Polsinelli Webinar

1. Big Decisions: ACO Participation, Reforming,
and Unwinding in 2019
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2. Introductions
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3. ACO Enrollment Considerations - 2019
 Why is 2019 a significant year for ACOs?
 What are key timeline issues for ACOs?
 ACO options for participation
 Strategies for success in downside risk
 Considerations for Unwinding
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4. ACO Basics
 Medicare Shared Savings Program (MSSP)
– Permanent Medicare program
– Four Tracks:
• Track 1 (upside-only)
• Track 1+
• Track 2
• Track 3 (prospective attribution, voluntary alignment)
 Next Generation ACO
– CMMI initiative - highest risk/reward
– Additional per-member, per-month payments
– Access to unique regulatory flexibility
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5. Current Participation in ACOs
• Overwhelming majority of ACOs & beneficiaries in
Track 1 (Bonus-only – no downside risk):
– 460/561 MSSP ACOs (82%)
– 101 downside risk (up from 42 in prior year);
• Track 1+:55
• Track 2: 8
• Track 3: 38
– 51 in the Next Generation ACO model
 CMS considers taking downside risk a major
program goal.
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6. Why is 2019 Significant?
 Sec. Alex Azar “Bolder Moves” Initiative:
“As just one example, we are looking at our efforts
regarding Accountable Care Organizations. The
program was intended to give providers three years to
learn how to accept risk and share savings, but the
results have been lackluster.
In retrospect, this is not such a surprise: Providers
were not given new meaningful space to experiment
— such as the arrangements they needed to truly take
on the risk of a patient’s outcomes. Meanwhile, they
were allowed to share in modest cost savings, but not
asked to accept responsibility for cost overruns.”
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7. Why is 2019 Significant?
Upside-only
contracts cost
the payer due to
gains from
random variation
Additional Information: http://www.ajmc.com/journals/issue/2013/2013-1-vol19-n8/option-pricing-a-flexible-tool-to-disseminate-shared-
savings-contracts
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8. Why is 2019 Significant?
 “ACOs may operate under the one-sided
model for a maximum of two agreement
periods.”
– 42 C.F.R. § 425.600
 This means maximum period is six years.
 First MSSP ACOs began in 2012 -- 2018 is last
year for upside-only risk.
 Unclear whether Azar comments mean
additional restrictions may occur.
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9. 2019 Application Timeline
 Notice of Intent to Apply: May 31, 12 pm ET
 Applications due: Summer 2018 (usually
July/August)
 Last date to add participants: Late
summer/early fall 2018 (last year 9/6)
 Last date to drop/change : Fall 2018 (e.g., late
October).
(Note: Dates based on 2018 schedule & CMS prior
practice.)
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10. Components of ACO Success
 ACO DNA
– Physician selection
– Contract terms
– Region
 ACO behaviors
– Benchmark maintenance e.g. risk adjustment
– Expense management e.g. selecting a couple
financially impactful initiatives
– Risk management
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11. Legal Tools – Engaging Partners
 Physician engagement:
– Employment
– Contracting with physician groups / individuals
– Selection of partners & structure of agreements will drive
legal considerations
 Engagement of other partners:
– Hospitals, SNFs/other post-acute providers
– Can cover continuity of care/preferred provider status,
efficiency improvements, shared resources, etc…
 Agreements to share personnel:
– Patient-facing care coordination staff
– “Back end” functions like data analytics, reporting vendors
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12. Legal Tools – Expense
Management
Sample mechanisms to achieve MSSP goals:
 Hospital efficiency agreements
 Continuity of care-related agreements
– Personnel
– Clinical standards
– Transfer / preferred provider agreements
 Developing a consistent set of cost-reduction
measures in agreements with employees/partners
 Most powerful when data-driven and focused on
known drivers of preventable high costs
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13. Legal Tools — Building
Infrastructure
 Data collection / sharing / analytics
– Development of methods to share PHI
– Payment for analytic functions
– Uniformity and/or interoperability of EHR systems
– Choice of in-house vs. outside contractor
 Advisory services:
– Identifying cost savings
– Actuarial modeling
– Preparing for / assessing likely magnitude of risk
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14. ACO Waivers – Fraud & Abuse
 HHS waived major Medicare fraud & abuse
laws regulating financial relationships:
– Stark Law
– Anti-Kickback Statute
– Gainsharing CMP
 Waivers apply to relationships reasonably
related to purposes of MSSP:
– General description must be publicly disclosed prior
to start of arrangement
– Slightly different rules based on stage of ACO
development
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15. ACO Special Rules – Antitrust
 General antitrust rule: cannot fix prices or allocate
market
 Particular concern for independent entities making up an
ACO
– Particularly important for shared acceptance of downside risk
 FTC-DOJ Statement of Antitrust Enforcement Policy:
– Rule of reason analysis: joint pricing possible if entities
financially or clinically integrated and agreement reasonably
necessary to accomplish benefits of integration.
 “Safety zone” if < 30% market share in each common
service in each primary service area.
 Voluntary review process available, but not mandatory.
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16. ACO Special Rules - Tax
 Tax-exempt entities can partner with for-profits in an
ACO. (IRS Notice 2011-20)
– Must be operated for charitable purpose (not private
benefit), earnings cannot inure to private individuals.
• Terms of participation set in advance
• ACO accepted in MSSP and not terminated by CMS
• Exempt org’s share of benefits proportional to its contributions
• Exempt org’s shared losses do not exceed its share of ACO benefits
• All contracts with ACO/participants/providers are FMV.
