Chris Lloyd, CEO MHMD Memorial Hermann Physician Network; CEO,
Memorial Hermann Accountable Care Organization
Bernie Duco, Of Counsel, Norton Rose Fulbright
October 28, 2014

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Speaker
Bernie Duco
Of Counsel, Norton Rose Fulbright
Bernie Duco joined Norton Rose Fulbright's healthcare team in 2014 after serving as Chief Legal Officer with the Memorial Hermann Health System.
Bernie led the development of Memorial Hermann's Medicare certified
Accountable Care Organization and was the lead legal advisor for MHMD –
Memorial Hermann's clinically integrated physician group. Prior to joining
Memorial Hermann, Bernie served as Senior Vice President and General Counsel for Mercy Health System in St. Louis. Having served for over 20 years as general counsel for large non-profit health systems, Bernie has broad corporate governance, transaction, and litigation management experience. Bernie received his JD from the University of Houston Law Center and his BA from Rice
University. He is licensed to practice in Texas and Missouri.

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Speaker
Chris Lloyd
CEO MHMD Memorial Hermann Physician Network;
CEO, Memorial Hermann Accountable Care Organization
Christopher Lloyd is the Chief Executive Officer of MHMD, the Physician Network for the
Memorial Hermann Health System in Houston, Texas. MHMD includes the largest clinically integrated physician organization in Texas with more than 2,000 participating physicians. He is also Chief Executive Officer of the Memorial Hermann Accountable Care Organization
(MHACO). The MHACO is one of the largest in the country and drives improved outcomes and cost measures across the Memorial Hermann care delivery enterprise. It currently functions across the entire payor spectrum, including the Medicare Shared Savings Program (MSSP), commercial and Medicare Advantage populations.
Chris has over 25 years of executive experience in acute healthcare settings, including community acute care, academic hospital and physician group management. Prior to assuming his current role in 2009, Chris was the Chief Operations Officer at Memorial Hermann Hospital in the Texas Medical Center. Within the Memorial Hermann System, he has also served as the
Chief of Clinical Service Lines, overseeing the major clinical functions across the system. In this role, he spearheaded the strategic planning and implementation of the Mischer Neuroscience
Institute in Houston, Texas.
Chris also worked for Catholic Healthcare West (CHW), now Dignity Health, serving at St.
Joseph’s Hospital in both operations and campus development, and led the construction and clinical planning for Barrow Neurological Institute. Prior to CHW, he worked for 11 years at
Advocate Healthcare in Chicago, Illinois, running hospital operations and a large multi-specialty physician group.
He also has an entrepreneurial spirit, having participated in the initial forming stages of
PedMeds.com and as an initial investor and board member. He also functioned as the President and COO before its move to the NASDAQ as a publicly traded company.

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A Clinically Integrated Network (CIN) is a collaboration among independent/private practice and employed physicians and a hospital or health system, designed to operate a clinical integration program, which is an active and ongoing program of clinical initiatives to improve the quality and delivery of health care services, leading to greater efficiency in care delivery and cost savings

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A properly developed and implemented clinical integration program contains initiatives that provide i.
measurable results, such as evaluation and concrete improvement and clinical performance ii.
reduction of unnecessary service utilization, and iii.
management and support of high-cost and high-risk patients

