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Accounting for Accountable Care Organizations

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Accounting for Accountable Care Organizations

Accountable Care Organizations (ACOs) are organizations of health care providers who provide care to a group of patients. Created in an attempt to decrease the cost of service delivery and increase efficiency, value and profit, these organizations are new territory for the CPA professional. This presentation was given to the Michigan Association of Certified Public Accountants at their Healthcare Conference on April 23, 2013.

Accountable Care Organizations (ACOs) are organizations of health care providers who provide care to a group of patients. Created in an attempt to decrease the cost of service delivery and increase efficiency, value and profit, these organizations are new territory for the CPA professional. This presentation was given to the Michigan Association of Certified Public Accountants at their Healthcare Conference on April 23, 2013.

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Accounting for Accountable Care Organizations

  1. 1. ACCOUNTING FOR ACCOUNTABLE CARE ORGANIZATIONS Michael H. James, JD - President & CEO, Genesys PHO, LLC, Flint Michael P. James, JD, MBA, CSSGB - Senior Attorney, Fraser Trebilcock, Detroit & Lansing Moderator: David S. Nathan, CPA - Executive Director, Assurance, Ernst & Young, LLP, Detroit
  2. 2. The Patient Protection & Affordable Care Act (ACA)  Became law in March 2010.  Supreme Court upholds constitutionality of ACA June 2012.  Authorized creation of Medicare Shared Savings Program (MSSP).
  3. 3. Medicare Shared Savings Program (MSSP)  MSSP designed to improve beneficiary outcomes and increase value of care by promoting:  Accountability for patient population;  Coordination of care for services;  Investment in infrastructure; and  Redesign of care processes.
  4. 4. What are ACOs?  ACOs are the vehicles through which providers/suppliers participate in the MSSP.  A legal entity designed to manage and coordinate care for Medicare fee-for-service beneficiaries under the MSSP.
  5. 5. Fundamental Principles of ACOs Improve Care for Beneficiari es Enhance Health in its Population Reduce Growth of Beneficiary Expenditur es What are ACOs?
  6. 6. ACO Providers  Providers:  Hospital;  Critical Access Hospital ("CAH");  Skilled Nursing Facility;  Comprehensive Outpatient Rehabilitation Facility ("CORF");  Home Health Agency;  Hospice participating in Medicare;  Clinic;  Rehabilitation Agency;  Public Health Agency (limited); or  Community Mental Health Center (limited).
  7. 7. ACO Suppliers and Professionals  Suppliers:  Physician or other practitioner, or an entity other than a provider, that furnishes health care services under Medicare.  ACO Professionals:  An ACO provider/supplier who is either:  1) a physician; or  2) a practitioner (a physician assistant, a nurse practitioner, or a clinical nurse specialist).
  8. 8. ACO Participants  ACOs are a collaboration of Participants, Providers, Suppliers and Professionals.  Participants: Individual or group of ACO providers/suppliers that alone or together with one or more other ACO Participants comprises an ACO.
  9. 9. ACO Formation and Participation  There is a distinction between individuals and entities that are permitted to form an ACO and those that are merely allowed to participate in an ACO that has already been created.
  10. 10. There are seven groups of ACO Participants eligible to form an ACO:  ACO professionals in group practice arrangements;  Networks of individual practices of ACO professionals;  Partnerships or joint venture arrangements between hospitals and ACO professionals;  Hospitals employing ACO professionals;  CAHs that bill under Method II;  Rural Health Clinics ("RHC"); and  Federally Qualified Health Centers ("FQHC"). Who Can Form an ACO?
  11. 11. Other Medicare-enrolled Providers and Suppliers are eligible to participate in an ACO: Who Can Participate in an ACO? • Skilled Nursing Facilities • Pharmacies • CORFs • Home Health Agencies • Nursing Homes • Medicare-Enrolled Hospices • Outpatient Clinics (limited) • Rehabilitation Agencies or Public Health Agencies • Long-Term Care Hospitals • Community Mental Health Centers (limited)
  12. 12. ACO Legal Structures  The Structure of an ACO must allow for:  Receipt and distribution of MSSP payments to participating providers and suppliers;  Repayment of shared losses to CMS;  Mechanisms for compliance with quality care and performance standards; and  Fulfillment of the governance, leadership and management and patient-centeredness criteria of the MSSP.
  13. 13. ACO Legal Structures  The ACO must be a legal entity formed under applicable State, Federal or Tribal Law.  Partnership;  Corporation;  Limited Liability Company;  Foundation; or  Other Legal Entity.
  14. 14. ACO Legal Structures  Do you form a new entity or can you use an existing entity for your ACO?
  15. 15. Types of ACOs Integrated Delivery System Model ACO CMS Health System ACO Hospital Physicians Skilled Nursing Facility Etc.
