HealthBlawg

Accountable Care Organization (ACO) Regulations: First Look

ACO regulations and related federal issuances hit the street last Thursday, after several months of waiting -- from CMS, OIG, FTC, DOJ and IRS.  They cover the waterfront, ranging from the central regulation defining the structure and workings of the ACO, to  limited Stark self-referral ban and anti-kickback statute waivers in the fraud and abuse arena, to new frameworks for antitrust analysis, to rules governing joint ventures involving taxable and tax-exempt organizations. 

Update 11/12/2011:  The final ACO Regulations are out - follow the link to my thoughts (camel, not unicorn), links to all of the final regs and issuances, and to an archived webinar on the final ACO regs and what they mean for the health care marketplace.

I had the opportunity to discuss the proposed regs the day after they were issued on a special edition of the Blog Talk Radio show, ACO Watch, hosted by Gregg Masters (@2healthguru).  Gregg's guests included Mark Browne (@consultdoc), Vince Kuraitis (@VinceKuraitis), Jaan Sidorov (@DisMgtCareBlog) and yours truly (@healthblawg).  We are geographically diverse, and bring a variety of perspectives to the table.  I invite you have a listen -- we enjoyed the opportunity to discuss the rules, we all learned from each other, and we hope you enjoy the conversation as well.  (It runs about 90 minutes.)

Update 4/5/2011: For a collection of ACO analyses curated by Anita Samarth see: http://bit.ly/ACO-Analyses.

Here are a few points to consider as part of a first look at the ACO rules:

1.    The rules were worth the wait.  There are a lot of moving parts to coordinate, and the multi-agency effort really came together.  The CMS rule also retains a fair amount of flexibility.  Some requirements are very specific, but others much less so.  (For one example of specific guidelines, take a look at the eight-part definition of patient-centeredness; an  organization must satisfy all eight in order to be an ACO.  Other requirements have no detail at all, and CMS will look to applicants to explain how they meet the requirements, without giving any hints.)

2.    This is the Frankenstein regulation:  A Medicare beneficiary must sit on the board of the ACO, CMS must approve all marketing materials before they are used ....  These requirements may be traced back to origins in CMS demonstration project and Medicare Advantage policies, respectively, and illustrate the way in which CMS took a short statute and really put some meat on the bones.  Some may balk at the weight of the requirements limiting the options of an ACO.

3.    CMS has bootstrapped a law aimed at ACOs serving at least 5,000 Medicare beneficiaries each into a system of rules that effectively requires that commercial business be handled in an ACO-like manner.  This, among other infrastructure requirements (e.g., 50% of ACO docs must be meaningful users of EHRs), leads to the conclusion that there will be relatively few ACOs, at least initially.  CMS estimates 75-150 nationwide.  There are, of course, many unanswered questions about what a commercial ACO would look like.  One model I am familiar with -- here in the People's Republic of Massachusetts -- is the AQC, or Alternative Quality Contract offered by Blue Cross Blue Shield of Massachusetts to providers enrolled in its HMO Blue product.  One question is whether a slightly different financial model could apply to the commercial side of the house.  One model worth a close look is Jeff Goldsmith's proposed ACO model, which would treat primary care, emergency and diagnostic care, and episodes of specialty care in three distinct ways.

In brief, Goldsmith recommends risk-adjusted capitation payments for primary care, fee-for-service payments for emergency care and diagnostic physician visits, and bundled severity-adjusted payments for episodes of specialty care.  Primary care would be provided through a patient-centered medical home model, which would likely have a collateral effect of reducing the total volume of emergency care and diagnostic physician visits.  Specialty care would be provided through "specialty care marts," ideally more than one per specialty per market to maintain a little healthy competition.

A quick explanation of this approach to an intensivist over the weekend elicited a favorable response.