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 $4.0 billion non-profit healthcare system in
Texas
 9 Acute Hospitals, 3
Heart & Vascular
Institutes
 Partnership with the
University of Texas
Health Science Center of
Houston
 98 Outpatient Sites:
Ambulatory Surgery,
Imaging, Sports
Medicine, Lab
 The nations busiest
Trauma program
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System Quality
Finance
Corporate
Members
Memorial
Hermann Health
System
Physician Council
Children’s
Governance
Audit
Memorial
Hermann
Foundation
HePIC
MH Accountable
Care
Organization
MH Community
Benefit Corp.
MH Medical
Group
MH Information
Exchange
MHMD
MH Health
Solutions, Inc.
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•
MHMD
– 4000 practicing physicians
• 1950 CI physicians in MHACO (single signature representation)
•
300 Advanced Primary Care Practices (PCMH)
•
250 additional PCPs
• Evolving High Performance Specialty Physicians (500)
• 200 are employed (MHMG)
•
University of Texas Physicians
–
800 physicians
–
CI and ACO affiliates
–
Some UT faculty participate in advanced and high performance practices
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MHMD agrees to:
•
Maintain primary loyalty to physicians
•
Negotiate well to align incentives
• Include physicians in work and decision making
•
Provide clear and timely information o
Membership Criteria, Quality Measure Scoring o
Accountability / Improvement Process o
Contract, Financial Performance
•
Provide physicians with information, services, and education to ensure high quality and ease practice burdens
•
Seek feedback from its physicians
•
Maintain confidentiality
•
Communicate, communicate, communicate
• Make meetings worthwhile and engaging
•
Create leadership training programs
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Physicians agree to:
• Practice evidence-based medicine
•
Uphold regulatory, quality, and safety goals
• Report quality data
•
Meet CI criteria
• Come to meetings and performance feedback sessions
• Pay attention to information from MHMD
•
Accept decisions by physicians in MHMD committee settings
• Be flexible, share ideas
•
Collaborate with colleagues and hospitals
• Behave as professionals
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MHMD Clinical Programs Committees
Physician Governance of Quality and Safety
MHMD Board of Directors
H&V
Cardiology
DVT/PE JOC
Neuro Woman/Child
Clinical Programs Committee
Surgery Medicine Oncology
Surgical Home JOC
Contract
Primary
Care
Neurology Neonatal
Pediatric Head CT JOC
Anesthesia
Critical
Care
Oncology Imaging Adult PCP
CV
Surgery
Neurosurgery OB/Gyn
End of Life Care JOC
Bariatrics Emergency Pathology Peds
Orthopedics Ad hoc
Order Set
Editorial Board
Informatics
Acute Surgery
ENT
Allergy
Hospital
Medicine
Post
Acute
Clinical Ethics &
Supportive Care
Peer Review
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Clinical Programs Committees: Connecting to the System Board & the Hospital Medical
Staffs/MECs
MH Hospital Board
System Quality Committee
HOSPITAL
MECs
Katy MEC MC MEC
MHMD Board of
Directors
Clinical Programs
Committee
H&V Neuro
NE MEC NW MEC
Woman/
Child
Medicine
Surgery
Oncology
Path/Rad Primary Care
Nursing
Councils
Operating
Councils
Executive
Liaisons
Service Lines
SE MEC
SL MEC
TWL MEC
SW MEC
TMC MEC
MH Medical Staffs (MHMD Members)
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CPC delegated authority from the System Quality Committee
“Up and Over”
BOARD SYSTEM
QUALITY COMMITTEE
Hospital MECs (11)
MHMD Board of Directors
Clinical Programs Committee
Critical
Care
Surgery Medicine
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North Region
•
•
Hospitals - 1 (TWL)
• MHDL PSC - 3
ASC - 4
•
FSER - 1
91 PCPs
•
•
OPID - 3
SMR - 6
• 47 APCP (36 MHMD, 11 MHMG/Phytex, 0 UT)
•
0 APP
•
44 CI PCPs (inc UT)
229 Specialists
•
9 MHMG/Phytex
•
220 CI Specialists (inc UT)
West Region
•
Hospitals - 3 (KT, KT Rehab, MC)
• ASC - 4
•
MHDL PSC - 6
163 PCPs
• OPID - 8
•
SMR - 5
• 64 APCP (48 MHMD, 15 MHMG/Phytex, 1 UT)
•
2 APP (2 MHMD, 0 MHMG/Phytex)
• 97 CI PCPs (inc UT)
283 Specialists
•
15 MHMG/Phytex
• 268 CI Specialists (inc UT)
Southwest Region
•
• Hospitals - 2 (SL & SW)
•
ASC - 4
MHDL PSC - 6
174 PCPs
•
OPID - 5
•
SMR – 8 (add’l 1 pending)
•
73 APCP (34 MHMD, 33 MHMG/Phytex, 6 UT)
• 4 APP (0 MHMD, 4 MHMG/Phytex)
•
97 CI PCPs (inc UT)
277 Specialists
• 38 MHMG/Phytex
•
239 CI Specialists (inc UT)
Counts as of 7/22/2014
Physician counts do not include physician extenders *Includes UT Pediatricians, some specialty Pediatricians, and some IM and FP’s with a secondary subspecialty
Northeast Region
• Hospitals - 1 (NE)
•
ASC - 2
•
CCC - 1
33 PCPs
•
MHDL PSC - 1
•
OPID - 3
• SMR - 2
•
20 APCP (15 MHMD, 4 MHMG/Phytex, 1 UT)
•
0 APP
• 13 CI PCPs (inc UT)
73 Specialists
•
4 MHMG/Phytex
• 69 CI Specialists (inc UT)
Central Region
•
Hospitals - 4 (CMHH, TMC, TIRR, NW)
• ASC - 3
•
MHDL PSC - 6
204 PCPs
•
OPID - 7
•
SMR - 4
•
51 APCP (11 MHMD, 7 MHMG/Phytex, 33 UT)
• 9 APP (5 MHMD, 4 MHMG/Phytex)
•
144 CI PCPs (inc UT)
757 Specialists
• 21 MHMG/Phytex
•
736 CI Specialists (inc UT)
Southeast Region
•
Hospitals - 1 (SE)
• ASC – 2
•
MHDL PSC – 3
• OPID - 6
•
SMR – 8
97 PCPs
• 38 APCP (15 MHMD, 16 MHMG/Phytex, 7 UT)
•
0 APP
• 59 CI PCPs (inc UT)
141 Specialists
•
7 MHMG/Phytex
• 134 CI Specialists (inc UT)
1 Additional SMR in Nederland
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3 Additional MDs in Bay City: 1 MHMG PCP, 1 MHMG
Specialist, 1 CI Specialist.

