New Patient Care Models Under Healthcare Reform

Apr 02 2010

The mammoth healthcare reform legislation enacted by Congress on March 23, 2010, included a number of provisions aimed at improving the quality and efficiency of healthcare through a transformation of the healthcare delivery system. This article explains exactly what the Act has to say about accountable care organizations (ACOs) and other patient care and reimbursement models and identifies implications for hospitals and physicians who wish to implement these models.

Section 3022 of the Act requires the Secretary of the Department of Health and Human Services to establish a “shared savings program” no later than January 1, 2012. The purpose of this program is to:

  • Promote accountability.
  • Coordinate items and services under Medicare Parts A and B.
  • Encourage investment in infrastructure.
  • Redesign care processes for high quality and efficient service delivery.

Under this program, groups of providers and suppliers may work together to manage and coordinate care for Medicare fee for service beneficiaries through ACOs. ACOs that meet quality performance standards are eligible to receive payments for shared savings under the program.

ACOs may consist of the following groups of providers and suppliers:

  • Group practices.
  • Networks of individual practices.
  • Partnerships or joint venture arrangements between hospitals and ACO professionals.
  • Hospitals employing ACO professionals.
  • Such other groups of providers and suppliers as DHHS determines are appropriate.

Under the Act, ACOs must:

  • Enter into an agreement with DHHS for not less than a three year period.
  • Include a sufficient number of primary care professionals to service the beneficiaries assigned to it (not less than 5,000 beneficiaries must be assigned to the ACO in order for it to be eligible to participate in the program).
  • Be accountable for the quality, cost and overall care of Medicare beneficiaries assigned to it.
  • Define processes to promote evidence based medicine and patient engagement, report on quality and cost measures, and coordinate care through specified technologies.
  • Establish a mechanism for shared governance.
  • Have a formal legal structure allowing it to receive and distribute payments.
  • Have a leadership and management structure including clinical and administrative systems.

The Act imposes various reporting requirements on ACOs to allow DHHS to evaluate the quality of care furnished by the ACO, including care transitions, discharge planning, and post hospital discharge follow up. DHHS must also establish quality performance standards to assess the quality of care furnished by the ACOs.

The key financial driver is that ACOs will have the opportunity to share in cost savings. DHHS will estimate benchmarks for the start of each agreement. ACOs that (a) meet quality performance standards and (b) achieve specified cost savings relative to the applicable benchmarks will be eligible to receive payments for a share of the savings that they achieve for the Medicare program.

Finally, the Act requires DHHS to establish a Medicaid demonstration project to allow pediatric providers to be recognized as ACOs and to share in cost savings.

Section 3023 of the Act requires DHHS to establish a pilot program on payment bundling. The program would involve integrating care during an episode of care in order to improve the coordination, quality, and efficiency of healthcare services. DHHS is directed to develop a list of “applicable conditions” involved in a relevant episode of care, based upon considerations such as a mix of chronic and acute conditions, a mix of surgical and medical conditions, opportunities to improve quality of care, significant variation in the number of readmissions or the amount of expenditures for post acute care spending, and high volume conditions with a high post acute care expenditure history. “Episode of care” is defined to start three days prior to admission and continue for 30 days following discharge.

The pilot program will establish payment methods including bundled payments and bids from entities for episodes of care. Payment would include the furnishing of services such as care coordination, medication reconciliation, discharge planning, and transitional care services. Bundled payments are required to be comprehensive, covering all the costs of applicable services furnished to an individual during that episode of care. The Act also sets forth various other quality and reporting requirements that will be applicable to this pilot program.

While DHHS is directed to develop requirements for entities to participate in this national pilot program, the Act does not contain any specific date by which this requirement must be prepared. In general, DHHS is required to submit a plan no later than January 1, 2016 for implementation of the program.

The Act extends the Gainsharing Demonstration Project that was initially approved in the Deficit Reduction Act of 2005. The Act also increases funding for the program. The project is extended through 2014.

The Gainsharing Demonstration Project is intended to test new payment methodologies between hospitals and physicians that align financial incentives by awarding physicians a share of hospital savings achieved through the delivery of higher quality and more efficient care.

Finally, the Act creates within CMS a “Center for Medicare and Medicaid Innovation” or “CMI” to test innovative payment and service delivery models. These models will have the goal of reducing program expenditures while preserving or enhancing the quality of care. The CMI is required to be up and running no later than January 1, 2011.

Under Section 3021 of the Act, CMI will be required to test a wide variety of payment and service delivery models, including those that:

  • Promote broad payment and practice reform and primary care, including medical homes.
  • Transition primary care services away from fee-for-service based reimbursement toward comprehensive payment or salary based payment.
  • Promote innovative care delivery through risk based comprehensive payment or salary based payments.
  • Utilize geriatric assessments and comprehensive care plans to coordinate the care of individuals with multiple chronic conditions.
  • Support care coordination for chronically ill individuals at high risk of hospitalization, through a health information technology enabled provider network.
  • Vary payment to physicians for advanced diagnostic imaging services, based upon adherence to “appropriateness criteria for the ordering of such services.”
  • Use medication therapy management services.
  • Employ community based health teams to support small practice medical homes.
  • Assist individuals in making informed healthcare choices by paying providers for using patient decision support tools that improve patient and caregiver understanding of medical treatment options.
  • Improve post acute care through continuing care hospitals that offer inpatient rehabilitation, long term care hospitals, and home health or skilled nursing care during an inpatient stay and the 30 days immediately following discharge.

While the Act encourages the development of new patient care models and delivery systems, it leaves unanswered major questions regarding how these new financial relationships and delivery models will work under the federal Stark and fraud & abuse laws.

The current regulatory framework addresses a fee for service system where much of the focus is on removing certain financial incentives that can impact referral patterns and result in both over and under-utilization of services. The current structure tends to break down with a move toward payments that are contingent on clinical outcomes, processes, utilization, costs, and overall efficiency.

Certain of the new payment models may create financial incentives to capture referrals or to stint on care, both of which are contrary to current law. For example, existing exceptions under the Stark Law may be inconsistent with payments that are based on quality outcomes or resource utilization. The “fair market value” and “commercial reasonableness” requirements under Stark pose significant challenges to these emerging models. Similarly, the anti kickback restrictions on remuneration that is intended to induce or reward referrals may also impede the development of these new models, while other statutes prohibit payments that may tend to reduce care – even if that payment is for the purpose of limiting unnecessary care.

Section 3022 of the Act, relating to ACOs, authorizes DHHS to waive provisions of the Stark, anti-kickback and CMP laws in order to carry out the intent of that section, while other provisions contain similar waiver authorizations for various demonstration programs and pilot projects in the Act.

Nevertheless, it is clear that much uncertainty surrounds the means by which hospitals and other providers may take advantage of the new payment programs and delivery systems that are contemplated in the Act. At the same time, the Act provides a blueprint for healthcare providers that are in the process of creating ACOs and other innovative delivery systems. Up until this point, initiatives have necessarily been limited to the commercial payer arena; now, the Act provides some key design elements that may be integrated into the ACO framework in order to be eligible under the Medicare program as well.

von Briesen & Roper Legal Update is a periodic publication of von Briesen & Roper, s.c. It is intended for general information purposes for the community and highlights recent changes and developments in the legal area. This publication does not constitute legal advice, and the reader should consult legal counsel to determine how this information applies to any specific situation.