[Federal Register Volume 84, Number 159 (Friday, August 16, 2019)]
[Notices]
[Pages 41974-41976]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17605]


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DEPARTMENT OF DEFENSE

Office of the Secretary


TRICARE; Accountable Care Organization Demonstration

AGENCY: Office of the Secretary, Department of Defense.

ACTION: Notice of demonstration.

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SUMMARY: Section 705(a) of the National Defense Authorization Act for 
Fiscal Year 2017 (NDAA for FY17) requires the Secretary of Defense to 
develop and implement value-based incentive programs for the TRICARE 
Program. It also outlines recommendations for adapting existing value-
based models, to include value-based incentive programs. The Defense 
Health Agency (DHA) intends to conduct and evaluate value-driven 
initiatives to move from volume-based reimbursement to value-based 
reimbursement for health care services. The proposed Accountable Care 
Organization (ACO) demonstration will help DHA assess whether value-
driven incentives can reduce health care spending and improve health 
care quality for TRICARE beneficiaries.

DATES: This demonstration is a value-based incentive program consistent 
with Section 705(a) of the NDAA for FY17, with an effective and 
implementation date of January 1, 2020. This demonstration authority 
will remain in effect until December 31, 2022, unless terminated or 
extended by the DHA via a subsequent Federal Register notice. KP and 
HGB may begin marketing and beneficiary education activities on or 
after August 16, 2019.

FOR FURTHER INFORMATION CONTACT: Mr. Joseph Mirrow at 
[email protected].

SUPPLEMENTARY INFORMATION: This notice is to advise all parties of a 
DHA demonstration project under the authority of Title 10, United 
States Code, Section 1092, entitled, ``TRICARE Accountable Care 
Organization Demonstration'' that will monitor whether higher levels of 
beneficiary satisfaction, cost containment, efficiency and 
effectiveness can be reached using an ACO. The demonstration will 
develop and evaluate an incentive payment model that: (1) Links 
improvement of health (core performance metrics); (2) improves 
beneficiary experience as Section 705(a) requires; and (3) compares the 
health outcomes of geographically overlapping TRICARE Prime beneficiary 
populations. This demonstration is being conducted in compliance with 
Section 705(a) of the NDAA for FY17. The demonstration will be 
conducted under the purview of the DHA and administered through the 
Managed Care Support Contractor (MCSC), Humana Government Business, 
Inc. (HGB), in conjunction with Kaiser Permanente (KP).
    The DHA will monitor several areas of the ACO demonstration 
including but not limited to:

--Beneficiary experience and whether it is impacted, positively or 
negatively, by delivering care through an ACO model, which will be 
measured through existing tools (e.g. the Joint Outpatient Experience 
Survey) and reenrollment rates.
--Financial costs incurred under traditional TRICARE Prime and Select 
plans, and compare those cost to the negotiated capitated per member, 
per month (PMPM) rate under this demonstration. The demonstration will 
enable DHA to demonstrate proof of concept for future implementations 
throughout the TRICARE Program.
--Evaluate quality of care delivered under the ACO model compared to 
other TRICARE plans.

A. Background

    Section 705(a) of the National Defense Authorization Act (NDAA) for 
FY 2017 directed the Department of Defense to conduct demonstration 
projects on incentives to improve health care provided under the 
TRICARE Program, also known as paying for value, or value-based 
reimbursement, rather than paying for volume. The incentive programs 
should link payments to hospitals and health care providers under the 
TRICARE Program to improve performance with respect to quality, cost, 
and reduction in the provision of inappropriate care. In addition, 
Section 705(a) of NDAA FY 17 authorizes adaptation of existing value-
based models, including value-based incentive programs. As such, this 
demonstration program is partially based on a capitation payment model 
with the outpatient and pharmacy portions of the care being capitated 
while inpatient care will be provided through a joint TRICARE network 
with Humana. A full or partial capitation model requires that a health 
care provider undertake the full (or partial) risk for health care 
quality and spending. This model is frequently used by commercial 
health plans as part of an overall approach to value-based 
reimbursement.
    In an effort to mitigate rising health care costs and develop 
higher-quality patient care, the DHA intends to conduct an ACO 
demonstration to determine if greater levels of beneficiary 
satisfaction, cost containment, efficiency, and effectiveness can be