Data / Metrics / Care Management
32
%
3.4
%
11
%
17
%
11
%
BASELINE
7.1
%
4.0
% 0%
12
%
.9%
12
%
63
%
43
%
5.6
%
2.6
%
19
52
%

System Adult ICU CLABSI
Do No Harm
Central Line Associated Blood Stream Infections
12
February CLABSI rates not available due to ISD technical difficulties
10
UCL = 9.42
8
6 UCL = 5.79
Mean = 5.53
UCL = 5.13
UCL = 3.86
4
Mean = 3.04
UCL = 2.97
UCL = 2.55
Mean = 2.52
Mean = 2.12
2
LCL = 1.64
Mean = 1.46
Mean = 1.17
LCL = 0.38
LCL = 0.29
0
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
Q tr 2
Q tr 3
Q tr 4
Q tr 1
2006
Generated: 4/2/2012 7:45:37 AM
Source file date: 3/23/2012
2007 2008
Reporting Months
2009 2010 2011 2012 produced by S ystem Quality and P atient S af
20

Zero Central Line Blood Stream
Infections: Evidence Based Protocols
To: Memorial Hermann Sugar Land
Hospital
Infections for 36 Months
February 1, 2008 to January 31,
2011
Zero CLABSIs x 36 Months
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Commercial MHACO Medicare
 Shared Savings and Aligned Incentives
 More flexibility in ACO “related” quality, safety and efficiency program incentives
 MHMD contracting capability
POPULATION MANAGEMENT
Quality Assurance And Improvement Program Processes
Promoting Evidence Based Medicine
Promoting Beneficiary Engagement
Internally Reporting On Quality And Cost Metrics
Promoting Care Coordination
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Admits/1,000
LOS
Impactable Admissions
Readmission Rate %
ER Visits/ 1,000
Avoidable ER Visits/1,000
Generic Prescribing %
MHMD
Houston Market
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Invest in the model, “prime the pump”
Drive higher quality and lower cost through appropriate structures
Physician/Hospital partnership
Physician board involvement, education and communication
Legal complexities throughout development

• Organization Form
• Governance
• Financial Arrangements with Physician Members
• CIN Participation
• Performance and Shared Savings Programs
• Risk Arrangements
• Data Usage
• CIN Start-Up and Development Support
• Payor Contracting
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I.
MSSP Introduction
II.
MSSP ACO Waivers
III.
FTC/DOJ Final Policy Statement

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• Medicare Shared Savings Program (“MSSP”) Purposes
– Promote accountability for the quality, cost, and overall care for a Medicare patient population
– Improve the management and coordination of care for Medicare fee-forservice beneficiaries
– Encourage investment in infrastructure and redesigned care processes for high quality and efficient service delivery
• Under the MSSP reimbursement model, CMS will share a percentage of shareable savings with accountable care organizations (“ACOs”) that:
– Generate shareable savings; and
– Meet quality performance standards
• Who Can Participate?
– ACO must have a minimum of 5,000 attributed beneficiaries
– A plurality of primary care services received by a beneficiary must be provided by
ACO participants for the beneficiary to be attributed to the ACO
– Hospitals are permitted to participate if partnered with physicians

