Maximizing ACO Success: Governance, Care Management, and Financial Strategies

1. Operating an ACO - Part 2June 23, 2011

2. Speakers • David Jones – CureIS Healthcare, Inc. (Minneapolis, MN) • Michael Kosir – Initiate Consulting (St. Paul, MN) 612.834.4544 djones@cureis.com 612.247.9728 mkosir@getideasmoving.com

3. PresentationOverview • What got us here • Why ACO | Why Now • Commercial vs Government ACOs • Medicare Shared Savings • Governance • Data Driven • Care Management • Financial Formula • Summary

4. What Got Us Here ≠ Texas Workers Compensation Research Institute 33% expenditure difference across state…with near-equal outcomes. Striking the Balance: An Analysis of the Cost and Quality of Medical Care in the Texas Workers’ Compensation System TexasNew Yorker 50% Medicare expenditure difference between similar health populations of El Paso & McAllen. A Cost Conundrum: What a Texas Town can teach us about health care GlobalThe Commonwealth Fund U.S. = highest cost but last in outcomes. 2007 study of 6 industrialized countries

5. What Got Us Here Runaway Inflation Spending on Health Care Services In 2005 dollars 1965 $187 Billion 2005 $1.9 Trillion 4.9% Average Annual Growth Average annual GDP growth 2.1% 5.1% of GDP 17.6% of GDP 2009 Source: Congressional Budget Office based on health services and supplies, as defined in CMS national health expenditure accounts.

6. Why ACO | Why Now Evolution Fee For Service Insurers pay for transactions HMO Controlled reimbursement | some quality Domestic Medicine 1:1 doctor – patient relationship Employer-based Care Employed physicians serving employees Medical Home Medical team ACO Patient-centered care controlled by medical professionals

7. ACO Differences Commercial Medicare • Patients Assigned • Patients Free to Roam • Patients Stay in Medicare • Payment/Penalty Terms Set • Quality Measures in Place • Pioneer Option • Patients Engaged • Patients Corralled • Patients Change Jobs/Plans • Payment/Penalty Terms Negotiated • Quality Measures Similar

8. Medicare Shared Savings Program Objectives (3 Part Aim) 1Better Care for Individuals 2Improved Health for Populations 3Lower Growth in Expenditures Qualified & Quantified! Data Information Data Information Data Information Data Information Data Information Data

9. Medicare Shared Savings Program Requirements • Minimum term 3 years • Financial means to repay losses & facilitate receipt/distribution of savings • Minimum Medicare beneficiaries 5,000 • Leadership & management for both clinical and administrative activities • Information Infrastructure ability to evaluate data & give feedback to organization • Shared governance representing beneficiaries, community partners, and provider/suppliers • Provider Driven 75% of governing body must be ACO participants • Public reporting of ACO performance and operational metrics and more…

10. Data & Information Drive Success

11. Governance – It REALLY Matters A commitment by leadership to improve value as a top priority + a system of operational accountability to improve performance at the following levels: • Care Management • Total Medical Leadership Commitment • Administrative • Active Medical Leadership Participation • Marketing • Active Medical Leadership Participation • All Else • Active Medical Leadership Participation If not engaged nothing else matters

12. Care Management Critical Aspects • Early diagnosis & intervention diabetes, CHF, COPD, etc. • Active application of best practices alerts, etc. • Peer review participating providers • Reduction of unnecessary ER visits • Reductions of hospital readmissions alerts, etc. • Creative patient education services e-mail, text, etc. Opportunities are endless…

13. Patient Satisfaction Build it… they may not come One of the 5 quality domains is Patient/Caregiver Experience. Simple Patient surveys assess the following: • Getting Timely Care, Appointments, and Information • How Well Your Doctors Communicate • Helpful, Courteous, Respectful Office Staff • Patients' Rating of Doctor • Health Promotion and Education • Shared Decision Making • Health Status/Functional Status Imagine if 20% of your shared savings were determined simply by measuring patient satisfaction.

14. Quality • 65 Measures • 5 Domains includes patient/caregiver experience • 6 Core disease states • PQRI limits • EHR Meaningful use and more…

15. Medicare Shared Savings Program The Basic Formula How It Works FFS Minimum Quality Minimum Savings + [ + = $ ] Intent: increased quality and increased savings equals increased sharing.

16. Formula: Components One Sided • Shared savings payments for achieving cost saving benchmarks Two Sided • Shared savings payments (higher percentage) for achieving cost saving benchmarks • Repayment of shared losses All ACOs will operate under the two sided model in year 3 of the initial contract period and thereafter.

17. Formula: Components

18. Formula: Components Minimum savings rate for each one sided ACO based on the number of beneficiaries assigned. MSR calculated as follows:

19. Formula: Components • Retrospective benchmarks = 3 years of data (weighted 60%. 30%, 10%) • No prescribed payments • Payments to TIN • Forfeit savings if ACO departs program early • 25% withhold of shared savings payment to offset possible future losses (2-sided only)

20. Formula: An Example New Way ACO 1-Sided Model 20,000 patients @ $8K average cost/yr (3 yr historic avg.) Benchmark = $160M 2.5% MSR = $4M Target Spend = $156M Performance Year 1 = $140M Net Savings = $20M 50% of Savings = $10M FQHC/RHC 2.5% Credit = $0.5M Total Savings Share = $10.5M Maximum = 7.5% of benchmark ($12M). New Way keeps everything.

21. Sharing Sharing the Savings You Decide!

22. Summary If You Remember Nothing, Remember This: • Medical Leadership Engagement • Data & Information • Quality Care • Patient Satisfaction • Know Your Formula

23. UpcomingWebinars Understanding Regulations of ACOs July 14, 2011 For more information and to register, visitwww.aaacountablecare.org

24. ForMore Information Don Giroux Associate Director 952-896-3236 don@aaaccountablecare.org AAACO Website www.aaacountablecare.org