  16. 16. Types of ACOs PHO Model ACO PHO ACO Hospital Independent Practice Assn. CMS
  17. 17. Types of ACOs Independent Practice Association Model ACO IPA ACO CMS PhysicianPhysicianPhysicianPhysician
  18. 18. Types of ACOs Group Practice Model ACO Group Practice ACO CMS SpecialistsHospital
  19. 19. ACO Governance and Governing Body  An ACO must establish a mechanism for shared governance.  An ACO must maintain an identifiable governing body with appropriate authority.  ACO Participants must have meaningful participation in both the composition and control of the ACO's governing body.
  20. 20. ACO Governance and Governing Body  ACOs are designed to be provider-led organizations.  At least 75% of the control of the ACO's governing body must be held by ACO participants.
  21. 21. ACO Governance and Governing Body  The ACO governing body must include at least one Medicare beneficiary representative.  Goal: Ensure that patients' interests are properly represented as the ACO seeks to improve care for beneficiaries and enhance health in the population.  The governing body of a Pioneer ACOs must also include a Consumer Advocate.
  22. 22. ACO Governance and Governing Body  The type of governing body used by an ACO will have will depend on its corporate structure.  Corporation – Board of Directors  Limited Liability Company – Board of Managers  Foundation – Board of Trustees
  23. 23. Legal Risks to ACOs  Fiduciary Duties and Ethical Conflicts  Corporate Practice of Medicine  Stark Laws, Anti-Kickback Statute and Civil Monetary Penalties
  24. 24. ACO Operations: Leadership / Management  An ACO's leadership and management structure is designed to be a dual system:  Administrative; and  Clinical.
  25. 25. Improve Care for Beneficiari es Enhance Health in its Population Reduce Growth of Beneficiary Expenditur es Administrative v. Clinical Operations
  26. 26. ACO Operations: Clinical Systems  Clinical management and oversight of the ACO must be managed by a senior-level medical director who is a physician and one of the ACO's providers/suppliers.  Board-certified physician;  Licensed in a State in which the ACO operates; and  Physically present on a regular basis at a location participating in the ACO.
  27. 27. ACO Operations: Administrative Systems  The appointment and removal of the ACO's operational leader must be under the control of the ACO's governing body.  An ACO's operations must be managed by an executive, officer, manager, general partner, or similar party.  Must have the ability to influence or direct clinical practice to improve efficiency processes and outcomes.
  28. 28. Required Processes & Patient-Centered Criteria  An ACO must promote:  evidence-based medicine;  patient and caregiver engagement;  reporting on quality and cost measures; and  coordinating care.  An ACO must also have a patient-centric focus that is promoted by the governing body and integrated into practice by leadership and management.
  29. 29.  CMS prefers that an ACO have a certain number of assigned Medicare beneficiaries to participate in the MSSP:  ACO – 5,000 beneficiaries; and  Pioneer ACO – 15,000 beneficiaries. ACO Membership
  30. 30.  During the application process, CMS evaluates the number of beneficiaries historically assigned to the applicable ACO participants during each of the three years preceding the proposed effective date of the ACO contract.  A beneficiary is assigned to an ACO based on that beneficiary’s utilization of primary care services by an ACO physician during an MSSP cycle. ACO Membership
  31. 31. ACO Membership 5% of Members = 45% of costs 15% of Members = 35% of costs 80% of Members = 20% of costs
  32. 32. Physician Networks  Need to have enough ACO Professionals so that most health care services can be provided through the network.
  33. 33. Utilization Management  Predictive Modeling for Last 2 Years of Life:  Medical homes  Home Calls  Care Plans  Navigators  ER / Hospital  Hospice  Multiple Chronic Diseases:  Medical home  Care Plans  Team Care  Navigator  ER / Hospital
  34. 34. Utilization Management  Chronic Disease:  Medical Home  Care Plans  Team Care  ER / Hospital  All Others:  Medical  Contact & Education  Care Plans  ER / Hospital
  35. 35. Payment Evolution  Insurance License.  Claims Processing.  Alignment of Fee Structures.  Incentive to Move from Volume to Value.  Quality Monitoring Systems.
  36. 36. Risk Sharing Culture of Restructuring More Patients in System Reduce Capacity of System
  37. 37. Fraser Trebilcock Davis & Dunlap, P.C. 124 W. Allegan Street, Suite 1000 Lansing, Michigan 48933 www.fraserlawfirm.com Phone: (517) 482-5800 Fax: (517) 482-0887 Fraser Trebilcock Davis & Dunlap, P.C. One Woodward Avenue, Suite 1550 Detroit, Michigan 48226 www.fraserlawfirm.com Phone: (313) 237-7300 Fax: (313) 961-1651 Michael P. James, J.D., M.B.A., CSSGB Phone: (517) 377-0823 (313) 965-9038 Email: mjames@fraserlawfirm.com www.linkedin.com/in/MichaelJamesLaw

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