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• ACO must be a recognized legal entity under state law and have a taxpayer identification number (TIN)
• A separate legal entity required for ACOs formed by multiple ACO Participants
• At least 75% control of the ACO’s governing body must be held by “ACO Participants”
• Governing body must include at least one Medicare beneficiary
• “ACO Participants” must have “meaningful participation” in the composition & control of the ACO’s governing body

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• ACOs elect to participate in the MSSP under one of two tracks
• Track 1 = sharing rate up to 50%, with no sharing in potential losses
• Track 2 = sharing rate up to 60% and higher sharing cap, but
ACO assumes risk for sharing in potential losses

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• ACO Waivers and Laws Waived
• Strategic Opportunities
• Specific ACO Waiver Requirements
• Related Matters
• Examples
– General Examples
– Specific Examples
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• Pre-Participation Waiver
– Waives: Stark, Federal Anti-kickback Statute (AKS), Gainsharing CMP with respect to start-up arrangements that pre-date an ACO's participation agreement with CMS
• Participation Waiver
– Waives: Stark, AKS, Gainsharing CMP with respect to any arrangement of an ACO, one or more of its ACO participants or its ACO providers/suppliers, or a combination thereof
• Shared Savings Distribution Waiver
– Waives: Stark, AKS, Gainsharing CMP with respect to distributions or use of shared savings earned by an ACO
• Physician Self-Referral Law Waiver
– Waives: AKS and Gainsharing CMP with respect to any financial relationship between or among the ACO, its ACO participants, and its ACO providers/suppliers that implicates the
Physician Self-Referral Law
• Waiver for Patient Incentives
– Waives: Beneficiary Inducements CMP and AKS with respect to items or services provided by an ACO, its ACO participants, or its ACO providers/suppliers to Medicare feefor-service beneficiaries for free or below fair-market-value
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• Opportunities for initiatives and programs that are reasonably related to the purposes of the MSSP
• Purposes of the MSSP :
1.
Promoting accountability for the quality, cost, and overall care for a Medicare patient population as described in the
MSSP
2.
Managing and coordinating care for Medicare fee-forservice beneficiaries through an ACO
3.
Encouraging investment in infrastructure and redesigned care processes for high quality and efficient service delivery for patients, including Medicare fee-for-service beneficiaries
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• The arrangement is undertaken by a party or parties acting with the good faith intent to develop an ACO
• The parties developing the ACO must be taking diligent steps to develop an
ACO that would be eligible for a participation agreement
• The ACO's governing body has made a bona fide determination that the arrangement is reasonably related to the purposes of the MSSP
• The arrangement, its authorization by the governing body, and the diligent steps to develop the ACO are documented. The documentation must identify at least the following:
– A description of the arrangement, including all parties to the arrangement and the financial or economic terms of the arrangement
– The date and manner of the governing body's authorization of the arrangement, including the Board’s “reasonably related” determination
– A description of the diligent steps taken to develop an ACO
• The description of the arrangement is publicly disclosed (such disclosure shall not include the financial or economic terms)
• If an ACO does not submit an application for a participation agreement for the target year, the ACO must submit a statement describing the reasons it was unable to submit an application
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• The ACO has entered into a participation agreement and remains in good standing
• The ACO meets the requirements of the regulations relating to governance, leadership, and management
• The ACO's governing body has made and duly authorized a bona fide determination that the arrangement is reasonably related to the purposes of the
MSSP
• Both the arrangement and its authorization by the ACO’ governing body are documented. The documentation must identify at least the following:
– A description of the arrangement, including all parties to the arrangement, the purposes of the arrangement, the items, services, facilities and/or goods covered by the arrangement and the financial or economic terms of the arrangement
– The date and manner of the governing body's authorization of the arrangement, including the ACO governing body’s determination that the arrangement is reasonably related to the purposes of the MSSP
• The description of the arrangement is publicly disclosed (disclosure shall not include the financial or economic terms).
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• The ACO has entered into a participation agreement and remains in good standing under its participation agreement with
CMS
• The shared savings are earned by the ACO pursuant to the
MSSP
• The shared savings are earned by the ACO during the term of its participation agreement, even if the actual distribution or use of the shared savings occurs after the expiration of that agreement
• The shared savings are:
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– Distributed to or among the ACO's ACO participants, its ACO providers/suppliers, or individuals and entities that were its ACO participants or its ACO providers/suppliers during the year in which the shared savings were earned by the ACO; or
– Used for activities that are reasonably related to the purposes of the MSSP
• With respect to the waiver Gainsharing CMP, payments of shared savings distributions made directly or indirectly from a hospital to a physician are not made knowingly to induce the physician to reduce or limit medically necessary items or services to patients under the direct care of the physician.

