The Financial Logistics of Accountable Care Organizations

and Healthcare Reform

September, 2011

Jason CortChief Operating Officer

PNC Healthcare, a part of PNC Financial Services

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• The Goal of Healthcare Reform

• Accountable Care Organizations

• Healthcare Payments

• Administrative Simplification

• The Role of Financial Services Companies

Agenda

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• Improve the health of the population

• Enhance the patient experience of care

• Reduce the per capita cost of care

The Goal

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• Section 3022 of the Affordable Care Act: Medicare Shared Savings Program

• To be established no later than 1/1/12

• The ACO shall have in place a leadership and management structure that includes clinical and administrative systems… to promote evidence-based medicine and patient engagement, report on quality and cost measures, and coordinate care.

• The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers.

• …in order to achieve the Goal.

Accountable Care Organization (ACO) Overview

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Details to work out

• The ACO shall have a formal legal structure that would allow the organization to receive and distribute payments for shared savings to participating providers of services and suppliers.

– What Legal Structure will you have?

• Hospital centric employing other professionals?

• Joint Ventures?

• Network of professionals

• Other?

– What model will you use?

– How will you quantify and measure risk up front?

– How will you implement and administer the ACO?

– How will you account for and distribute the funds?

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• Fee for Service

• Bundled Payments

• Pay for Performance

• Value-based purchasing

• Shared Savings

How are your organizations going to handle these?

How do you plan for them initially?

How do you amend them as necessary?

Healthcare Payment Structures

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• This is not the first time, and this is not the only industry, where value-based compensation is used.

• Agree to the parameters up front, and make sure they are measurable.

• Plan extensively for the infrastructure

• Align incentives

Managing Payments

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• Cash flow management

– Complex payment processing for all transaction types

– Coordinating electronic payments (EFT) and electronic remittance advices (ERA) for providers

– Facilitating distribution based on ACO payment scenarios

How can Banks help with ACOs?

Administrative Simplification

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• The National Committee on Vital and Health Statistics (NCVHS) is the statutory advisory committee with responsibility for providing recommendations on health information policy and standards to the Secretary of the Department of Health and Human Services (HHS). Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), NCVHS is to advise the Secretary on the adoption of standards and code sets for HIPAA transactions. The Patient Protection and Affordable Care Act (ACA) (Sec. 1104. (g)(3)), enacted on March 23, 2010, calls for NCVHS to assist in the achievement of administrative simplification to “reduce the clerical burden on patients, health care providers, and health plans.” by providing advice and recommendations to the Department of Health and Human Services (HHS) on the development of uniform operating rules for electronic exchange of information not defined by a standard or its implementation specification. Specifically ACA tasks NCVHS to:

Administration Simplification Introduction

* February 17, 2011 Letter from NCVHS to The Honorable Kathleen Sebelius, Secretary, Department of Health and Human Services

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1. Advise the Secretary whether a nonprofit entity meets the requirements for operating rules development;

2. Review the operating rules developed and recommended by such nonprofit entity;

3. Determine whether such operating rules represent a consensus view of the health care stakeholders and are consistent with and do not conflict with other existing standards;

4. Evaluate whether such operating rules are consistent with electronic standards adopted for health information technology; and

5. Submit to the Secretary a recommendation as to whether the Secretary should adopt such operating rules.

Administrative Simplification Introduction (cont.)

* February 17, 2011 Letter from NCVHS to The Honorable Kathleen Sebelius, Secretary, Department of Health and Human Services

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Administrative Simplification Focus

HIPAA Claims-related transactions:• Eligibility Inquiry and Response (270/271)• Certification (278)• Claim Submission (837)• Claim Status Inquiry (276/277)• Payment/Remittance (835)

Current utilization of electronic transactions by type *

% Electronic Transactions

% Other format

Eligibility Verification 40 60

Claims Submission 85 15

Claim Status Inquiries 40 60

Claim Payments 10 90

Claim Remittance 46 54

* Source: US Healthcare Efficiency index http://www.ushealthcareindex.com

Timeline:• The Department of Health

and Human Services is required to adopt and regularly update standards, implementation specifications, and operating rules for the electronic exchange and use of health information for the purposes of financial and administrative transactions.

• These will be created and implemented from 2012 to 2016.

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Draft Rules have been published and are being voted on by CAQH/ CORE*

1.Draft Phase III CORE ERA Infrastructure (835) Rule

2.Draft Phase III CORE EFT Enrollment Data Rule

3.Draft Phase III CORE ERA Enrollment Data Rule

4.Draft Phase III CORE EFT & ERA Reassociation (CCD+/835) Rule

5.Draft Phase III CORE Uniform Use of CARCs and RARCs (835) Rule; includes Draft CORE-required Code Combinations for CORE-defined Business Scenarios

September 2011 Update

*Council for Affordable Quality Healthcare/Committee on Operating Rules for Information Exchange

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• Provider – Payer enrollment for EFT

• Changes to provider systems and processes

• Reassociation

• Financial Service Partner Relationship

– The NACHA Operating Rules are silent on how this information is provided - providers should contact their banks to arrange for the method and timing of delivery.

Administrative Simplification Related Issues

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Questions

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3-23-2011

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