality Performance Standard Level

43. Incorporation of Other Reporting Incorporation of Other Reporting Requirements Related to the Physician Quality Reporting System and Electronic Health Records Technology

44. Public Reporting

45. Aligning ACO Quality Measures with other Laws and Regulations

46. Quantity Measures Section Overview 1.Expenditure Benchmark 2.Minimum Savings Rate 3.Net Savings Threshold (for certain one-sided ACOs only) 4.Shared Savings Rate 5.Performance Payment Limit 6.Shared Savings Withhold 7.Minimum Loss Rate 8.Loss Rate 9.Loss Recoupment Limit

47. Expenditure Benchmark In order to determine whether an ACO is generating savings to share – or losses to be recouped – CMS must first establish a per-capita expenditure benchmark. The explanatory text of the proposed MSSP regulations observe that the benchmark is effectively “a surrogate measure of what the Medicare FFS Parts A and B expenditures would otherwise have been in the absence of the ACO.”

48. Expenditure Benchmark CMS will compute the per-capita expenditures for an ACO based on the per capita Parts A and B fee-for- service expenditures for beneficiaries that would have been assigned to the ACO in each of the preceding three years. To minimize variation from catastrophically large claims, CMS truncates an assigned beneficiary’s total fee-for-service per capita expenditures at the 99 th percentile (as determined for each benchmark year).

49. Expenditure Benchmark CMS computes a 3-year risk and growth-trend adjusted per capita expenditure amount for the patient populations in each of the 3 benchmark years with reference to growth and health status indices. The resulting benchmark is the “risk adjusted per capita expenditures for beneficiaries historically assigned to the ACO in each of the 3 years used to establish the benchmark.” CMS updates this fixed benchmark by the projected absolute amount of growth in national per capita expenditures for Parts A and B services under the original Medicare fee-for- service program using data from CMS’s Office of the Actuary.

50. Minimum Savings Rate In order for an ACO to receive a shared savings payment, its actual expenditures must be lower than the benchmark amount by more than a certain percentage – the “minimum savings rate” (“MSR”). The MSR is intended to account for normal variations in expenditures.

51. Minimum Savings Rate For two-sided ACOs (and one-sided ACOs in their third-year), the MSR is a flat 2%. Example 1:A two-sided ACO has an expenditure benchmark of $10,000 per beneficiary. In this case, the ACO’s actual expenditures must be less than $9,800 per beneficiary (i.e. $10,000 – ($10,000 * 0.02)) in order to generate any shared savings for which it might be paid.

52. Minimum Savings Rate For two-sided ACOs (and one-sided ACOs in their third-year), the MSR is a flat 2%. Example 1:A two-sided ACO has an expenditure benchmark of $10,000 per beneficiary. In this case, the ACO’s actual expenditures must be less than $9,800 per beneficiary (i.e. $10,000 – ($10,000 * 0.02)) in order to generate any shared savings for which it might be paid.

53. Minimum Savings Rate By contrast, the MSR for ACOs using the one-sided model is determined on a sliding scale, based on the number of assigned beneficiaries, as follows: No. BeneficiariesMSR Lower BoundMSR Upper Bound 5,000 – 5,9993.9%3.6% 6,000 – 6,9993.6%3.4% 7,000 – 7,9993.4%3.2% 8,000 – 8,9993.2%3.1% 9,000 – 9,9993.1%3.0% 10,000 – 14,9993.0%2.7% 15,000 – 19,9992.7%2.5% 20,000 – 49,9992.5%2.2% 50,000 – 59,9992.2%2.0% 60,000 +2.0%

54. Minimum Savings Rate Example 2: A one-sided ACO has 7,500 beneficiaries. Under the proposed regulations, it would be assigned an MSR of 3.3%, because it lies at the midpoint between 7,000 and 7,999 beneficiaries on the sliding MSR scale. Example 3: Same facts as Example 2. The one-sided ACO has a benchmark of $10,000 per beneficiary. In this case, the ACO’s actual expenditures would need to be less than $9,670 per beneficiary (i.e. $10,000 – ($10,000 *.033)) in order to generate any shared savings for which it might be paid. However, as we will see, actual expenditures may need to be even lower.

55. Net Savings Threshold For certain one-sided ACOs, CMS will not make any shared savings payment on “dollar-one” savings – at least for the first 2 years of the Agreement. Rather, shared savings will only be paid to the extent they exceed a second percentage – the “net savings threshold” – which is a flat 2% of the expenditure benchmark. Two-sided ACOs (and one-sided ACOs in their third year) are exempt from this additional shared savings threshold because they are at risk for losses.