• The ACO has entered into a participation agreement and remains in good standing under its participation agreement with
CMS
• The financial relationship is reasonably related to the purposes of the MSSP
• The financial relationship fully complies with a Stark Law exception
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• The ACO has entered into a participation agreement with CMS and remains in good standing.
• There is a reasonable connection between the items or services and the medical care of the beneficiary
• The items or services are in-kind and:
– Are preventive care items or services; or
– Advance one or more of the following clinical goals:
– Adherence to a treatment regime.
– Adherence to a drug regime.
– Adherence to a follow-up care plan.
– Management of a chronic disease or condition
• Examples of permitted incentives include:
– Blood pressure cuffs for hypertensive patients
– Smoking cessation treatment
– Free home visits to coordinate in-home care during a post-surgical patient’s recovery period
• Excludes financial incentives. For example:
– waiving copayments or deductibles
– Sporting or entertainment event tickets
– Jewelry, household items, beauty products, gift certificates for non-health care related retail items
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• Prohibition on providing gifts or other remuneration to Medicare beneficiaries as inducements for joining/remaining in the ACO or seeing providers in the ACO

– No separate waiver for commercial arrangements.
However, CMS indicated in comments to regulations that it believes avenues exist to provide flexibility for ACOs participating in commercial plans
– Nothing precludes arrangements downstream of commercial plans (e.g., arrangements between hospitals and physician groups) from qualifying for the ACO participation waiver
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• CMS indicated that the ACO pre-participation waiver and participation waiver do not turn on source of funds for arrangement
• Examples provided:
– arrangements with specialists or nursing facility staff members to engage in care coordination for ACO beneficiaries or implement evidence based protocols could be reasonable related to the purposes of the MSSP even if the arrangement were to reflect a likelihood that the patient might be referred to or within the ACO
– a per-referral payment (e.g., $500 for every referral generated by the specialist or paying $100 for every patient transported to an ACO hospital provider) would not be reasonable related to the purposes of the MSSP
– ACO Regulations generally prohibit ACOs, ACO participants and ACO provider/suppliers from requiring that beneficiaries be referred only to ACO participants or ACO providers/suppliers within the ACO or to any other provider or supplier
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• Per patient fee paid to doctors to manage patients through the health care system
• A portion of savings paid to physicians for decreasing hospital’s costs and/or increasing hospital’s efficiencies
• Performance-based incentive payments, potentially rewarding, for example:
– Meeting requirements for reporting on quality and cost measures
– Positive performance on MSSP quality metrics
– Physician performance on other quality, safety and efficiency performance metrics
– Adherence to the ACO’s policies and protocols
– Adherence to care protocols and implementation of evidence-based medicine
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• Program to incentivize use of more cost-effective providers
• Incentive programs for implementation of quality and efficiency programs at managed surgery centers
• Incentives to physicians for implementation of care processes to reduce cost, create efficiencies and improve quality
• Incentives to implement population health management programs
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“…the Agencies will treat joint negotiations with private payors as reasonably necessary for an ACO’s primary purpose of improving health care delivery, and will afford rule of reason treatment to an ACO that meets CMS’s eligibility requirement for, and participates in the [MSSP] and uses the same governance and leadership structure and clinical and administrative processes it uses in the [MSSP] to serve patients in the commercial markets…”
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Medicare Shared Savings Program
– Regulations: 42 C.F.R. Part 425
– CMS Commentary: 76 Fed. Reg. 67,802 (Final Rule, Nov. 2, 2011 )
CMS/OIG Waiver
– CMS/OIG Commentary: 76 Fed. Reg. 67,992 (Uncodified Interim Final
Rule With Comment Period, Nov. 2, 2011 )
Federal Trade Commission (FTC)/Department of Justice (DOJ)
Final Policy Statement
– Statement of Antitrust Enforcement Policy Regarding Accountable Care
Organizations Participating in the Medicare Shared Savings Program ,
76 Fed. Reg. 67,026 (Final Policy Statement, Oct. 28, 2011)
IRS Notice and Fact Sheet
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– IRS Notice 2011-20, 2011-15 I.R.B. 652 (April 18, 2011)
– Tax-Exempt Organizations Participating in the Medicare Shared
Savings Program through Accountable Care Organizations , IRS Fact
Sheet, FS-2011-11, Oct. 20, 2011

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