4.    Also in the bootstrapping department, CMS has shifted the ACO from a "shared savings" approach to having ACOs share risk as well as the upside.  Of course, this makes a lot of sense; a number of commentators, including the HealthBlawger, had lamented the fact that risk sharing was left out of the statute.  CMS has used its general waiver and demo authority under the ACA to move the ACO into risk sharing.  The ACO may choose: share risk from day one, and enjoy a potentially higher percentage of the upside, or defer the risk sharing to year three.

5.    The retrospective nature of patient attribution and savings calculations mean that each ACO must treat every Medicare fee-for-service patient as if he or she is "theirs."  Patients have the right to decide whether they want their data shared with an ACO; if enough patients are spooked by health care data privacy and security issues, fewer and fewer will authorize the sharing from CMS to the ACO, and the ACO will have to drive by feel -- or base its management of Medicare beneficiaries on its management of its general patient population.

6.    Organizations that dominate their local markets may be the most successful as ACOs, but they may face the most involved antitrust review at the hands of the FTC/DOJ.

7.    Scoring on 65 quality metrics in 5 domains will help determine the amount of any shared savings to be paid to an ACO.  One domain, patient experience of care, links up nicely with the patient-centeredness threshhold requirement noted above.  (For private sector attention to patient experience, see what the Leapfrog Group is doing in this domain, using some of the same measures.)  While some may bristle at the number of metrics, it is worth noting that these metrics are all drawn from existing sets of measures.

8.    All in all, the regulations represent the first stage of realizing the ACO vision expressed by Don Berwick last fall: there is a field open to experimentation (albeit a field likely limited to large networks of significant means that can underwrite the up-front infrastructure costs), and the ACO rules sketched out in the statute and further delineated in the regulations will enable CMS to incentivize the provider community to help achieve the triple aim of better care for individuals, better health for populations and reduced per-capita costs.  

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

Whither meaningful use of the certified, interoperable EHR?

Paul Roemer asks:

Have you ever been a part of a successful launch of a national IT system that: 

• required a hundred thousand or so implementations of a parochial system?
• has been designed by 400 vendors?
• had 400 applications based on their own standards?
• has had to transport different versions of health records in and out of hundreds of different regional health information networks?
• needed to be interoperable?
• could have resulted in someone's death if it failed?

Me neither.

The challenges are many, yet many health care systems already are, or soon will be, moving to implement pieces of this national system.  Are they motivated by the HITECH Act promise of up to $44,000 per physician for meaningful use of a certified EHR?  Perhaps, but that won't cover the cost.  The real value is in the ability to manage a patient's care effectively, efficiently and seamlessly across practice sites and, beyond that, to learn from population-level data. 

The federales already know this -- check out the recent All Things Considered piece on the Medicare claims database.  The aggregators of de-identified data putting it to secondary uses already know this, though their work may be made more complicated by the new HIPAA and Son of HIPPA rules out from HHS and FTC.  Some health systems know this, and are prepared to match the federales' incentive payments to docs who get on the bus (adding some Stark, fraud and abuse and tax issues to the already-heavy load of considerations).

Health care provider systems are ready to get with the program, but may need some guidance in negotiating the regulatory and operational minefields as they move to implement EHR systems. 

If you're part of a system looking for some ground-floor planning and strategic thinking on this thorny set of issues, please get in touch with Paul or me.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

Caritas Christi $100m infusion from Ascension Health on hold

Caritas Christi, the Boston-area Catholic health system, has been through the wringer and was looking forward to some capital improvements to be financed by issuing bonds.  $100m of the bonds were to be acquired by Ascension Health -- one of the two larger Catholic health systems that considered acquiring Caritas and then backed off.  Today's Boston Globe tells us that the bond issue is on hold and Caritas is looking at layoffs.  As my colleague Marc Bard is quoted as saying, Caritas is not alone: elective surgery is down and uncompensated care is up at all hospitals. 

