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New CMS BPCI Advanced Bundled Payment Model: Risks, Regulatory Requirements, Implementation Challenges

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TUESDAY, APRIL 24, 2018

Presenting a live 90-minute webinar with interactive Q&A

John M. Harris, MBA, Director, Veralon, Philadelphia

Sheila Madhani, Senior Director, McDermott+Consulting, Washington, D.C.

J. Peter Rich, Partner, McDermott Will & Emery, Los Angeles

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Medicare’s BPCI Advanced Model:

An Overview

Sheila MadhaniMcDermottPlus Consulting

[email protected], 202-204-1459

April 24, 2018

www.mcdermottplus.com

Model Overview

Medicare’s Bundled Payment Care Initiative (BPCI) AdvancedThe bundle encompasses total Medicare fee for services (FFS) spending on all items and services furnished to a BPCI

Advanced Beneficiary during the Clinical Episode, including outlier payments, and will be part of the Clinical Episode

expenditures for purposes of the Target Price and reconciliation calculations, unless specifically excluded.

√ A voluntary model for acute care hospitals (ACHs) and physician group practices (PGPs) being implemented by

the Centers for Medicare & Medicaid Services (CMS) Center for Medicare and Medicaid Innovation (Innovation

Center)

√ A single retrospective bundled payment and one risk track, with a 90-day Clinical Episode duration

√ 29 Inpatient Clinical Episodes and three Outpatient Clinical Episodes

√ Qualifies as an Advanced Alternative Payment Model (APM) under the Quality Payment Program (QPP)

√ Payment is tied to performance on quality measures

√ Preliminary Target Prices provided in advance of the first Performance Period of each Model Year

√ Reconciliation will be a semi-annual process where CMS will compare the aggregate Medicare FFS expenditures

for all items and services included in a Clinical Episode against the Target Price for that Clinical Episode to

determine whether the Participant is eligible to receive a payment from CMS, or is required to pay a Repayment

Amount to CMS


How Did We Get Here?

Highlights from Medicare’s experience with bundled payments

1980s Inpatient Prospective Payment System (IPPS)• Hospital’s reimbursed for a patient’s full inpatient stay based on a patient’s DRG

2007 Physician Hospital Collaboration Demonstration• The evaluation considered quality and costs through the immediate post-discharge period and beyond to look at impacts of

gainsharing activities on longer term outcomes (mortality, readmissions) and utilization of services

2009 Medicare Acute Care Episode Demonstration• 28 cardiac and 9 orthopedic inpatient surgical services and procedures included in the bundled payment demonstration

2011 Innovation Center Established• The CMS Innovation Center has a portfolio testing various payment and service delivery models• The Affordable Care Act appropriated $10 billion to support Innovation Center activities initiated from FY 2011 to FY 2019

2013 BPCI Models (1, 2, 3, 4)• Four broadly defined models of care, which link payments for the multiple services beneficiaries receive during an episode of

care

2015 Oncology Care Model• Aligns financial incentives to enable improved care coordination, appropriateness of care, and access to care for beneficiaries

undergoing chemotherapy

2016 Comprehensive Care for Joint Replacement Model (CJR)• Bundled payment model for hip and knee replacements

2018 BPCI Advanced• Voluntary bundled payment model for 32 Episodes of Care


Model Timeline

APPLICATION PROCESS

January – March 2018

• 1/9/2018: Requests for Application released

• 1/11/2018: Application portal opens

• 3/12/2018: Application portal closes

CMS SCREENS

APPLICANTSMarch – June 2018

AGREEMENT PROCESS

May – August 2018

• May 2018: CMS distributes target prices to applicants

• June 2018: CMS offers participant agreements to applicants

• August 2018: Signed participant agreements due to CMS; clinical episode

selections and program deliverables are also due to CMS

MODEL

IMPLEMENTATION

August 2018 – December 2023

• 10/1/2018: Model goes live

• 3/31/2019: First date for Advanced Alternative Payment Model (APM) Qualified

Participant (QP) determination

• 1/1/2020: Next application period

• 12/31/2023: End of first cycle


BPCI Advanced Participant Categories

Participant

Any entity that enters into a BPCI Advanced Model participation agreement to participate in the model; can be either a Convener or a Non-

Convener.

Convener

Role: Bears and apportions financial risk, facilitates participation by smaller PGPs or ACHs, provides data and analytic feedback, and offers

logistical and operational support

Type of entities: Medicare enrolled provider or an entity that is not enrolled in Medicare

Non-Convener

Role: Bears financial risk only for itself and does not bear financial risk on behalf of multiple

downstream episode initiators (EIs)

Type of entities: PGPs and ACHs

Participating Practitioners

Role: Enter into arrangements with conveners and non-conveners, furnish care, and/or

participate in various activities (e.g., care redesign)

Type of entities: A physician or non-physician practitioner (e.g., nurse practitioner) paid

separately by Medicare for their professional services

CMS has indicated that the following providers cannot participate in BPCI Advanced: Critical Access Hospitals (CAHs), Prospective Payment System (PPS)-exempt Cancer Hospitals, Inpatient Psychiatric Facilities, Hospitals in Maryland, Hospitals in the Rural Community Hospital demonstration, Hospitals in the Pennsylvania Rural Health Model


BPCI Advanced at 100,000 Feet

1. Clinical Episode

Triggered

2. Services Provided

3. Semi-annual

reconciliation


Episode Trigger

BPCI Advanced is made up of 32 clinical episodes; an episode is

triggered through an anchor stay or anchor procedure

Anchor Stay

√ An inpatient stay at an Acute Care Hospital with a qualifying MS-DRG billed to Medicare FFS by

an EI

√ 105 MS-DRGs across 29 Clinical Episodes

Anchor Procedure

√ An outpatient procedure (identified by a Healthcare Common Procedure Coding System (HCPCS)

code)) on an associated Hospital Outpatient (HOPD) facility claim billed to Medicare FFS by an EI