 Compare IRS LTR 201615022:
– Non-MSSP ACO was not tax-exempt when one of its primary
functions was negotiating payer agreements on behalf of
exempt & non-exempt entities.
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17. ACO Special Rules – Medicare
 SNF 3-Day Rule
– Medicare rules currently require three-day inpatient hospital
stay before reimbursing post-hospital SNF care. (42 USC §
1395x(i)).
– Track 3 & Track 1+ ACOs can request waiver of this rule for
some prospectively-assigned beneficiaries.
– SNFs aligned to these ACOs may provide Medicare-
reimbursable care even for shorter hospital stays.
 Telehealth rules
– New Bipartisan Budget Act rules effective 2020.
– ACOs can be reimbursed for telehealth services provided in
homes of prospectively assigned beneficiaries.
– Only for Tracks allowing downside risk – currently 1+, 2, 3.
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18. Available Downside Risk Tracks
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19. Risk Appetite
How well has your Track 1 Performed?
Do you have hospital participants?
Are there any planned ACO changes?
Do you prefer prospective or retrospective
attribution?
Are you expected to benefit under regional
benchmarking?
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20. Actuarial Tools for Taking
Downside Risk
– Monthly financial reconciliation and forecasting
of savings/losses
– Measurement of downside risk exposure
– Premium (budgeting) for catastrophic risk
transfer through reinsurance (captive)
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21. 2016 Savings/Loss Rates
• ACO savings/losses follow a normal distribution
• Average savings/loss is 0.9%
• Standard deviation is 5.4%
1 0 3 2 5 7
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41
76
115
69
43
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7 2 1 0 1
% of Benchmark
[-23%,-21%](-21%,-18%](-18%,-16%](-16%,-13%](-13%,-11%](-11%,-8%]
(-8%,-6%]
(-6%,-3%]
(-3%,-1%]
(-1%,2%]
(2%,4%]
(4%,7%]
(7%,9%]
(9%,12%]
(12%,14%]
(14%,17%]
(17%,19%]
(19%,22%]
(22%,24%]
Frequency
0
20
40
60
80
100
120
140
2016 Distribution of MSSP Savings/Losses
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22. Catastrophic Risk
 2.2% probability of
being in the red worth
0.25% of benchmark
 Assumes:
– Maximum ACO retention
of 5% of benchmark
– 10% of benchmark loss
cap
– 50% savings/loss rate
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23. Repayment Mechanisms
 A credit guarantee to ensure that ACO has the financial
strength to repay a portion of potential losses
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24. Legal Considerations for Downside Risk
 Who bears risk? ACO entity? Distributed to
providers?
 How to secure repayment mechanism? If one party
secures, can/must it be compensated with higher
savings?
 Any need for additional state licenses or
authorizations?
 Changes needed to incentivize providers?
 Do you have the right provider mix?
 Do you need to add/change/supplement data
capabilities to better manage population?
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25. Decision to Unwind
 MSSP close-out process
 Contracts with partners (inc. physicians)
– Loss of waivers / other flexibility
 Non-MSSP payer relationships
– Commercial ACO / CIN relationships
– MA / Medicaid MCO participation
 Dissolution of ACO-related legal entities:
– Joint operating companies
– Intervening entities used to distribute shared savings
– Joint ventures to co-manage service lines, operate data
services, etc…
 Loss of claims data used to drive care management
initiatives
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26. Reimbursement Implications of
Unwinding
 End of MACRA bonuses & special rules:
– No 5% Bonus if previously downside risk track
– No MIPS APM scoring rules for Track 1
– No automatic bonuses for “Improvement Activity”
 Implications for ongoing MIPS application:
– Capabilities to report on Quality, EHR, IA
 Other value-based payment impacts:
– Hospital VBP; readmissions penalties; HAC; post-
acute VBP.
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27. Possible Alternative Strategies
 Restructuring / re-enrollment:
– Adding/changing participants
– Retaining high performers
– Refining incentives
 Enrolling multiple sets of providers:
– “Starter” & “Advanced” track
– May face regulatory hurdles
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28. Modified Enrollment Groups
Track 1 ACO
(TIN: 1234)
Participants
Group A (high
performers)
Group B (low
performers)
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29. Modified Enrollment Groups
Track 1 ACO
(TIN: 1234)
Participants
Group B
(low
performers)
Track 3 ACO
(TIN: 5678)
Participants
Group A
(high
performers)
Note: Assumes participants can be divided based on TINs; cannot split up
professionals in same TIN
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30. Examples of modifying enrollment
groups
 Physician-level variation
due to:
– Panel size
– Panel risk
– Specialty
– Service type
– Practice patterns
 Risk-adjusted credible
intervals separate
performance
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31. Ability to Modify Enrollment
Groups?
 Track 1+ rules – cannot participate if:
– Same ACO legal entity previously participated in
downside risk; or
– > 40% of participants previously participated in
risk-based ACO model.
 Other Tracks?
 CMS has significant discretion to accept or
deny ACOs based on distribution of
participants.
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32. Other Legal Issues in Modifying
Enrollment Groups
 Contractual:
– Modification/assignment of Participation Agreements?
– Maintaining at least 5000 beneficiaries in each group
– Renegotiation of distribution methodology
 Allocating responsibilities among new ACOs and/or
non-ACO legacy providers
 Many issues similar to unwinding:
– Repayment mechanism;
– Impact on payer relationships;
– Allocation of vendor contracts;
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33. Questions
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34. Polsinelli provides this material for informational purposes only. The material
provided herein is general and is not intended to be legal advice. Nothing herein
should be relied upon or used without consulting a lawyer to consider your specific
circumstances, possible changes to applicable laws, rules and regulations and other
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relationship.
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