The article repeats Caritas CEO Ralph de la Torre's earlier pledge to keep all of its hospitals open, but I have to wonder whether there might be a change in the air -- Carney Hospital is a candidate for conversion to non-acute-care uses, and such a conversion may well be a reasonable approach to cost-cutting while enabling a more appropriate use of the facility.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

Interoperable EHRs: elusive grail or within our grasp?

The indefatigable John Halamka makes a convincing case that "interoperability is implementable today with harmonized standards, appropriate security, and a service oriented architecture using the internet," and that the only thing barring the way to a fully interoperable national EHR system is resources, or incentives -- the technology is there.

(This conclusion begs the question: is GE's recently-announced foray into developing a new open standard for EHRs really necessary?  The $200 million committed seems to be a drop in the proverbial bucket; as a recovering public health official, I always tend to ask: How many childhood vaccines could you buy with that kind of money instead?)

So, what sort of incentives would move providers to climb on board the interoperable EHR express?  The federales have taken at least two approaches thus far:

First, the executive order giving hospitals a free pass for kicking in some dough when physicians in a position to refer business are buying EHR systems.  (Not exactly doing land-office business, even after the IRS cleared up a little issue -- the executive order created a Stark exception and fraud and abuse safe harbor but hadn't addressed issues raised by tax-exempt hospitals forking over big bucks for the benefit of for-profit medical groups.)

Second, a little MIPPA carrot-then-stick action on the electronic prescription front, with the potential promise of expanding the 2% incentives into other related arenas.

Will these incentives move a lot of docs online?  I'm not convinced.  Frankly, the hospital community is not exactly looking for ways to spend money these days.  I'd like to see the time limits on the executive order extended so that hospitals have a chance to rebound and fund some physician EHR infrastructure.  The MIPPA-type or RHQDAPU-type incentives will move docs, as other similar incentives have moved docs and hospitals to report on a million measures.

I'd like to see the federales make some bold moves -- which the Obama administration may be prepared to do -- and fund EHR infrastructure in the private sector.  Directly.  By writing some checks.  There's at least $700 million of public and private funds on the table, but more is needed. The benefits to be realized are great enough, both in terms of public health and in terms of cost savings to government and other payors (and by payors I mean ultimate payors -- those who pay health insurance premiums) that the short-term cost (which is not inconsequential) should be underwritten in the same sort of deficit spending kind of way that FDR used to fund the New Deal.

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

Ascension Health buys $100m in Caritas Christi bonds: Phase I of an acquisition?

A year or so ago, Ascension Health wanted nothing to do with Caritas Christi.  The national Catholic health care system considered buying the Boston-based Catholic health system after it put itself on the block, but backed away given the toxic condition of Caritas Christi's books at the time.  After getting its house in order somewhat, Caritas Christi is looking for some capital to continue doing what needs to be done, and Ascension Health has agreed to pony up in a $100m, below-market-rate bond deal.  (See more HealthBlawg posts on Caritas Christi). 

Question of the moment for Caritas Christi CEO Ralph de la Torre:  What's the end game here? 

Ascension Health, like most for-profit or not-for-profit systems, must allocate its capital where it can best serve the mission of the organization.  In light of its mission, Roy Poses at Health Care Renewal recently looked askance at Ascension Health's decision to close a hospital in Detroit's inner city while building one in the tony suburbs.

Is Ascension Health interested in acquiring Caritas Christi now that some historical financial and other irregularities are behind it, and some state-attorney-general-endorsed restructuring has been accomplished?  Or is this just an investment?  Ascension Health says it "has a commitment to strenghthening Catholic healthcare."  De la Torre says it's just an investment and the funds will be put to good use across the system.  But one has to wonder whether Ascension Health will be back to kick the tires again and consider adding Caritas Christi -- a small, local Catholic health system -- to its portfolio and, if it does, whether Caritas' financially troubled Carney Hospital (for example) will be able to carry on in its present form.            