√ 29 HCPCS codes* across 3 Clinical Episodes

* Based on 2018 Hospital Outpatient Prospective Payment System (OPPS) Final Rule


Eligible Clinical Episodes

The 32 Clinical Episodes (29 inpatient

and three outpatient) cover 7 specialty

areas

Spine, Bone and Joint Episodes

KidneyInfectious Diseases

NeurologyCardiac

EpisodesPulmonary Episodes

Gastrointestinal Episodes

Episode Length

• Inpatient: Anchor Stay + 90 days beginning the day of discharge

• Outpatient: Anchor Procedure + 90 days beginning on the day of the outpatient procedure completion

• CMS has also established a 30-day Post-Episode Monitoring Period


Eligible Inpatient Episodes

• Disorders of the liver excluding

malignancy, cirrhosis, alcoholic hepatitis

• Acute myocardial infarction

• Back and neck except spinal fusion

• Cardiac arrhythmia

• Cardiac defibrillator

• Cardiac valve

• Cellulitis

• Cervical spinal fusion

• COPD, bronchitis, asthma

• Combined anterior posterior spinal fusion

• Congestive heart failure

• Coronary artery bypass graft

• Double joint replacement of the lower

extremity

• Fractures of the femur and hip or pelvis

• Gastrointestinal obstruction

• Hip & femur procedures except major joint

• Lower extremity/humerus procedure

except hip, foot, femur

• Major bowel procedure

• Major joint replacement of the lower

extremity

• Major joint replacement of the upper

extremity

• Pacemaker

• Percutaneous coronary intervention

• Renal failure

• Sepsis

• Simple pneumonia and respiratory

infections

• Spinal fusion (non-cervical)

• Stroke

• Urinary tract infection

Eligible Clinical Episodes cont.

Eligible Outpatient Episodes

• Percutaneous Coronary Intervention (PCI)

• Cardiac Defibrillator

• Back & Neck except Spinal Fusion

Selecting Episodes• When signing participation

agreements, participants must select the clinical episodes for which they will be held accountable

• CMS may elect to add or remove episodes on an annual basis beginning in 2020

• Participants joining the Model beginning on October 1, 2018, will not be allowed to drop clinical episodes until 2020, except upon request by CMS


Services Included in the Clinical Episode

Hospital services that comprise the Anchor Stay or the Anchor Procedure

Physicians’ ServicesOther Hospital

Outpatient Services

Inpatient Hospital Readmission

Services

Long-term Care Hospital (LTCH)

Services Hospice Services

Inpatient Rehabilitation Facility (IRF)

Services

Skilled Nursing Facility (SNF)

Services

Home Health Agency (HHA)

Services

Clinical Laboratory Services

Durable Medical Equipment (DME)

Part B Drugs

BPCI Advanced will treat

transfers as one continuous hospitalizationit

orin Period


Financial Methodology

+ BPCI Advanced will use retrospective reconciliation to determine if a

Participant will be required to repay CMS or if they are eligible for a payment

+ CMS will determine the total Medicare fee for services (FFS) spending on all

items and services furnished to a Medicare beneficiary during the clinical

episode, including outlier payments (“Total FFS Amount”)

+ Payment may be made to participants or participants may owe a payment to

CMS after CMS reconciles this Total FFS Amount for a clinical episode

against the “target price” for the clinical episode


Financial Methodology cont.

1. Target Price Calculated

(Preliminary)

2. Reconciliation (Final Target Price used;

occurs semi-annually)

3. Positive or Negative Reconciliation Amount is Adjusted for Quality

Performance

4.Net Payment Reconciliation Amount (NPRA) OR Repayment

Amount

5. Stop Loss/Stop Gain Capped at +/- 20%

6. Post Episode Monitoring Period


Financial Methodology cont.

1. Target Price Calculated (Preliminary)

Target Price = Benchmark X CMS Discount (3%)

• Distributed to applicants in May 2018, prior to the deadline to sign participation agreements

• CMS will calculate a specific benchmark price for an EI using a risk adjustment model• The PGP’s Benchmark Price will be based on the Benchmark Price for the ACH where the

Anchor Stay or Anchor Procedure occurs • All benchmark prices will be discounted by 3%

2. Reconciliation (Final Target Price used; occurs semi-annually)

• Using the Final Target Price, Clinical Episodes will be reconciled based on the Performance Period in which the Clinical Episode is attributed

• Retrospective Reconciliation based on comparing actual Medicare FFS expenditures to the final Target Price

• All Positive and Negative Reconciliation Amounts will be netted across all Clinical Episodes attributed to an EI, resulting in a Positive or Negative Total Reconciliation Amount

3. Adjusted for Quality Performance • The Positive or Negative Total Reconciliation Amount is then adjusted based on quality performance, resulting in the Adjusted Positive or Negative Total Reconciliation Amount

4.Net Payment Reconciliation Amount (NPRA) OR Repayment Amount

• Non-convener: CMS will pay the NPRA to the Participant; or the Participant will pay CMS the Repayment Amount

• Convener: All Adjusted Positive Total Reconciliation Amounts are netted against all the Adjusted Negative Total Reconciliation Amounts for the Participant’s EIs to calculate either the NPRA or a Repayment Amount

5. Stop Loss/Stop Gain Capped at +/- 20% • Reconciliation payments, both to Participants from CMS, and from Participants to CMS, are capped at +/- 20%