[[Page 41975]]

reached using a capitation model. To achieve this goal, the DHA will 
conduct a three-year demonstration program that will address the NDAA 
FY 17, Section 705(a) requirements. The ACO demonstration will be 
conducted in Atlanta, Georgia. This area was selected due to the lack 
of Military Medical Treatment Facilities (MTFs), the existence of which 
could confound the demonstration outcomes, as well as providing an 
ideal population size in the Atlanta metropolitan area.

B. Description of the Demonstration Project

    TRICARE's three-year demonstration project will be voluntary for 
TRICARE Prime Active Duty Family Members, Prime Retirees, Prime Retiree 
Family Members, and TRICARE Select beneficiaries in the metro Atlanta 
area. Beneficiaries will be invited to participate in any of the three 
years during the demonstration time period by enrolling in the ACO 
demonstration. From the ACO demonstration enrolled beneficiary's 
perspective, this will be a TRICARE Prime option, with KP serving as 
the primary care manager (PCM), and coordinating referrals to other KP 
specialties, or affiliated providers, as appropriate. KP will provide 
education to all interested beneficiaries regarding plan differences at 
the time of enrollment in the ACO demonstration. To ensure a sufficient 
number of beneficiaries participate in the demonstration, a target of 
3,000 to 4,000 demonstration enrollees is set for year one with a goal 
of 8,000 to 10,000 enrollees by year three. The total number of 
eligible beneficiaries in the Atlanta area is approximately 70,000.
    This demonstration will be implemented as an integrated ACO model 
with HGB serving as the DHA MCSC with KP working under HGB in 
compliance with HGB's contract. HGB will provide oversight, management, 
billing and enrollment, operational support, customer service for 
beneficiaries and military, a provider network for out-of-area care, 
delegated medical management and referral services for beneficiaries, 
and management of claims payments, encounter reporting and beneficiary 
eligibility. KP will provide ACO demonstration enrollees access to all 
KP primary and specialty providers in the Atlanta, Georgia area, 
virtual and video visits and consults, as well as match the current 
TRICARE Prime benefit and prescription benefits to include copayments, 
cost shares, deductibles, and coinsurance.
    Applicable annual TRICARE enrollment fees will be waived for 
TRICARE beneficiaries who elect to participate in the ACO 
demonstration, for the first year in which they enroll. TRICARE Prime 
and TRICARE Select beneficiaries are eligible to participate in the 
demonstration. Under this demonstration, TRICARE beneficiaries are 
subject to the current Open Season enrollment restrictions unless they 
have a Qualifying Life Event. Beneficiaries with Other Health 
Insurance, TRICARE for Life beneficiaries not eligible to enroll in 
TRICARE Prime, Continued Health Benefit Care Benefit Program 
beneficiaries, Sponsors in the Guard/Reserves, and Active Duty Service 
Members are not eligible to participate in the program.
    ACO demonstration enrolled beneficiaries will have the option to 
select a provider via the KP website located at KP.org, telephone, or 
while in a network provider's medical office. KP will send a letter to 
the ACO demonstration enrolled beneficiary if a choice is not made 
after a 60 day period and a Primary Care Manager (PCM) will be assigned 
to the enrolled beneficiary based on their residential zip code. KP 
will also send a letter to the ACO demonstration enrolled beneficiary 
if there are provider panel or location changes. ACO demonstration 
enrolled beneficiaries may change their primary care provider as long 
as the provider is within the KP provider network. TRICARE 
beneficiaries, enrolled under the ACO demonstration, will use the 
online KP provider network directory to include national vendors for 
durable medical equipment (DME), ambulance transport, transplants, and 
centers of excellence.
    The TRICARE Pharmacy benefit will be matched by KP for the ACO 
demonstration. This will include the KP formulary listing, mail order, 
and specialty drugs. However, demonstration enrolled beneficiaries will 
not be eligible to receive vaccinations administered at a pharmacy. All 
beneficiaries enrolled in the demonstration will be able to fill 
prescriptions at KP pharmacies including mail service and specialty/
compounded drugs.