David Harlow
The Harlow Group LLC
Health Care Law and Consulting

Caritas Christi to bring on a new CEO

Greater Boston's Caritas Christi Health System has had a rough couple of years -- fiscal difficulties at some of its hospitals and with its physician network, troubles with a former CEO, several failed attempts to sell itself to larger Catholic health care systems, and an anxious state attorney general looking over its shoulder.

Ralph de la Torre is reportedly coming on board as the new Caritas CEO -- he is chief of cardiac surgery at Beth Israel Deaconess, with a proven management track record as head of the BI-Deaconess Cardiovascular Institute.

Bringing in a new CEO and making the governance changes planned by Caritas and viewed favorably by the AG's office and its consultants will not solve Caritas' problems, but will give it a fighting chance.  Here's hoping the Caritas board, the Archdiocese and the AG let the new CEO have a go at it.

-- David Harlow 

Caritas Christi: the Massachusetts AG releases a report with recommendations for the system's future

Last November, Massachusetts Attorney General Martha Coakley announced that her office had engaged an out-of-town consultant to review the performance and structure of the Caritas Christi Health Care System and offer some recommendations.  One of the options on the table at the time for Carney Hospital -- one of the Caritas facilities -- looked good to me: convert the struggling inpatient facility to non-acute/outpatient uses.  You can read more about the history and these observations here.

Yesterday, Coakley's office put out a press release announcing the consultant's report and distributing a letter signed by Coakley announcing the following key recommendations, among others:

• Diocesan leadership should relinquish control over strategic, operational, and financial matters to the independent Board of Governors.  Diocesan leadership should retain influence only over matters of religious direction.
• Services at Caritas Carney Hospital in Dorchester should be based on current community need, not historical service lines.  Carney should consider further developing, as well as expanding, services such as behavioral and ambulatory health, for which there may be a need in the community Carney serves.
• St. Elizabeth’s Medical Center in Brighton should continue its realignment as a community teaching hospital, with a concentration on two or three major service lines.
• The Caritas Physician Network, which had an operating loss of nearly $30 million in FY 2007, should evaluate all physician contracts and compensation arrangements in comparison to industry medians and implement a new compensation structure for employed physicians, with greater emphasis on physician productivity.

An interesting point made by Coakley's office is that the Caritas system is an important counterweight to other health care systems in the Boston area, and needs to stick around in order to maintain some measure of competition in the marketplace.  This raises a series of questions for me:  Whose interests is she protecting here?  The not-for-profit Caritas?  (That's officially why she got involved in the first place.)  The mostly not-for-profit health care insurers of Massachusetts?  Ultimate premium payors, be they individuals or employers?  The "market?"  Can the AG protect a struggling not-for-profit, with her public charities hat on, and the health care market, with her antitrust regulator's hat on, at the same time?

I'll leave that philosophical question hanging, and get back to some of the specifics here.   

The system's troubles have led to its operating margin hovering below 1% for about a decade; it is generally accepted that an operating margin of at least 3% (and probably more) is necessary to generate sufficient funds to cover basic capital improvements, etc., over time.

A structural issue that has contributed to the system's troubles is the command-and-control issue: tight control of the system by the archdiocese. So tight that it probably led to an offer made to a would-be new system CEO being declined.  Caritas is already working on structural changes in the form of bylaws revisions that have been working their way through AG and archdiocesan approval processes.  We'll see how this shakes out.

One key recommendation is the point about St. E's -- it has no business trying to be a tertiary/quaternary care hospital in a hospital town like Boston, and the resources diverted from other parts of the system, and the attempted alignment of other system resources as feeders, resulted in a whole lot of disaffected folks in other parts of the system, and really never got St. E's to where Caritas wanted it to go.  Revamping St. E's plans -- as well as realigning Carney's plans with the needs of its local community (e.g., focusing on behavioral health and other underserved needs, and not necessarily trying to maintain a full-service acute care hospital) -- may help bring the system around.  Caritas leadership says changes at St. E's are already under way -- though the Boston Globe's coverage of the AG's consultant's report and Caritas reaction notes that occupancy and financial improvements have yet to follow.  The Globe story also notes that local pols are still not convinced that Carney should be repurposed as a non-acute facility.