6. Post Episode Monitoring Period • All Part A & B services are monitored 30-days following the Clinical Episode end date• Participant must repay CMS the total amount identified as excess spending


Quality Measures

Measures for Years 1 & 2 of the modelCMS may add additional quality measures in future years

Required for all Clinical Episodes

• All-cause Hospital Readmission Measure (NQF #1789)

• Advanced Care Plan (NQF #0326)

Only applies to select Clinical Episodes

• Perioperative Care: Selection of Prophylactic Antibiotic: First or Second Generation Cephalosporin (NQF#0268)

• Hospital-Level Risk-Standardized Complication Rate (RSCR) Following Elective Primary Total Hip Arthroplasty (THA) and/or Total Knee Arthroplasty (TKA) (NQF #1550)

• Hospital 30-Day, All-Cause, Risk-Standardized Mortality Rate (RSMR) Following Coronary Artery Bypass Graft Surgery (NQF#2558)

• Excess Days in Acute Care after Hospitalization for Acute Myocardial Infarction (NQF #2881)

• AHRQ Patient Safety Indicators (PSI 90)


Quality Measures cont.

Methodology to Link Payments to QualityWho contributes to the quality score?

√ Performance measures across Participants, and if applicable, all of the Participants’ downstream providers and

suppliers

How are quality scores calculated?

√ A raw score is calculated for each quality measure at the clinical episode level

√ It is rolled-up to the EI level

√ Score is scaled, benchmarked and combined as a volume weighted average to generate a Composite Quality

Score (CQS) and associated CQS Adjustment Amount for each Clinical Episode attributed to an EI

√ Relative performance will be used to adjust each Positive Total Reconciliation Amount and each Negative Total

Reconciliation Amount

√ For the first two Model Years, the amount by which any Positive Total Reconciliation Amount or Negative Total

Reconciliation Amount may be adjusted by the CQS Adjustment Amount is capped at 10 percent


Quality Payment Program (QPP)

MACRA established the Quality Payment ProgramBeginning in 2019, eligible clinicians will be paid for Medicare Part B services under the new Quality Payment Program

(QPP), and they will elect to either be subject to payment adjustments based upon performance under the Merit-based

Incentive Payment System (MIPS) or to participate in the Advanced Alternative Payment Model track (APM).

MIPS

Eligible clinicians choosing the MIPS pathway will have payments increased, maintained or decreased

based on relative performance in four categories: use of information technology, clinical quality, cost

and clinical improvement activities.

Advanced APM

Eligible clinicians choosing the Advanced APM pathway will automatically receive a bonus payment

once they meet the qualifications for that track.

MIPS Timeline

CY 2017 CY 2018 CY 2019 CY 2020

Year 1Performance Period




Year 1Payment Year

Year 2Payment Year


QPP cont.

Eligible Clinicians Will Choose a Pathway

Quality Payment Program

Track 1Merit-based Incentive

Payment System

(MIPS)

Track 2Advanced Alternative

Payment Models

(APMs)

Details MIPS Advanced APMs

FFS Adjustments

(Adjustment to annual

update)

Yes

(+/- 4% beginning in 2019 Payment Year;

goes up to +/- 9% by 2022)

Not Applicable

Bonuses and Other

Payments

Bonus to Top 25%

Providers in top 25% of all aggregate MIPS scores receive additional positive

adjustment factor (2019 – 2024)

5% Incentive Payment

(2019-2024)

Annual Update

(Beginning in 2026) 0.25% 0.75%

Criteria for

ParticipationMIPS Reporting Requirements in Four Performance Categories Participation Thresholds


BPCI Advanced and the QPP

BPCI Advanced will qualify as an Advanced Alternative Payment Model (APM)

under the Quality Payment Program

+ Meets the Advanced APM Criteria

– Financial Risk: Participants will be financially at risk for up to 20% of the final Target Price

– Certified Electronic Health Record Technology (CEHRT): Participants must be able to attest to

the use of CEHRT, prior to participating in the Model

• For non-hospital participants, at least 50% of eligible clinicians in an entity must use the

CEHRT definition of certified health IT functions to participate in this Model

– Quality: Payment will be linked to quality using a pay-for-performance methodology

+ Timing

– BPCI Advanced will meet the criteria to qualify as an Advanced APM beginning on the

Performance Period’s effective date, October 1, 2018

– Beginning on January 1, 2019, participation in the model will be considered for the purposes of

Qualifying APM Participant (QP) determination and the five percent APM incentive payment

– The model will also be considered a MIPS APM beginning January 1, 2019 and may benefit

those participants who do not qualify as a QP and thus will be subject to the MIPS APM

scoring standard under the QPP

+


BPCI Advanced and QPP Determinations

Participant type Level at which QP determinations will be made

Hospital participating on its own Individual level

Group practice participating on its own

“Assessed as a group”

Mix of group practices and hospitals participating together through a convener

QP determinations will be made for ECs participating through group practices only, and they will be assessed as a group

Multiple group practices (only) participating together through a convener

Multiple physician groups will be assessed as one group (i.e. collectively at the participant level)

Multiple hospitals (only) participating together through a convener

Individual level

Source: Medical Group Management Association (MGMA); Bundled Payments for Care Improvement (BPCI) Advanced and Qualifying Advanced Payment Model Participant (QP) Determinations; https://www.mgma.com/getattachment/be746b78-96e1-4549-bd3d-3ea59fb5d7a1/BPCI-Advanced-and-QP-status.pdf.aspx?lang=en-US&ext=.pdf


Five Key Takeaways

#1: Medicare-certified acute care hospitals (ACHs) and physician group practices (PGPs) may participate in

BPCI Advanced as either a Convener Participant or a Non-Convener Participant

CMS defines a Participant as an entity that enters into a BPCI Advanced Model Participation Agreement with CMS to

participate in the model.

