This document discusses developing a shared savings distribution methodology for accountable care organizations (ACOs) and the impact on home health care providers. It outlines key considerations for home health agencies (HHAs) regarding whether to join an ACO, including potential benefits like ensuring referrals and developing relationships with other providers, as well as potential costs like additional resources and requirements to abide by ACO protocols. It emphasizes that the ACO's shared savings distribution methodology is a critical consideration, and should properly incentivize HHAs and reward high-performing HHAs to encourage collaboration toward shared goals of quality care and cost savings.

1. DEVELOPING AN ACO SHARED
SAVINGS DISTRIBUTION
METHODOLOGY
IMPACT ON HOME
HEALTH CARE PROVIDERS
NOVEMBER 1, 2017 WWW.CITRINCOOPERMAN.COM

2. PRESENTED BY
Aaron D. Cohen, JD
Principal and Health Care Practice Co‐Leader
Citrin Cooperman
Michael E. Criscione, CPA
Audit Partner and Health Care Practice Co‐Leader
Citrin Cooperman
Aaron provides financial and strategic advisory services to health care
organizations throughout the continuum of care, including hospitals and
health systems, skilled nursing facilities, home health agencies, hospices,
physician practices, ambulatory surgery centers, and rehabilitation
facilities. Aaron works with health care organizations considering and
involved in fundamental operational and financial transformations
resulting from changes in regulations, financing, or strategic
opportunities. Aaron's wide breadth of experience includes providing a
diverse array of services related to health care transaction, strategic
partnerships, and affiliations. Furthermore, Aaron has extensive strategic
planning experience.
Michael has more than 30 years of public accounting experience. He specializes in
audit and business advisory solutions for healthcare entities such as home health
agencies, hospices, long‐term care and assisted living facilities, community health
centers, and health and human service providers. Michael also provides assistance
with the preparation of third‐party cost reports, benchmarking reports, and financial
analysis.
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3. PRESENTATION
OUTLINE
i. Current market and structural trends impacting home health
agencies (HHAs)
ii. HHA Participation in ACOs ‐ Connecticut
iii. Potential Benefits of Joining an ACO
iv. Potential Costs of Joining an ACO
v. What ACOs are looking for when choosing HHA Participants
vi. What HHAs should be looking at when determining the right ACO
vii. A Critical Consideration when determining the right ACO ‐ ACO
Shared Savings Distribution Methodology (“SSDM”)
 Proper incentives for HHAs
 Proper rewards for high performing HHAs
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4. CURRENT MARKET AND STRUCTURAL TRENDS
IMPACTING HHAS
• Volumes fairly flat after years of growth
• Rate pressure
• Medicare
• 1/1/2018 – .4% decrease
• Home Health Grouping Model (HHGM) – 1/1/19!
• Medicaid – no significant reimbursement increases
• Commercial insurances – increase in volume and very little change in reimbursement rates
• Acute care discharges to lowest cost setting for healthier patients – including directly
to the community
• Revised Conditions of Participation – Jan 2018
• Revenue cycle management – increase in complexity and importance
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5. CURRENT MARKET AND STRUCTURAL TRENDS
IMPACTING HHAS
• Transition to value based care
• Providers narrowing networks
• Fight for referrals
• Diagnosis‐based expertise in demand
• Need for enhanced IT and data analysis capabilities
• OASIS training and real time reporting (clinician level)
• Outcome measures
• Quality Assurance and Performance Improvement (QAPI)
• Staffing Shortage
• Nurses
• Home health aides – impact of increases to minimum wages
4