C. Communications

    The DHA will proactively educate beneficiaries and other 
stakeholders about this change through the TRICARE MCSC--HGB--as well 
as through marketing materials presented by KP. Marketing materials 
will explain the ACO demonstration benefit to the beneficiaries while 
allowing TRICARE sponsors and beneficiaries to make the best choice for 
their families. KP will begin marketing to potential beneficiaries on 
or after the date of publication of this notice. KP will inform and 
collect the consent of beneficiaries at the time of demonstration 
enrollment of any benefit or process differences compared to the 
traditional TRICARE Prime and Select programs.

D. Evaluation

    This demonstration project will assist the DHA in evaluating 
whether capitated payment models will result in a reduction in health 
care spending and/or improvements in health care quality for TRICARE 
beneficiaries. The demonstration will add to the DHA's body of 
knowledge regarding the requirements for implementing successful value-
based payments. Regular status reports and a full analysis of the 
demonstration outcomes will be conducted consistent with the 
requirements in Section 705(a) of the NDAA FY17.
    Regular evaluations of health care claims, patient satisfaction, 
and cost of care for the ACO demonstration beneficiaries and a 
comparison group will provide data relating to the impact of health 
care spending in order to ascertain whether accountable care and 
capitation reimbursement result in positive changes in cost trends and/
or if there has been an improvement in the quality of health care. 
Following the conclusion of each demonstration year, costs and 
performance will be analyzed and compared to previous years of the 
demonstration as well as to care received across the TRICARE Program to 
determine whether capitated payment structures, as well as incentive 
payments were effective in reducing health care spending and/or 
improving health care quality. The DHA Director reserves the right to 
terminate the demonstration early if the enrollment, cost, or quality 
do not support continuation of the demonstration.

E. Reimbursement

    The PMPM will be negotiated based on DHA claims history from the 
prior three years of beneficiaries enrolled in the same geographic 
area. Reimbursement under the ACO demonstration will be notionally 
modeled after a capitation reimbursement structure with care being 
divided into three separate Parts; A, B, and D (modeled after the 
traditional Medicare program). KP will receive a PMPM payment for all 
ambulatory care as aligned with Part B and D services (as outlined 
below).
    Notional Part A Fund expenses include, but are not limited to: 
Costs identified for inpatient hospital medical

[[Page 41976]]

and surgical services; inpatient hospital psychiatric services; home 
health care services; skilled nursing facility care; and inpatient 
rehabilitation. HGB will reimburse all inpatient care, as aligned with 
Part A services, utilizing existing reimbursement systems (e.g., 
Diagnosis Related Groups) with inpatient providers submitting claims 
for reimbursement to HGB. As long as the inpatient admission was 
directed by a KP provider, ACO beneficiaries will be subject to ``in 
network'' cost-sharing. HGB will report reimbursements for Part A 
services to KP on a monthly basis. Expenses will also include the cost 
of other covered services or costs which may be mutually defined and 
approved by KP, HGB, and the DHA.
    Notional Part B Fund expenses include, but are not limited to: 
Primary care; hospital-based physician fees; specialists fees; hospital 
outpatient services; outpatient surgery procedures; podiatry; 
outpatient rehabilitation; physical therapy; occupational therapy; 
speech therapy; vision; supply costs of covered immunizations; 
therapeutic radiology; outpatient renal dialysis; outpatient 
laboratory; outpatient radiology; durable equipment and durable medical 
equipment;, Medicare defined Part B drugs; ambulance; and other 
outpatient diagnostic or treatment services. Expenses will also include 
the cost of other covered services or costs which may be mutually 
defined and approved by KP, HGB, and the DHA.
    Notional Part D Fund expenses include all costs for outpatient 
prescription drugs and vaccines that are not otherwise included in the 
Parts A or B Fund. Expenses will also include the cost of other covered 
services or costs which may be mutually defined and approved by KP, 
HGB, and the DHA.