#2: BPCI Advanced will require all Participants to take on downside financial risk from the outset of the

Performance Period of the Model

Participants may owe payments to CMS if costs are higher than the Target Price. Payments from CMS to Participants

and payments to CMS from Participants will be subject to a stop-gain and stop-loss policy, which is 20 percent of the

Target Price.

#3: The BPCI Advanced Model includes 29 inpatient clinical episode categories as well as three outpatient

categories.

Clinical episodes under BPCI Advanced will be triggered by the presence of either a qualifying MS-DRG on an inpatient

claim or a qualifying HCPCS code on a hospital outpatient claim.

#4: The BPCI Advanced Model will qualify as an Advanced APM and a MIPS APM under the Quality Payment

Program (QPP) beginning with the 2019 Performance Period.

Beginning on January 1, 2019, participation in the model will be considered for the purposes of Qualifying APM

Participant (QP) determination and the five percent APM incentive payment.

#5: Final positive or negative payment adjustments will be impacted by performance on quality measures.

BPCI Advanced participants must report on all applicable quality measures set forth by CMS and their performance on

those measures could result in a positive or negative payment adjustment for an episode.


Innovation Center Moving Forward

+ During his confirmation hearings in January 2018, Secretary Azar identified “shift to

value” as one of his four priorities (addressing high drug prices, allowing for

innovation and shifting from paying for sickness to paying for outcomes,

making healthcare more affordable and available; and the opioid epidemic

+ CMS has recently signaled that they are exploring the implementation of small-scale,

voluntary models; they are also exploring the use of waivers to increase flexibility

+ Recent appointment of Adam Boehler as the permanent new director for the

Innovation Center

+ The creation of the Congressional Innovation Caucus (March 2018) may also create

momentum in this area

+ Additional Advanced APMs are expected to be announced later in 2018

Successful Implementation of Bundled Payments for Care Improvement –Advanced

John Harris, Director

[email protected]

Veralon

© 2018 Veralon Partners, Inc. 26

70%of our business

is from returning

clients

30Years of

experience our leadership

averages in the healthcare industry

Offices in Philadelphia,

New York, Chicago,, Atlanta, and LA

5

About Veralon

Strategy & Planning

Mergers & Acquisitions

Valuation/Physician Compensation

Clinical Transformation/ Value-based Payment

>1,100Clients in 48

states


The Analytic Process: Approaching Bundled Payments


Considerations for Potential Bundles

Steps to appropriately evaluate each bundle before deciding to participate:

Compare performance to benchmarks to assess “starting point”1

Identify opportunities for cost-reduction and improvement2

Consider physician alignment dynamics3

Evaluate impact of clinical advancements (e.g. shift to outpatient)4

Review overlap with other value-based models (e.g. ACOs)5


How to Select the Right Bundle(s)

Focus Area Criteria for Bundle Selection

Financial

Is there high enough volume?

Is our episode payment lower than peers?

Can we reduce post-acute utilization?

ClinicalCan we improve results through care redesign?

Is there significant variation in LOS?

Quality

Is there an opportunity to reduce readmissions?

Is there an opportunity to improve quality scores?

For each bundle is there an opportunity to reduce costs and improve quality?


What Does it Take to be Successful in Bundled Payments?


Key Success Strategies among Veralon’sBPCI Clients

• Defined group of participating and engaged physicians

• Quality monitoring and reporting

• Gainsharing

Physician engagement

• Standardization of care though post-acute period

• Dedicated care coordination staff manage patients after discharge

• Increased patient engagement and education

• Utilize new, evidence-based treatment options to improve outcomes and reduce costs

• Frequent, multidisciplinary team meetings to track performance

Care redesign

• External: Develop “preferred partners” for post-acute care

• Internal: Assemble a multidisciplinary team from all relevant departments

Partnerships


Effective Strategies for Care Redesign

Increase post-hospitalization follow-up and medical management for patients

Coordinate care across the inpatient and post-acute spectrum

Enhance discharge planning and select appropriate post-acute care setting

Improve adherence to treatment or drug regimens

Reduce readmissions and complications during the post-discharge period

Manage related chronic diseases

1

2

3

4

5

6

Depending on the bundle, different care redesign strategies may need to be utilized

33© 2018 Veralon Partners, Inc. 33

Veralon Clients have been Successful in Joint Replacement Bundles

$- $5,000 $10,000 $15,000 $20,000 $25,000

Q1-Q2 2017

2016

2015

2014

2013

Major Joint Cost by Setting

Short Term Inpatient Hospital Readmissions

Skilled Nursing Facility (SNF) Home Health

Inpatient Rehabilitation Facility (IRF) Other


Managing First Post-Acute Discharge Patterns can Reduce Costs

First Post Acute Index

Event Setting

Average HCC Score

Episode Count Within

Category

% of Episode Count by First

Post Index Event Setting

Total Allowed

Amount for Episode

Allowed Amount

per Episode

Home Health 1.13 100 30% $2,000,000 $20,000

Outpatient Therapy 0.80 150 50% $2,500,000 $16,666

Skilled Nursing

2.50 30 10% $1,000,000 $33,333

Inpatient Rehabilitation 2.70 4 0% $180,000 $45,000

Community 0.99 19 6% $300,000 $15,789

● Manage post-acute care (“PAC”) patterns by:

o Strengthen relationships with PAC facilities—develop preferred partnerships

o Shift care to lower cost settings

o Enhance care management and care coordination

Q3 2016 – Q2 2017 Data based on ~300 Joint Cases


Challenges of BPCI Advanced (BPCI-A)