A real key to success will be the rebuilding of the physician network in a sensible fashion.  It has lost money and personnel as Caritas has foundered, and it will play a central role in any recovery of the system as a whole.

The lessons here are not unique to Caritas.  Any system needs to be sensitive to its marketplace, to its component hospitals and physicians, and to the reimbursement environment.  Juggling these issues and others is never easy, and this report should serve as a wake-up call not only to Caritas, but to any system.  These influences are constantly shifting, and just because a health care system has found the right balance for the moment does not ensure that it will remain in balance for the foreseeable future.

-- David Harlow

SEIU's new tactics

This week, fellow Boston health care blogger Paul Levy (Running a Hospital) continues to chronicle the thrust-and-parry between SEIU and the Beth Israel Deaconess Medical Center, where he is CEO, as the SEIU's tactics get some ink in the NY Times.  In this round, the SEIU writes to BIDMC trustees who work in the for-profit world, questioning BIDMC financial reports and pushing Sarbanes-Oxley-type responsibilities for the board.  Paul puts the current tactics in perspective in his post.

-- David Harlow

Stark III partial effective date delay published today

CMS today published a rule delaying the effective date of the Stark III "stand in the shoes" rule, as it applies to AMCs and 501(c)(3) integrated health systems, for one year (i.e., until December 4, 2008). The one-year delay in the effective date of part of the Stark III rule was announced November 9, as academic medical centers and their advisors sought to have CMS delay, amend or clarify portions of the rule that would remove Stark exception protections from many current mission support payment arrangments between faculty practice plans and other components of AMCs.

In one of the few bits of editorializing in this brief issuance, CMS staff responded to the suggestion by some that tax-exempt AMCs need to toe the line in order to maintain their tax-exempt status and avoid intermediate sanctions that may be imposed by the IRS -- thus insinuating that "double oversight" by two Federal agencies is unnecessary -- thus:

We note that, in a prior rulemaking (Phase I), in response to a comment that compensation arrangements between organizations regulated under the IRS rules pose minimal risk of program or patient abuse, we indicated that regulation under IRS rules, though beneficial, is not necessarily sufficient to prevent fraud or abuse (66 FR 917).  Our action delaying the date of applicability of the Phase III provisions in § 411.354(c)(1)(ii), § 411.354(c)(2)(iv), and § 411.354(c)(3) with respect to integrated section 501(c)(3) health care systems should not be read as a reversal of our previous position. As stated above, we are delaying the date of applicability of these provisions in a targeted manner in order to evaluate any unintended impact of the Phase III ‘‘stand in the shoes’’ provisions.

While CMS may end up clarifying some ambiguities in the rule, a wholesale rollback is probably too much to ask for.  There will, nevertheless, likely be some significant back-and-forth between CMS and the regulated community between now and next December.

In the interim, it is worth reiterating that the delay in effective date applies to a very narrow range of situations -- see the relevant portion of the regulation with the delayed-effective-date "stand in the shoes" language highlighted.  The delayed sections of the reg only apply to two narrow categories of provider: (1) AMC, as defined in the Stark reg, and (2) integrated 501(c)(3) health system, where each component of the system is a 501(c)(3) tax-exempt entity.

While the good folks at CMS further "evaluate" this reg, they will also be pondering the Stark 2.5 rule (or is that now Stark IV?) embedded in the 2008 MPFS.  As that reg works its way through the process, it may have even more far-reaching effects.

-- David Harlow

Health Beat hosts Health Wonk Review

The beat goes on -- Maggie Mahar's pulled together a diverse group of posts for this week's Health Wonk Review  at Health Beat.

-- David Harlow