Accountable Care Organizations: Value Metrics and Capital Formation, 1st Edition (Hardback) book cover

Accountable Care Organizations

Value Metrics and Capital Formation, 1st Edition

By Robert James Cimasi

Productivity Press

378 pages | 28 B/W Illus.

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pub: 2013-06-05
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Description

An accountable care organization (ACO) is a healthcare organization characterized by a payment and care delivery model that seeks to tie provider reimbursements to quality metrics and reductions in the total cost of care for an assigned group of patients. Accountable Care Organizations: Value Metrics and Capital Formation explores the historical background and evolution of the ACO model as the basis for the development of the value metrics and capital formation analyses that are foundational to assessing the current efficacy and capacity for change.

The book examines the four pillars of value in the healthcare industry: regulatory, reimbursement, competition, and technology in addressing the value metrics of ACOs, including requirements for capital formation, financial feasibility, and economic returns. It focuses the discussion of non-monetary value on a review of aspects of population health within the context of such objectives as improved quality outcomes and access to care.

  • Explains why ACOs might be the cost-containment and quality improvement answer the industry has been looking for
  • Describes the circumstances and capital structures where ACOs represent a sound investment
  • Includes a foreword by Peter A. Pavarini, Esq.

The book examines the positive externalities of the ACO model, including results for third parties outside the basic construct of the ACO contracts shared savings payments. It also discusses the potential role and opportunities for consultants in assisting their provider clients in the consideration, development, implementation, and operation of an ACO.

Reviews

"Accountable Care Organizations is the first comprehensive text on capital formation and value metrics for this new healthcare business model… I can think of no one more qualified to write it than Bob Cimasi at Health Capital Consultants … it is destined to become a classic work … read, review, refer, and profit by this valuable resource."

—Dr. David Edward Marcinko, FACFAS MBA, Institute of Medical Business Advisors, Inc.

"The author offers various models and policy initiatives, some of which are in partial test, and updates on other initiatives at beginning stages of organization."

—Blue Heron Journal, March 2014

An excerpt from the foreword:

Although many authors, including the one writing this foreword, have previously attempted to explain the ACO concept in practical terms, virtually no one thought to thoroughly analyze the financial underpinnings of this model until Bob Cimasi decided to write this book. What an ambitious work it is! Even though most existing ACOs remain gestational or in their earliest years of operation, Mr. Cimasi and his associates at Health Capital Consultants have managed to assemble an authoritative body of information on this rapidly evolving subject and to present their findings in an easily understood manner.

Together with many of my colleagues in the American health law bar, I have long respected Bob Cimasi’s passion and talent for unraveling complex healthcare equations and objectively assigning value to all or part of a business or relationship. That was difficult enough to do in a traditional fee-for-service environment; it will be much harder as the nation transitions to shared savings, bundled payments and other new methods of value-based purchasing. With the publication of Accountable Care Organizations: Value Metrics and Capital Formation, readers will now have insight on the principles and methods Mr. Cimasi and his team of experts carefully use to appraise transactions within a changing healthcare payment and delivery system. This text is much more than a compilation of educational resources on a currently hot topic. Rather, it could become a seminal work relied upon by all stakeholders in a transformed healthcare marketplace. I cannot think of anyone more qualified than Bob Cimasi to take on such a daunting task.

It is always a privilege to be asked to read a manuscript before it becomes publicly available. This time, however, I found reading Accountable Care Organizations: Value Metrics and Capital Formation to be like looking through a window on a brave new world. I found myself asking: is this finally the way Americans will learn how to assure quality, efficiency and fairness in one of the most important aspects of their daily lives? I hope the readers of this book will be challenged to ask that same question as they seek to understand the ins and outs of ACOs.

—Peter A. Pavarini, Esq Partner, Squire Sanders (US) LLP, July 2012

Table of Contents

Background and the Path to ACOs

Introduction

History of Accountable Care

History of Managed Care

ACO: Another Name for Managed Competition

The Path to Accountable Care Organizations

Setting the Stage for ACOs: An Environment Demanding Change

Chapter Summary

Endnotes

Federal ACOs

Purpose of Accountable Care Organizations

Overview of Value-Based Purchasing

The Patient Protection and Affordable Care Act (ACA) and the Medicare Shared Savings Program

Overview and Intent of the MSSP

Related Affordable Care Act Provisions

Center for Medicare and Medicaid Innovation

Value-Based Purchasing Demonstrations

Medical Home Model

Bundling Demonstration Project

MSSP Proposed Rule

Overview of the Main Provisions of the MSSP Proposed Rule

Industry Response

Significant Changes between the MSSP Proposed and Final Rule

MSSP Final Rule

Operational Terminology

Accountable Care Organization

ACO Participant

ACO Provider/Supplier

ACO Professional

Development

Eligible Entities

Structural Requirements

Governance

Implementation

The ACO Agreement

Accountability: The Assignment of Medicare Beneficiaries

Operation

Quality and Other Reporting Requirements

Monitoring and Termination

Reimbursement

Shared Savings Payments

Subsequent ACO Models under Development

Pioneer ACO Model

Advanced Payment ACO Model Initiative

Accelerated Development Learning Sessions

Proposals for State Payors: Medicaid ACOs

Industry Feedback and Agency Response

American Hospital Association (AHA)

American Medical Group Association (AMGA)

American Medical Association (AMA)

American Academy of Family Physicians (AAFP)

America’s Health Insurance Plans (AHIP)

Physician Group Practice Demonstration Project Participants

Medicare Payment Advisory Commission

Chapter Summary

Endnotes

Commercial ACOs

What Are Commercial ACOs?