Challenge 1: Impact of the Benchmarking Methodology


BPCI Performance Does Not Dictate BPCI-A Potential

Hospital Benchmark

Price

Standardized Baseline Spending

Patient Case Mix

Adjustment

Peer Adjusted

Trend Factor

● Most “successful” BPCI participants have likely already eliminated the easiest cost targets during the baseline period and may have a harder time squeezing out more savings

● Changes to the benchmark pricing methodology

o Incorporates both regional and historicalpricing, rather than the strictly historical prices of BPCI

o Hospitals are assigned to peer groups based “Peer Group Characteristics”

o Each hospital’s historical spending is adjusted for the patient case mix in each episode, and then for the Peer Adjusted Trend (PAT) factor


Peer Group Characteristics

● Academic medical center (“AMC”) or non-AMC

● Urban or rural hospital

● Safety-Net or Non-Safety Net Hospital

Impact of New Benchmark Methodology

1. A hospital in a lower-cost rural setting might have a harder time meeting target prices in BPCI-A than it did in BPCI, since the benchmark will be adjusted downward by the low-cost position of its peers

2. A large, urban, AMC that is low-cost relative to its (AMC) peer group could benefit from the increased benchmark price, and might receive a positive Net Payment Reconciliation Amount (NPRA) without any other changes

Examples

● Census division

● Bed size


Challenge 2: BPCI-A Interaction with ACOs


• Type of ACO Matters

Interaction with ACOs

Cases Included in BP Reconciliation:

MSSP Tracks 1, 1+, 2

• BP patient episode costs will be replaced with the BP Target Cost regardless of actual performance

Cases Excluded from BP Reconciliation:

Next Generation and MSSP Track 3

• Clinical Episodes in BPCI Advanced will be excluded for these Medicare beneficiaries

© 2018 Veralon Partners, Inc.

BPCI-A Interaction with CMMI ACO Models

Model to which

Patient is Attributed

Episode Costs

Attributed to

BPCI-A

Participant

Episode Costs

Attributed to ACO

Cost Savings

Accrue to

MSSP Tracks

1, 1+, 2BPCI-A and ACO Actual Spend Bundle Target Price BPCI-A Participant

Track 3 MSSP

and Next

Generation

ACO

ACO N/A Actual Spend ACO

41

● Setting a patient’s episode to the target price could mean loss in savings for the ACO

o In an extreme case, these foregone savings could mean failingto meet the ACO Minimum Savings Rate threshold

o Beware of BPCI-A PGP participants “scooping” patients and accruing savings

Implications of ACO Interaction

● BPCI-A episodes will not be initiated for beneficiaries in these ACOs

o How much volume is attributed to these ACOs? Worth it?

Next Generation & MSSP Track 3 Participants

MSSP Track 1, 1+ or 2 Participants


Challenge 3: Qualifying for MACRA Advanced APM


● To be considered a qualifying participant (QP), clinicians must meet specified patient volumeor payment thresholds

● Key issues:

o Aggressive thresholds

o Timing of QP Performance period is two years prior to payment year

o Will affect clinicians differently by specialty

o CMS will make QP determinations differently if you are a convener vs. non-convener (e.g. group vs. individual)

MACRA AAPMMany BPCI Advanced participants hope to receive AAPM 5% lump-sum bonus and avoid MIPS

Thresholds make it more difficult than participants may realize to qualify for the 5% bonus


Minimum QP Thresholds1

Payment

Year2

QP

Performance

Period

Percent of

Payments

Percent of

Patients

2019 2017 25% 20%

2020 2018 25% 20%

2021 2019 50% 35%

2022 2020 50% 35%

2023+ 2021+ 75% 50%1 Clinicians must meet minimum payment OR patient

requirements. Plans to count commercial AAPMs may

affect these thresholds.2 Thresholds must be met during QP performance

period, two years prior to the payment year.

44

Challenge 4: Physicians Take Precedence


Precedence within BPCI AdvancedAn Episode Initiator triggers the claim for Anchor Stay or an Anchor Procedure

1. Attending Physician

The PGP that submits a claim that includes the National Provider Identifier (NPI) for the attending physician.

2. Operating Physician

The PGP that submits a claim that includes the NPI of the operating physician.

3. Acute Care HospitalThe ACH where the services that triggered the Clinical Episode were furnished.

Previously under BPCI, Precedence rules were based on contract timing AND provider type


● As PGPs focus on episode costs, they will seek hospitals that help them succeed

o Enhanced discharge planning and care management

o Post-acute network development

Physicians take PrecedenceHospitals may seek alignment with PGPs by helping the PGPs succeed in BPCI Advanced


Scenario 1: Invest

to Attain PGP

Alignment

Scenario 2: No

Investment, no

PGP Alignment

Total Cases 400 100

Revenue per Case

Spend per Episode 18,000$ 18,000$

Portion of Spend Attributed to Inpatient 30% 30%

Total Inpatient Revenue per Case 5,400$ 5,400$

Variable Expenses per Case

Inpatient Variable Expense per Case 1,620$ 1,620$

Care Management Expense per Case 500 -

Total Variable Expenses per Case 2,120$ 1,620$

Net Income per Case 3,280$ 3,780$

Total Cases 400 100

Total Net Income 1,312,000$ 378,000$

Opportunity from Aligning with PGPs

Challenge 5: To go with or without a Convener?


● Is it preferable to outsource care management or build in-house capabilities?

● Does the hospital/PGP have access to tools (analytics, care management, care redesign, and financial reporting)?

● Will the convener provide sufficient support to generate the required impact on savings?

● Is the value from a convener worth sharing savings?

● Will the convener affect determination of QP status for MACRA?