56. Net Savings Threshold The proposed MSSP regulations further exempt those ACOs with fewer than 10,000 assigned beneficiaries that satisfy one (1) of the following four (4) conditions: 1.All ACO participants are physicians or physician groups; 2.75% or more of the ACO’s assigned beneficiaries live in counties outside a Metropolitan Statistical Area; 3.50% or more of the ACO’s assigned beneficiaries were assigned on the basis of services received from Method II critical access hospitals; or 4.At least 50% of the ACO’s beneficiaries had at least one encounter with a participating federally qualified health center (FQHC) or rural health center (RHC).

57. Net Savings Threshold Example 4: Same facts as Examples 2 & 3. Assuming the ACO does not qualify for an exemption to the net savings threshold, its actual expenditures would need to be less than $9,470 per beneficiary in order to generate any shared savings for which it might be paid, calculated as follows: $10,000 (benchmark) - $ 330 (MSR of 3.3%) $ 9,670 (initial savings threshold) -$ 200 (2% shared savings threshold) $ 9,470 (final savings threshold)

58. Shared Savings Rate The actual amount of shared savings that an ACO is able to realize is determined by the “shared savings rate.” The shared savings rate is a combination of the “quality performance sharing rate” and certain additional adjustments based on the percentage of assigned beneficiaries having an encounter with an FQHC or RHC. The “quality performance sharing rate” is a percentage determined by reference to an ACO’s performance under the quality performance standards.

59. Shared Savings Rate Quality Performance Sharing Rate One-sided ACOs can receive a quality performance sharing rate of up to 50% - at least for the first two years of their Agreement. Two-sided ACOs (and one-sided ACOs in the third year of their Agreement), on the other hand, can realize a quality performance sharing rate of up to 60%. For the first year of the Agreement, the only standard to be satisfied is “complete and accurate reporting.”

60. Shared Savings Rate Quality Performance Sharing Rate (Cont.) Performance below a the minimum attainment level with respect to a quality measure will receive zero points as to that measure, while performance equal to or greater than the minimum attainment level will receive points on a sliding scale. ACO Performance LevelQuality Points 90+ percentile FFS/MA Rate or 90+ percent2 points 80+ percentile FFS/MA Rate or 80+ percent1.85 points 70+ percentile FFSIMA Rate or 70+ percent1.7 points 60+ percentile FFS/MA Rate or 60+ percent1.55 points 50+ percentile FFS/MA Rate or 50+ percent1.4 points 40+ percentile FFSIMA Rate or 40+ percent1.25 points 30+ percentile FFS/MA Rate or 30+ percent1.10 point <30 percentile FFS/MA Rate or <30 percentNo points

61. Shared Savings Rate Quality Performance Sharing Rate (Cont.) After the first year of the Agreement, the “quality performance sharing rate” will be computed with reference a 130 point scale. This scale is comprised of sixty-five (65) quality performance measures divided among five (5), equally-weighted “domains.” DomainMeasures (Total) 1. Patient/Caregiver Experience1-7 (7 measures) 2. Care Coordination8-23 (16 measures) 3. Patient Safety24-25 (2 measures) 4. Preventive Health26-34 (9 measures) 5. At-Risk Population/Frail Elderly/Diabetes35-65 (31 measures)

62. Shared Savings Rate Example 5: A one-sided ACO in its first year has 7,500 beneficiaries, a benchmark of $10,000 per beneficiary, and is not exempt from the net savings threshold. If actual expenditures are $9,300 per beneficiary and the “complete and accurate reporting” standard is satisfied, the ACO would be entitled to a shared savings payment of $637,500. $10,000 (benchmark) - $ 330 (MSR of 3.3%) $ 9,670 (initial savings threshold) -$ 200 (2% net savings threshold) $ 9,470 (final savings threshold) -$ 9,300 (actual per beneficiary expenditures) $ 170 (per beneficiary savings) * 0.5 (shared savings rate) $ 85(ACO’s share of per beneficiary savings) * 7,500(number of beneficiaries) $ 637,500(shared savings payment)

63. Shared Savings Rate Example 6: Same facts as Example 5, except that the ACO is in the third year of its Agreement. Because it is now “on-risk,” the MSR goes down to a flat 2%, the net savings threshold drops out and the maximum quality performance sharing rate goes up to 60%. Assuming the ACO scores a respectable 124.9 out of 130 points on its quality performance measures (or 96.077%), the ACO stands to realize $2,160,000 of shared $ 10,000 (benchmark) - $ 200(MSR of 2%) $ 9,800(savings threshold) -$ 9,300 (actual per beneficiary expenditures) $ 500 (per beneficiary savings) * 0.576 (shared savings rate = 0.60 * 0.96077) $ 288(ACO’s share of per beneficiary savings) * 7,500(number of beneficiaries) $2,160,000(shared savings payment)

