CMS Announces Comprehensive ESRD Care Initiative for Up to 15 ESRD Seamless Care Organizations (ESCOs)

February 6, 2013

On Jan. 31, 2013, the Centers for Medicare & Medicaid Services (CMS) released a request for applications to participate in the testing of its Comprehensive End-Stage Renal Disease (ESRD) Care model. The stated goals of the model are to improve beneficiary health outcomes, improve coordination of benefits and access to services and reduce per-capita Medicare expenditures. Through this new five-year initiative, CMS will partner with up to 15 ESCOs to test and evaluate a new model of payment and care delivery specific to Medicare beneficiaries with ESRD. Since enrollment in the program is being limited, it is anticipated that the application process may be competitive. Organizations interested in participating in testing of the model are required to submit a nonbinding letter of intent by March 15, 2013, and an application to CMS by May 1, 2013.

Interested parties must form ESRD Seamless Care Organizations, called “ESCOs,” consisting of groups of healthcare providers led by care professionals experienced in providing care to beneficiaries with ESRD. Each ESCO must: (i) be a distinct legal entity with a taxpayer identification number; (ii) be capable of receiving and distributing shared savings payments and repaying shared losses; (iii) establish reporting mechanisms and ensure ESCO participant compliance with program requirements, including quality performance standards; and (iv) be formed by ESCO “participant-owners” that must include representation from at least one Medicare-certified dialysis facility, at least one nephrologist or nephrology group practice not employed by the dialysis facility, and at least one other Medicare provider or supplier (but subject to certain limitations). ESCOs must agree to participate in the program for at least three years by entering into an ESCO Participation Agreement, and may thereafter enter into a two-year extension of participation.

Each ESCO will be required to maintain a governing body authorized to execute the functions of the ESCO and maintain decision-making authority on its behalf. The ESCO is also required to maintain a transparent governing process to ensure that CMS has the ability to monitor its operations. ESCO participants must have at least 75 percent control of the ESCO’s governing body, and no single participant may represent more than 50 percent of the membership of the governing body. Members of the governing body are required to place their fiduciary duty to the ESCO ahead of their individual interests and must adopt a conflict of interest policy. The governing body must also include an independent ESRD Medicare beneficiary representative and an independent consumer advocate.

To be eligible to participate in the program, ESCOs must have a minimum of 500 Medicare beneficiaries “matched” to their organization. The matching process will use historical data on beneficiaries who are receiving care from participating dialysis facilities. To be matched to an ESCO, a beneficiary must: (i) be enrolled in Medicare Parts A and B; (ii) not be enrolled in a Medicare Advantage Plan, cost plan or other non-Medicare Advantage Medicare managed care plan; (iii) be receiving dialysis services; (iv) not have a functioning transplant; (v) be at least 18 years old, reside within the market area of the ESCO and receive at least 50 percent of his/her annual dialysis services in the ESCO’s geographic area; (vi) not have Medicare as a secondary payer; and (vii) not be assigned to a Medicare ACO or another Medicare shared savings program as of the date of the initial matching for the ESCO model — a factor that may prove to be challenging for the matching of beneficiaries to an ESCO.

ESCOs will be clinically and financially responsible for all care offered to a group of matched Medicare beneficiaries, not only dialysis care or care specifically related to a beneficiary’s ESRD. Using quality measures that assess both the health and experience of beneficiaries with ESRD receiving care from providers and suppliers participating in the model, CMS intends to assess the performance of ESCOs in improving beneficiary outcomes. The quality measures will assess and monitor preventative health, chronic disease management, care coordination and patient safety, patient and caregiver experience and patient quality of life. CMS has not yet disclosed the specific quality measures but anticipates releasing them prior to the May 1, 2013, application deadline. ESCOs that achieve a minimum quality threshold and succeed in offering care that lowers Parts A and B total cost of care for beneficiaries will have an opportunity to share in Medicare savings with CMS. ESCOs that do not achieve a minimum threshold of quality care will not be ineligible to share in savings and may also be terminated from participation.

The model offers three payment tracks, depending on whether a dialysis facility is owned by a large dialysis organization (LDO) – an organization with more than 200 dialysis facilities – and participates in the model. ESCOs that include at least one dialysis facility owned by an LDO are required to participate in a risk-based payment arrangement allowing for both shared savings and shared losses over the life of the model. Other participating organizations may join in one of two other payment tracks. ESCOs that do not include a dialysis facility owned by an LDO may participate either in the LDO “two-sided” payment model or a “two-sided phase-in model” in which down-side risk for the ESCO’s losses only becomes effective in the third year of participation, but which model also limits the ESCO’s opportunities during years 1 through 3 to participate in shared savings.

Information about the program, including application materials and slides from CMS’ February 5, 2013, Open Door Forum discussing the program, are available on the CMS Innovation Center website. McGuireWoods is in the process of analyzing the benefits and pitfalls of establishing an ESCO, the steps to be taken to establish an ESCO and its impact on participating providers, and will soon be providing further information. Please contact one of the authors for more information about the Comprehensive ESRD Care model.