Considerations

EHR system and IT personnel

Care redesign experts

Care management team

Performance-monitoring platform (data analytics tool and personnel)

Without a Convener:

With a Convener:


Depends primarily on volume and experience with risk management under value-based payment structures

49

©2015 McDermott Will & Emery LLP. McDermott operates its practice through separate legal entities in each of the countries where it has offices.

BPCI Advanced Bundled Payment Model:

Legal Issues

J. Peter Rich

McDermott Will & Emery LLP

2049 Century Park East, Suite 3800

Los Angeles, California 90067

[email protected]

(310) 551-9310

April 24, 2018

mailto:[email protected]

Select Legal Issues

▪ State Managed Care Regulatory Considerations

▪ Antitrust Considerations

▪ Medicare Fraud and Abuse Waivers

▪ Medically Necessary Care Requirement

▪ Medicare Payment Policy Waivers

▪ Provider Contract Issues

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Managed Care Regulatory Considerations

BPCI Advanced

– Bundled payments fall into a middle ground between fee-for-service

(FFS) reimbursement and capitated-type risk arrangements, though

conceptually more akin to FFS with a withhold. Need to confirm that

are no applicable state managed care regulatory requirements.

– Convener and/or Providers must assume downside financial risk of up

to 20% of target cost overruns.

– Conveners such as Remedy Partners may agree with providers to

assume the downside risk in return for a percentage (e.g., 50%) of any

upside the providers are able to achieve.

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(Cont.)

▪ If the target prices for all covered Clinical Episodes initiated

by an Episode Initiator are exceeded by over 3% (on an

overall net basis), then the Episode Initiator must pay CMS

the difference, up to 20% of that net excess amount.

▪ This level of downside financial risk may implicate state

managed care/insurance regulations, which should be

reviewed.

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Managed Care Regulatory Considerations -

California (Cont.)

▪ For example, the California Department of Managed Health

Care (the “DMHC”) has in the past taken the position that

California ACOs that assume similar downside risk under

MSSP, Pioneer, or Next Gen contracts with CMS must have

a Restricted Knox-Keene Plan license.

▪ Unclear whether BPCI-A contract would require such

licensure, but there are compelling arguments to the

contrary.

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– California (Cont.)

▪ Under BPCI-A, downside risk is “limited” and based on specific episodes of care (unlike capitated payments, which are prepaid payments made to the providers irrespective of health care services actually provided).

▪ However, the physicians or the convener ultimately may have to pay CMS for up to 20% downside financial shortfall. The DMHC has long prohibited downside risk arrangements (such as otherwise permitted hospital-medical group/IPA risk pool arrangements) that may require physicians to pay for any losses “out-of-pocket” (such losses may instead be offset/amortized against future physician capitation).

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Managed Care Regulatory Considerations –

California (Cont.)

▪ The DMHC’s Financial Solvency Standards Board (FSSB) regulates all capitated medical groups/IPAs indirectly as risk bearing organizations (“RBOs”) to assure that they meet minimum financial solvency (tangible net equity or “TNE”) standards. But what if a BPCI-A contracting medical group has not been previously been capitated and therefore is not regulated by the FSSB? And a convener that agrees to assume the ultimate downside risk is entirely unregulated.

▪ Nevertheless, the DMHC now appears to be moving informally toward the position that BPCI-A and ACOs are outside of the DMHC’s jurisdiction, essentially akin to voluntary “federal preemption.”

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Colorado

– If an ACO is engaged in the business of insurance, then must have

Colorado Division of Insurance (“DOI”) certificate

– The Colorado Division of Insurance bulletin on ACO risk assumption:

“(T)he transfer of risk for consideration, such as capitated contracts

for the provision of health care services, constitutes the transaction of

insurance business and subjects the entity assuming the risk to

relevant insurance regulatory requirements”.

– The compelling arguments summarized in the previous slides should

lead the Colorado DOI to conclude that the limited downside risk under

BPCI-A is distinguishable from capitated and other insurance-type risk.

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Massachusetts

▪ In Massachusetts, annual risk certification required for “significant” downside risk arrangements

– Certification classifies provider as a risk bearing provider organization (“RBPO”)

– Application materials

• Financial statements

• List of all risk contracted carriers and payers (which could include CMS under ACO or BPCI-A)

• Actuarial certification

– RBPO must demonstrate that its risk contracts are not expected to threaten its financial solvency

▪ Risk Certificate Waiver also available if providers can demonstrate that they have not assumed significant downside risk.

▪ This regulatory certification requirement also appears to have been intended to apply to capitation, not bundled payments arrangements with limited downside risk.

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New York

▪ Risk-sharing arrangements must be approved by New York

State Department of Financial Services (“DFS”)

– A health care provider may not enter into a financial risk transfer

agreement with an insurer unless it is approved by DFS.

– A lay entity assuming capitated risk is defined as an “intermediary

entity” and also must obtain approval from DFS.

– Assumption of capitated risk by a health care provider and/or

intermediary entity subjects such provider or entity to financial

requirements (e.g., posting of financial security deposit).

– Appears that BPCI-A alone should not require DFS approval.

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Texas

▪ Risk Contracting by Lay Entities

– Non-provider intermediary entities that share risk with insurers/HMOs must obtain a license as a health care plan, limited health care service plan or a single health care service plan, depending on the services provided.

▪ Texas also licenses entities that operate similar to ACOs, which are deemed Health Care Collaboratives (“HCCs”).

▪ Unclear whether Texas would regulate BPCI-A arrangements, but the above compelling arguments against managed care regulation of BPCI-A arrangements should be accepted.

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NAIC Guidance

▪ The National Association of Insurance Commissioners (the “NAIC”) has issued guidance on payment structures that may be regulated under state insurance laws.