Part A Services

    As noted earlier, HGB will reimburse inpatient claims (Part A) for 
care rendered for TRICARE beneficiaries enrolled in the ACO 
demonstration utilizing existing TRICARE reimbursement methodologies. 
Prior to each demonstration year, the DHA will evaluate, and if 
appropriate, approve an annual cost target prepared by HGB and reviewed 
by KP, for Part A services defined above, with a risk corridor that 
results in equal sharing of risk between KP and the DHA for gains and 
losses. Part A services will be reconciled to the target on an annual 
basis using three months of run out (April 1 of each year) with 
settlement to occur at 6 months following close of period (July 1 of 
each demonstration year). The approved DHA Part A cost target will be 
prepared by HGB and reviewed by KP. The Director, DHA, will have the 
ultimate authority to approve or reject the proposed cost target.

Part B and Part D Services

    The intent of this demonstration is to fully capitate all 
outpatient and professional care, defined in this demonstration as 
``Part B'' and ``Part D'' services. Prior to the start of each 
demonstration year, Humana, with KP, shall propose a PMPM to the DHA. 
The Director, DHA, shall approve or deny the proposed PMPM amount. If 
the PMPM is denied and cannot be negotiated, then the demonstration 
will be terminated. When an ACO enrolled beneficiary receives care from 
KP, KP will submit the encounter data record to HGB, who will in turn, 
submit the TRICARE encounter data record to the DHA for reimbursement, 
in accordance with TRICARE operational and systems polices. However, KP 
will be paid on the basis of a PMPM methodology. The DHA will pay KP an 
additional PMPM amount (the incentive payment, mentioned earlier in 
this Notice) for achieving specific value and quality performance 
goals, as negotiated by the DHA.
    Beneficiaries enrolled in the ACO demonstration who visit a 
provider outside of the KP demonstration may be subject to point of 
service charges consistent with TRICARE claims processing rules. 
Rarely, the DHA may elect to remove specific enrolled beneficiaries 
from the demonstration (or decline to re-enroll them), and require the 
beneficiary to make a new plan election (e.g., TRICARE Prime or Select) 
in accordance with TRICARE procedures if the beneficiary does not 
follow KP processes. This demonstration is patient-centered, and 
changes in enrollment are disruptive to beneficiaries, and therefore 
will generally be considered inappropriate unless in the most 
extraordinary of cases. Such a determination will be made by the 
Director, DHA, or designee, on a case-by-case basis, when brought to 
the attention of DHA by HGB. Requests from HGB for patient removal must 
include: A beneficiary-specific justification regarding patient 
unwillingness to follow KP rules; a description of the specific efforts 
made by HGB and KP to engage the patient in care and care decisions; a 
description of patient and/or caregiver education efforts; along with 
data showing that failure to follow such rules has resulted in 
significant impact to the beneficiary's health, quality of care, or 
total cost of care to the Government or beneficiary. The Director, DHA, 
shall be the final authority on patient disenrollment, and decisions 
shall be made on the basis of the best interest of the specific patient 
(health, quality of care, and cost to the Government/beneficiary), and 
not on a basis that disenrollment is needed for financial reasons by KP 
or HGB.

F. Implementation

    Care for ACO demonstration enrolled beneficiaries demonstration 
will begin effective January 1, 2020, and will continue for a period of 
three years from the date of the original demonstration unless 
terminated earlier by the Director, DHA. KP and HGB may begin patient 
education and marketing efforts regarding this demonstration on or 
after the date of publication of this notice.

    Dated: August 12, 2019.
Aaron T. Siegel,
Alternate OSD Federal Register Liaison Officer, Department of Defense.
[FR Doc. 2019-17605 Filed 8-15-19; 8:45 am]
 BILLING CODE 5001-06-P