64. Shared Savings Rate Adjustment for FQHC/RHC Encounters The sharing rate for ACOs can be increased depending on the percentage of beneficiaries with treatment encounters at FQHCs or RHCs, all as follows: Because the minimum threshold is 1%, it would appear that the 7,500 beneficiary ACO from our examples would need to have at least 75 beneficiaries who had at least one (1) encounter at an FQHC or RHC in order to be eligible for this increase. % of Beneficiaries with Visits to FQHCs or RHCs Increase in Sharing Rate for One-Sided ACOs Increase in Sharing Rate for Two-Sided ACOs 1–10%0.5%1.0% 11–20%1.0%2.0% 21–30%1.5%3.0% 31–40%2.0%4.0% 41–50%2.5%5.0%

65. Performance Payment Limit Shared savings payments under the proposed MSSP regulations are subject to a cap (the “performance payment limit”). A one-sided ACO is subject to a sharing cap of 7.5% of its benchmark. A two-sided ACO (and a one-sided ACO in its third year) is subject to a sharing cap of 10% of its benchmark. Thus, if the benchmark is $10,000 per beneficiary, the most that a one- sided ACO can realize in shared savings payments is $750 per beneficiary, and the most that that an ACO subject to loss-sharing can realize is $1,000 per beneficiary.

66. Performance Payment Limit Example 7: A one-sided ACO in its first year of operation has 7,500 beneficiaries, a benchmark of $10,000 per beneficiary, no beneficiaries with visits to a FQHC or RHC, and is not exempt from the net savings threshold. Under these facts, actual per beneficiary expenditures would need to be $2,030 under the benchmark before the ACO hits the performance payment limit: $10,000 (benchmark) - $ 330 (MSR of 3.3%) $ 9,670 (initial savings threshold) -$ 200 (2% net savings threshold) $ 9,470 (final savings threshold) -$ 7,970 (actual per beneficiary expenditures) $ 1,500(per beneficiary savings) * 0.5 (shared savings rate) $ 750(payment performance limit)

67. Shared Savings Withhold Because an ACO may be subject to losses in later years – even one-sided ACOs (at least for the third year of their Agreements) – the proposed regulations provide for a 25% withhold on all shared savings payments otherwise due to the ACO as a form of security for such losses. CMS will pay any amounts withheld and not otherwise applied to losses at the end of the 3-year Agreement.

68. Minimum Loss Rate Two-sided ACOs (and one-sided ACOs in their third year) are subject to loss sharing under the proposed MSSP regulations. As with shared savings, an ACO’s actual expenditures must exceed the benchmark amount by at least 2 % – the minimum loss rate (“MLR”) – before incurring an obligation to share losses. Thus, if an ACO has a benchmark of $10,000 per beneficiary, the ACO would have to have actual expenditures in excess of $10,200 per beneficiary (i.e. $10,000 + ($10,000 * 0.02)) before incurring an obligation to repay losses.

69. Loss Rate The loss rate to be paid by an ACO is the inverse of its final adjusted sharing rate (i.e. 100% - the fully-adjusted MSR). Example 8: Same facts as Example 6, except that ACO has no beneficiaries with visits to a FQHC or RHC. If the ACO’s actual expenditures are $10,700 per beneficiary in Year 3, it would have a repayment obligation of $1,590,000: $ 10,000 (benchmark) + $ 200 (MLR of 2%) $ 10,200 (initial savings threshold) -$ 10,700(actual per beneficiary expenditures) $ (500)(per beneficiary loss) * 0.424 (loss rate (i.e. 100% - 57.6% MSR)) $ (212)(ACO’s share of per beneficiary loss) * 7,500(number of beneficiaries) $(1,590,000)(loss subject to recoupment)

70. Loss Recoupment Limit Just as the proposed rule imposes a cap on the shared savings that can be realized by an ACO, there is also a cap on the losses required to be repaid. The loss recoupment limit is equal to 5% of the benchmark for the first year an ACO is on-risk, increased to 7.5% for the second year and increased again to 10% in the third year. Because it is effectively measured by the number of years on-risk, a one-sided ACO in the third year of its Agreement would be subject to a 5% loss cap – not a 10% cap.

71. Loss Recoupment Limit Example 9: Same facts as Example 8. Under this scenario, the loss cap would be $500 per beneficiary (i.e. $10,000 * 0.05). However, in order to hit this cap, the ACO would need to have actual per beneficiary expenditures that are at least $1,380 over the benchmark: $ 10,000 (benchmark) + $ 200 (MLR of 2%) $ 10,200 (initial savings threshold) -$ 11,380(actual per beneficiary expenditures) $ (1,180)(per beneficiary loss) * 0.424 (loss rate (i.e. 100% - 57.6% MSR)) $ (500)(loss recoupment limit)

72. Upcoming Webinars Operations of ACOs – Part 2 June 23, 2011 Understanding Regulations of ACOs July 14, 2011 For more information and to register, visit www.aaacountablecare.org www.aaacountablecare.org

73. For More Information Don Giroux Associate Director 952-896-3236 don@aaaccountablecare.org AAACO Website www.aaacountablecare.org