▪ The Health Plan Accountability Working Group of the NAIC has stated that if a provider organization is “accepting risk on a prepaid basis, they are in the business of insurance and need to be concerned about existing insurance laws.”

▪ The NAIC indicated that certain payment mechanisms do notconstitute the business of insurance, including fee-for-service payments and Diagnosis Related Group (DRG) payments, which are analogous to bundled payments.

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Antitrust Considerations

▪ Illegal “price fixing” may occur when independent competing physician or other providers join together to negotiate bundled payment agreements if the physicians are not financially or clinically integrated.

▪ BPCI-A downside risk may be sufficient financial integration or there would be clinical integration if a single integrated medical group is used.

▪ But Medicare continues to pay the physicians at Medicare FFS rates under BPCI-A; therefore, no price-fixing risk (unlike commercial bundled payment arrangements where physicians agree to charge discounted rates).

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Medicare Fraud and Abuse Laws

▪ Stark Law: Prohibits physician referrals for certain federally

funded designated health care services to entities in which

physicians have a “financial interest.”

▪ Anti-Kickback Statute (“AKS”): Prohibits any person to

exchange anything of value to induce referrals of federal

health care program business.

▪ Civil Monetary Penalty Statute (“CMP”): Prohibits hospitals

from paying physicians to reduce medically necessary

services for a patient in federally funded health care

programs without express CMS waivers, or safe harbors.

63

Medicare Fraud and Abuse Laws

▪ Gainsharing arrangements such as bundled payments face

federal regulatory risk, particularly in the absence of

applicable safe harbors and/or waivers.

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New BPCI-A Fraud and Abuse Waivers?

▪ Recent AMA letter to the OIG (2/26/18) advocated two

specific new BPCI-A waivers:

1. Broad Medicare Coordinated Care and Alternative Payment

Models (APM) Safe Harbor

• Covering both development and operation of BPCI-A model

• Provide adequate protection for the entire care delivery process, to include

downstream entities and manufacturers

• Physicians should be able to maintain independent practice and have

access to necessary infrastructure and resources to participate in APMs.

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New BPCI-A Fraud and Abuse Waivers?

2. Cybersecurity Safe Harbor

• Allowing sharing of cybersecurity items and services

• Potentially with 15% contribution similar to the EHR safe harbor

• AMA argued that otherwise small practices are overlooked and priced out

of participation in APMs if they cannot access affordable cybersecurity

tools.

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BPCI-A Fraud and Abuse (Gainsharing)

Waivers?

▪ Additional BPCI-A waivers similar to earlier BPCI-A models’ gainsharing and other waivers are essential, but CMS has not yet released the BPCI-A waivers.

1. Savings Pool Contribution Waiver

• For contributions of internal cost savings to the BPCI Savings Pool

2. Incentive Payments Waiver

• For incentive payments made from the BPCI Savings Pool

3. Group Practice Gainsharing Waiver

• For gainsharing payment made by a Gainsharer group to a Gainsharer group practice practitioner

4. Patient Engagement Incentive Waiver

• For items or services provided by an Awardee, Episode Initiator, or Gainsharer to a Beneficiary for free or below fair market value

67

BPCI-A Fraud and Abuse (Gainsharing)

Waivers? (Cont.)

▪ In addition, the existing Stark risk-sharing exception, the AKS

managed care safe harbor, and the AKS health plan discount

safe harbor should be applicable to BPCI-A arrangements.

▪ However, in the absence of express waivers or safe harbors,

participating hospitals must be careful not to provide financial

inducements for referrals (including non-BPCI Medicare

referrals). For example, hospitals at risk if subsidize

physicians’ obligation to pay CMS for downside financial

performance (nonprofit tax-exempt hospitals also may violate

exemption requirements).

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BPCI-A Medicare Beneficiary Access and

“Medically Necessary Care” Service Requirement

▪ Participants may not restrict Medicare beneficiary access to

medically necessary care.

▪ CMS concerned that BPCI participants have a financial incentive

to “cherry pick” most profitable patients.

▪ CMS will routinely monitor and analyze data on service utilization.

▪ If CMS monitoring reveals inpatient access to medically necessary

care is unduly restricted, CMS may terminate an Awardee’s BPCI-A

Agreement. CMS may also require the Participant to terminate

arrangements with Episode Initiators, Participating Practitioners, and

others, as CMS deems appropriate.

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BPCI-A Medicare Payment Policy Waivers

CMS has waived following three payment provisions for BPCI-A:

1. SNFs and applicable awardee – Three-day inpatient hospital stay no longer required prior to the provision of Medicare covered post-hospital extended care services, if certain requirements are met:

a. Beneficiary is discharged to a “qualified SNF” (i.e., SNF has three or more stars in Nursing Home Five-Star Quality Rating System for at least 7 of 12 preceding months and on list of Qualified SNFs posted on CMS website);

b. Beneficiary is a BPCI-A Beneficiary at the time of discharge;

c. Beneficiary’s diagnosis at the time of discharge corresponds to a Clinical Episode for which Participant is accountable under BPCI-A; and

d. All other coverage requirements met.

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(Cont.)

2. Home health – Services and supplies furnished incident to the services of a physician or other practitioner need not be under direct supervision of physician or practitioner, if services furnished:

a. To a BPCI-A beneficiary who does not qualify for Medicare coverage of home health services;

b. By licensed clinical staff under the general supervision of a physician or other practitioner;

c. By licensed clinical staff and billed by physician or other practitioner;

d. Not more than once in a 30-day Episode of Care, not more than twice in a 60-day Episode of Care, or not more than three times in a 90-day Episode of Care; and

e. In accordance with other Medicare coverage and payment criteria.

