This document discusses developing a shared savings distribution methodology for accountable care organizations (ACOs) and its impact on home health care providers. It outlines key considerations for home health agencies (HHAs) regarding whether and how to participate in ACOs, including potential benefits and costs of participation. A critical consideration is the ACO's shared savings distribution methodology, which should properly incentivize HHAs and reward high-performing HHAs to ensure the ACO model is sustainable. The document provides an overview of ACO participation trends in Massachusetts and considerations for HHAs in evaluating potential ACO partners.

1. DEVELOPING AN ACO SHARED
SAVINGS DISTRIBUTION
METHODOLOGY
IMPACT ON HOME
HEALTH CARE PROVIDERS
DECEMBER 7, 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 ‐ Massachusetts
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
• 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
• Succession – senior management and boards
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5. CURRENT MARKET AND STRUCTURAL TRENDS
IMPACTING HHAS
• Transition to value based care
• 2018 – first year of financial impact to MA agencies ‐ +‐ 5% to Medicare rate
• 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
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6. MSSP ACOS AND HHA PARTICIPATION-
MASSACHUSETTS
• 18 unique MSSP ACOs in MA in 2015
• 8 of the 18 ACOs generated shared savings ($5‐12 million)
• 14 unique MSSP ACOs in MA in 2016
• There are over 800 unique providers participating with these ACOs ‐ significant market penetration
• All 14 ACOs are Track 1 – no downside risk, lower sharing percentage opportunity
• 1 ACO has documented formal HHA relationships
• Integra Community Care Network LLC – South County Home Health
• Current state in 2017
• 17 unique MSSP ACOs – a couple new entrants, as well as certain ACOs dropping out
• 2 ACOs now on Track 3 – higher upside potential, material downside risk
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7. FUTURE OUTLOOK OF ACOs IN MASSACHUSETTS –
GROWTH OF NEXT GEN ACOs AND GREATER RISK
• MA is ahead of the curve of ACO participation in the US
• Movement towards models with greater risk ‐ Next Gen ACO model
• MA had 2 of the 18 Next Generation ACOs in 2016
• Steward Integrated Care Network, Inc. ‐ $272,140 in shared savings
• Pioneer Valley Accountable Care, LLC ‐ $4,683,960 in shared savings
• 45 Next Gen ACO models now operational in 2017 with 5 of them located in MA
• Partners Community Physicians Organization, Atrius Health, Inc. and Integra Community Care Network LLC
added
• With higher levels of risk, there is a greater opportunity to generate significant shared
savings, as well as increased need to protect against poor results
• New England Journal of Medicine ‐73% of variation in Medicare spend related to post‐acute care
• ACOs need strong participation from HHAs for superior performance
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8. 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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9. 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
• Potential cost pressures placed on HHAs
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10. 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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11. 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
• Level of risk taken by ACO
• Scope of payor participation with ACO
• Patient population covered by the ACO
• Service area
• Number of covered lives
• Demographics of population covered
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12. 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
• % savings shared w/ ACO by participating payor(s)
• Fairness in the distribution of shared savings by the ACO
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13. 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 – such savings are effectively the
profits that an ACO can earn from high performance in managing the
health of a population
• 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
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14. Is the ACO model
sustainable?
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
• Similarly, we strongly advise ACO participants to gain a true understanding of potential financial upside of
ACO participation before agreeing to join or participate
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16. SSDMs - ACOs IN MASSACHUSETTS
• Broad range of experience across ACOs in Massachusetts participating in Medicare Shared Savings
Program
• Distribution of shared savings is primarily directed towards the following:
• Infrastructure
• ACO participants
• Care redesign/resources
• Split of shared savings distributed to each of the 3 areas noted above is different at each unique ACO
• As low as 25% and as high as 100% distribution of shared savings to participating providers
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17. 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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18. 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:
• Patient/caregiver experience
• Care coordination/patient safety
• Preventive Health
• At‐risk population
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19. 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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20. 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?
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21. 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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22. 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)
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23. 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.
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24. 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, but certain PACs may be as well
• 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
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25. 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
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26. 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.
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27. 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%
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28. 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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29. 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
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30. 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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31. THANK YOU!
QUESTIONS?

32. 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