Distinguishing between Federal ACOs and Commercial ACOs

Regulatory

Reimbursement

Competition

Technology

Development

Eligible Entities

Structural Requirements

Coordination of Care

Technology

Governance

Implementation

The ACO Agreement

Accountability

Operation

Quality and Other Reporting Requirements

Monitoring

Reimbursement

Fee-for-Service

Pay-for-Performance

Bundled Payment

Partial Capitation

Full Capitation

Global Budget

Tiered Payment Models

Shared Savings and Losses

Chapter Summary

Endnotes

Hypothetical Models for the Development and Operation of ACOs

Structural Features

Federal ACOs

Commercial ACOs

Traditional Structure

Single Healthcare Organization Structure

Transition Challenges

Operational Challenges

Federal ACOs

Commercial ACOs

Competitive Marketplace Challenges

Federal ACOs

Commercial ACOs

Chapter Summary

Endnotes

Impact of ACOs on the Healthcare Industry: Addressing Industry Concern

Regulatory Concerns

Impact on Providers

Antikickback Laws

Capital Finance Considerations for the Development and Operation of ACOs

Background

History of Healthcare Financing

The Financial Crisis: 2007–2009

Financial Feasibility Analysis for ACO Investments

Case Studies: Real Investments of Capital

The Investment Decision

Value Metrics

Cash Flow Analysis

Feasibility Analysis

Payback Period and Discounted Payback Period Methods

AARR Method

Net Present Value

Internal Rate of Return

Further Feasibility Analysis

Chapter Summary

Endnotes

Considerations of Value for the Positive Externalities of ACOs

Defining Value

Value to SOCIETY

Monetary Value

Cost of Healthcare

Productivity Measures

Nonmonetary Value

The Role of the Healthcare Consultant

Overview

Economic and Financial Consulting Services Relevant to ACOs

Episodic Services

Continuity Services

Value Metric Services

Financial Feasibility Services

Valuation (Financial Appraisal) Services: Establishing Fair Market Value and Commercial Reasonableness

Selecting and Working with Consultants

Consultant Skills and the Body of Knowledge

Organizational and Strategic Capabilities

The Consulting Process

Data Gathering & Research

The Consulting Analytical Process

Technical Tools

Reporting of Consulting Engagement Deliverables

Chapter Summary

Endnotes

Conclusion

Epilogue

Bibliography

Regulatory

Reimbursement

Competition

Technology

Glossary

Literature Review

Index

About the Author

Author

Robert James Cimasi, MHA, ASA, FRICS, MCBA, AVA, CM&AA, is chief executive officer of Health Capital Consultants (HCC), a nationally recognized healthcare financial and economic consulting firm headquartered in St. Louis, Missouri, since 1993. Cimasi has more than 25 years of experience in serving clients, with a professional focus on the financial and economic aspects of healthcare service sector entities including valuation consulting and capital formation services; healthcare industry transactions including joint ventures, mergers, acquisitions, and divestitures; litigation support and expert testimony; and certificate-of-need and other regulatory and policy planning consulting.

Cimasi holds a master’s in health administration from the University of Maryland and holds several professional designations: Accredited Senior Appraiser (ASA–American Society of Appraisers), Fellow Royal Intuition of Chartered Surveyors (FRICS–Royal Institute of Chartered Surveyors), Master Certified Business Appraiser (MCBA–Institute of Business Appraisers), Accredited Valuation Analyst (AVA–National Association of Certified Valuators and Analysts), and Certified Merger & Acquisition Advisor (CM&AA–Alliance of Merger & Acquisition Advisors).

He has served as an expert witness in numerous court cases and has provided testimony before federal and state legislative committees. He is a nationally known speaker on healthcare industry topics, the author of several books, including The Adviser’s Guide to Healthcare(AICPA. 2010) and Healthcare Valuation: The Financial Appraisal of Enterprises, Assets, and Services in the Era of Reform (Wiley, 2005), as well as numerous chapters, published articles, research papers and case studies, and is often quoted by healthcare industry press.

In 2006, Cimasi was honored with the prestigious Shannon Pratt Award in Business Valuation conferred by the Institute of Business Appraisers. Cimasi serves on the editorial board of the Business Appraisals Practice of the Institute of Business Appraisers, of which he is a member of the College of Fellows. In 2011, he was named a Fellow of the Royal Institution of Chartered Surveyors (RICS) and serves on the editorial board of the RICS Modus Americasjournal. Cimasi is also the current chair of the American Society of Appraisers Healthcare Special Interest Group (ASA HSIG) subcommittee.

Subject Categories

BISAC Subject Codes/Headings:
BUS041000
BUSINESS & ECONOMICS / Management
BUS070080
BUSINESS & ECONOMICS / Industries / Service Industries
MED002000
MEDICAL / Administration