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(Cont.)

3. Telehealth – Geographic area requirement no longer

required for payment of telehealth services.

– Otherwise, geographic area requirement under 1834(m) of the Social

Security Act requires that (i) originating site be a physician office,

hospital, critical access hospital, etc. and (ii) the distant site be

different from the originating site and not a Federally Qualified Health

Center or Rural Health Clinic.

– Geographic area requirement waived as long as the services furnished

in accordance with all other Medicare coverage and payment criteria.

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BPCI-A and MACRA

▪ CMS allows the BPCI-A model to be considered an

advanced alternative payment model (“APM”) under MACRA,

allowing participating physicians to qualify for a 5% bonus

payment.

▪ One of the key factors that intended to make the BPCI-A

model attractive to physicians.

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BPCI-A and MACRA (Cont.)

▪ Qualifying APM Participant (“QP”) determinations will be

based on:

– For Non-Convener Participants that are hospitals, appears that

eligible clinicians will be assessed individually (but unclear if intended

to supersede MACRA roll-ups of QPs determination by group TIN, as

under advanced APMs generally; FAQs thus far have not clarified this

ambiguity).

– For Non-Convener Participants that are Physician Group

Practices (“PGPs”), eligible clinicians will be assessed as a group.

Unclear if this extends to the whole group, including physicians who do

not perform the bundled services.

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BPCI-A and MACRA (Cont.)

▪ Qualifying APM participant (“QP”) determinations will also be

based on:

– For Convener Participants that will have hospitals and PGPs as

episode initiators, eligible clinicians will be assessed only through

PGPs and assessed as a group.

– Unclear if hospital-employed doctors are not deemed “PGPs” and thus

not considered.

▪ A single convener may send in multiple applications and

manage participants separately.

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CMS-Awardee Contract

▪ General provisions in CMS-Awardee BPCI contracts:

– Providers must achieve metrics specified under the BPCI-A

Agreement with CMS.

– CMS right to audit all participants.

– Awardee must submit a written annual certification that it maintains

and satisfies a compliance plan that meets the requirements under the

CMS-Awardee contract.

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CMS-Awardee Contract (Cont.)

▪ Gainsharing arrangement provisions in CMS-Awardee BPCI contracts likely to be included in BPCI-A contracts:

– Providers must be in compliance with all terms of the gainsharing agreement and meet quality measures in order to receive incentive payments.

– Incentive payments may be made only to Awardees, Episode-Integrated Providers (“EIPs”), BPCI Entities, and Gainsharers.

– Awardees, EIPs, BPCI Entities, and Gainsharers may not condition the receipt of incentive payments on volume or value of referrals.

– Gainsharing methodologies for calculating incentive payments cannot directly account for volume or value of referrals.

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Convener-Episode Initiator Contract

▪ General Provisions:

– Provider may not share received funds with any provider who is not a

part of the Awardee’s BPCI program.

– Collaboration among Convener, Episode Initiator, and Provider

regarding cost-effective and medically-appropriate treatment options.

(e.g., a study by the Society of Actuaries found that substantial

savings could have achieved by discharging patients to their homes,

as opposed to inpatient rehab or SNF. 3)

– BPCI-A risk-sharing is limited to only hospitals and physician group

practices (“PGPs”), unlike the existing BPCI program that includes

post-acute care participants.

783. Juliet M. Spector et al., Milliman, Provider Payment Arrangements, Provider Risk, and Their Relationship with the Cost of Health

Care (2015). See also Bill Copeland & Christine D. Chang, Deloitte, Navigating Bundled Payments: Strategies to Reduce Costs

and Improve Health Care.

Convener-Episode Initiator Contract (Cont.)

▪ Gainsharing Methodology:

– Incentive payments to be derived solely from the BPCI Savings Pool.

– Convener shall have the right to recoup any portion of a distribution

made to provider in error, either by immediate repayment or right to

offset of future distributions.

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▪ Gainsharing Methodology (cont.):

– Incentive payments cannot exceed 50% of a physician’s Medicare Part

B billings for BPCI patients.

• This limit does not apply to physician groups enrolled in the BPCI program

as EIPs.

– Total Reconciliation Amounts are adjusted (for the first time under

BPCI) based on quality performance on applicable quality measures;

similarly, incentive payments to Providers also partially based on

quality metrics.

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▪ Sample Gainsharing Methodology in Convener-Episode

Initiator Contracts (cont.):

– Provider Incentive Pool (established for each BPCI program)

• Funding: Each pool funded by one-third of Net Savings realized by the

BPCI program for each quarterly performance period.

– Sum of gains and losses calculated from the difference between claims paid by

CMS and the target price for that bundle, less program administration costs (~

2.5%), equals Net Savings.

• Allocation:

– 85% of the pool allocated to physicians who achieved program goals; and

– 15% of the pool reserved for physicians who achieve program goals in the

management and coordination of patient care during an SNF covered stay.

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– Each episode of care will be assigned a net gain or loss comparing the

case’s individual claims to the target price.

• For surgical episodes: 70% of the gain or loss is assigned to the operating

physician and 30% of the gain or loss is assigned to the designated post

acute physician

• For medical cases: 60% of the gain or loss is assigned to the hospitalist or

designated attending physician and 40% to the designated post acute

physician.

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– Quarterly, each provider’s individual gains and losses will be

aggregated and netted to determine the initial incentive amount for

each provider.

– Calculation of adjusted incentive amount for each provider:

Providers’ net losses will be absorbed pro-rata by providers who

experienced net gains based on the providers’ net gains relative to the

sum of all providers with a net gain.

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Questions and Answers

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