6. HHA PARTICIPATION IN ACOS - CONNECTICUT
• 14 unique ACOs in Connecticut
• Only 1 ACO is listed as an HHA is a reportable partner on ACO website – Hartford
Healthcare Accountable Care Organization, Inc.
• Hospital system‐owned HHA
• Types of arrangements:
• HHA or SNF owned (not common)
• Formal ACO Partnership (some, but not many)
• Informal relationship – Today’s presentation
• Based upon above, there is the potential for greater HHA involvement with ACOs –
must weigh benefits and costs
• Potential differentiator with other HHAs in the market
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7. POTENTIAL BENEFITS OF JOINING AN ACO
• Ensure the HHA is not “left out” as community providers narrow their preferred
provider lists
• Develop closer relationships with:
• Community Hospitals
• SNFs
• Physicians
• Other referral sources (adult day, other HHA, non‐medical home care agencies)
• Platform for development of improved care coordination and transition of care
capabilities for higher risk patients
• Superior performance = opportunity to drive volume from ACO participants
• Share data with ACO participants to facilitate improved clinical performance
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8. POTENTIAL COSTS OF JOINING AN ACO
• Additional time and resources spent without guarantee of financial
benefit
• Requirement to abide by protocols and policies of ACO
• HHA may lack significant governance role
• Can increase difficulty of maintaining “Switzerland” position among
competing providers in its community
• Administrative difficulty of undertaking multiple value‐based
arrangements at the same time – some episodic and some
population management in nature
• Bundled payment arrangements
• Clinically integrated networks
• Need to enhance IT services, capabilities and software/ hardware
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9. WHAT ACOS ARE LOOKING FOR WHEN CHOOSING HHA
PARTICIPANTS
• Cost‐efficient businesses with top quality metrics
• Low readmission rates
• Shorter length of stay
• Better health outcomes
• IT/Data capabilities to leverage high performing services
• Interface capabilities
• Strong capability to manage care for chronically ill patients
• Expertise with special needs populations – behavioral health
• Transition of care expertise
• Specialization with particularly complex patients (e.g., COPD, CHF, etc.)
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10. WHAT HHAS SHOULD BE LOOKING AT WHEN
DETERMINING THE RIGHT ACO
• What % of my referrals and admissions come from the members of the ACO
• Building the “right” relationships in the community
• Does the local hospital participate?
• Is the ACO aggressively carving out other local providers?
• Participation of social welfare organizations in the community
• Patient population covered by the ACO
• Service area
• Number of covered lives
• Demographics of population covered
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11. WHAT HHAS SHOULD BE LOOKING AT WHEN
DETERMINING THE RIGHT ACO
• Level of participation of HHA in the ACO ‐ preferred provider or
affiliated entity
• Preferred provider
• Adhere to ACO standards and protocols
• Share data
• Work together with ACO to prevent readmissions, decrease costs and
improve outcomes
• Affiliated entity
• Directly involved in the ACO’s activities, operations, and governance
• Opportunity to receive shared savings
• Ability to drive volume – favorable mix of “good” volume
• Attractive financial upside associated with superior performance
• Fairness in the distribution of shared savings by the ACO
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12. ACO SHARED SAVINGS DISTRIBUTION METHODOLOGY -
BACKGROUND
• Shared savings are earned by ACOs as a result of providing high quality
care to a specified, covered population at a cost below a prescribed
benchmark
• Savings below the cost benchmark are shared between the ACO and the
payor that contracts with the ACO
• Shared savings are effectively the profits that an ACO can earn from high
performance in managing the health of a population
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13. ACO SHARED SAVINGS DISTRIBUTION METHODOLOGY -
BACKGROUND
(Continued)
• SSDM sets forth how an ACO allocates and distributes shared
savings to its participating providers
• ACOs have been granted significant regulatory flexibility in
determining SSDM
• General outline of the proposed SSDM is typically required
prior to the beginning of ACO operations
12

14. Is the ACO model
sustainable,
particularly if certain
financial “winners”
and “losers” are
created among the
participating
providers?
Is each class of
provider (including
HHAs) financially
incentivized to work
closely with their
participating providers
to generate shared
savings?
Do you have a clear
understanding of the
upside of ACO
participation?
ACO SHARED SAVINGS DISTRIBUTION METHODOLOGY –
KEY QUESTIONS
13

15. FRAMEWORK FOR OUR PROPOSED SSDM
OUR THESIS
• Prior to commencement of the ACO, an SSDM must be thoroughly developed by the ACO that will
properly reward each of the primary classes of participants (physicians, hospitals, post‐acute care
providers) for undertaking the right actions, such that all major participants are appropriately motivated
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16. FRAMEWORK FOR OUR PROPOSED SSDM
OUR APPROACH
• The SSDM should identify and weigh all of the contributions made by the different types of participating
providers to the generation of shared savings:
• Clinical contributions and financial contributions
• In determining clinical contributions, providing benchmark or better performance on certain, specific
clinical quality measures should be disproportionately rewarded
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17. FRAMEWORK FOR OUR PROPOSED SSDM
WHY WE BELIEVE THIS IS THE BEST APPROACH
• The different objectives and starting points for each of the primary classes of ACO participants are
accounted for
• Proper incentives are provided for each individual participating provider:
• Too much emphasis on rewarding the specific clinical contributions generating shared savings (e.g.,
reducing hospitalization) may reduce the incentive for hospitals and certain specialists to actively
engage in the ACO
• Too much emphasis on rewarding financial contributions may reduce the incentive for primary care
providers and post‐acute care providers to produce the clinical behavioral changes and care
management most responsible for generating the shared savings
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18. FRAMEWORK FOR OUR PROPOSED SSDM
• Not all quality metrics are created equal: providing benchmark or better performance on some of them is
more directly related to the production of shared savings
• Allows the ACO to properly engage each of the primary classes of participating provider from start‐up to
maturity of the ACO
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19. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
• 34 quality measures used for ACOs in the Medicare Shared Savings Program (“MSSP”) as a representative
set of quality metrics
• A similar analysis could be applied to any alternative quality measure sets used by other public and
private sector sponsored ACOs
• Quality measures are separated into 4 domains (see the next slide)
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20. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
• All measures should be evaluated in determining whether clinical quality standards have been achieved
• However, we believe high performance on certain quality measures may be disproportionately associated
with demonstrably superior value results
• In order to determine which quality measures are most directly tied to improvements in value, we have
developed a three‐factor test – see next slide
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21. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
The “Three Factor Test” – James Couch, MD
1) Does meeting the quality measure reduce the total cost of care?
2) Does meeting the quality measure generally improve the measurable
health status of patients?; and
3) Does meeting the quality measure close specifically identifiable gaps in
care delivery (having the highest degree of variation), which leads to
measurable outcomes‐based improvements?
20

22. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
• Quality performance measures that best meet the Three Factor Test should carry the most weight in
determining shared savings distributions
• Benchmark or better performance on these metrics are more likely to produce the greatest demonstrable
improvements in those clinical and financial outcomes most responsible for generating shared savings
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23. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
• In evaluating all 34 quality performance measures, five (5) of them best meet the Three Factor Test
• Two measures pertain to Ambulatory Sensitive Unplanned Admissions for:
• Chronic Obstructive Pulmonary Disease (COPD) and Asthma (ACO #9 Measure)
• Heart Failure (ACO #10 Measure)
• Three measures pertain to All Cause Unplanned Admissions for:
• Diabetes (previously diagnosed) (ACO #36 Measure)
• Heart Failure (ACO #37 Measure)
• Multiple Chronic Conditions (ACO #38 Measure)
22

24. IDENTIFYING CLINICAL CONTRIBUTIONS IN AN ACO
• These measures concern the outcomes of patients who have been diagnosed with a life‐threatening
and/or high cost condition.
• How well ACO providers manage the care of these patients as evaluated by these five (5) measures may
have a disproportionate impact on the existence and magnitude of shared shavings.
• Providers scoring the best on these measures should be disproportionately rewarded, and know upfront
that they will be, to incent them to deliver optimal, cost effective performance.
23

25. IDENTIFYING FINANCIAL CONTRIBUTIONS IN AN ACO
• It is also important to take into account in the SSDM the financial contributions which ACO participants
make.
• In particular, successful ACO participation will likely result in loss of volumes across the measured ACO
patient population
• Hospitals and specialist physicians are the most directly impacted
• An ACO that generates shared savings likely had to reduce utilization in a manner that reduced
payments to these providers
• Emphasis on preventative care and care management reduces hospitalization and referrals to
specialists for costly procedures and associated drugs
24

26. IDENTIFYING FINANCIAL CONTRIBUTIONS IN AN ACO
• The sacrifice of monetary gain under the fee‐for‐service reimbursement regime to
these providers should be accounted for as a financial contribution to the ACO
• Keeps all participating providers more interested in working towards ACO
success
• Allows for sustainability of ACO from start‐up phase to maturity
25

27. PROPOSED METHODOLOGY FOR WEIGHTING
CONTRIBUTIONS
Example
• An ACO achieves $10 million in shared savings in year 1.
• The ACO’s clinical contributions to the shared savings are measured at $5 million for primary care
physicians, specialists at $1.5 million, hospitals at $1.5 million, and post‐acute care providers at $2
million.
• The financial losses from ACO participation are measured at $1 million for specialists, $3 million for
hospitals, and $1 million for post‐acute care providers.
26

28. PROPOSED METHODOLOGY FOR WEIGHTING
CONTRIBUTIONS
Example
• Total equivalent capital contributions = $15 million
• $10 million total clinical capital contributions
• $5 million total financial contributions
• Percentage Equity Stakes in the Partnership
• Primary care physicians ($5 mil/$15 mil) = 33%
• Specialists ($2.5 mil/$15 mil) = 17%
• Hospitals ($4.5 mil/$15 mil) = 30%
• PACs ($3 mil/$15 mil) = 20%
27

29. PROPOSED METHODOLOGY FOR WEIGHTING
CONTRIBUTIONS
Example
• Distributions of Shared Savings
• Primary care physicians (33 % of $10 mil in net shared shavings) = $3.33 million
• Specialists (17 % of $10 mil in net shared shavings) = $1.7 million
• Hospitals (30 % of $10 mil in net shared shavings) = $3 million
• PACs (20% of $10 mil in net shared savings) = $2 million
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30. IMPORTANT CONSIDERATIONS AS ACO REACHES
MATURITY
• Cost of capital associated with equity investments in the ACO
• Financial impact of increased market share achieved by providers as the ACO is recognized in the
community for superior quality at a lower cost
29

31. CONCLUSION
• Joining an ACO is a potentially attractive strategy for HHAs
• The HHA should undertake a cost/benefit analysis of ACO participation, as well as closely examine the
best possible ACO(s) to join
• The way that an ACO distributes shared savings to its participants is a key consideration for HHAs in
determining the best ACO(s) to join
• To ensure ACO success, a shared savings distribution methodology which fairly and accurately recognizes each
participant’s contributions must be developed
• The SSDM must properly incentivize all providers to provide high quality, value based care
• Special emphasis must be placed on the quality measures that meet the “Three Factor Test” when developing a
scoring and performance incentive system
• The distribution methodology should be laid out at the beginning of ACO activity
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32. THANK YOU!
QUESTIONS?

33. HELPING
YOU FOCUS
ON WHAT
COUNTS
citrincooperman.com
Aaron Cohen, JD
Principal and Health Care Practice Co‐Leader
Citrin Cooperman
301.654.9000
acohen@citrincooperman.com
Michael Criscione, CPA
Audit Partner and Health Care Practice Co‐Leader
Citrin Cooperman
401.421.4800
mcriscione@citrincooperman.com