Exhibit 3. ACO Payment Models and Results Payment model Results Health Share rec

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Exhibit 3. ACO Payment Models and Results Payment model Results Health Share receives a global per-capita budget from Health Share has mapped an ambitious plan to the Oregon Health Authority (ie. the states Medicaid improve care and outcomes for Medicaid beneficiaries agency). which it apportions to risk-accepting entities through the alignment of physical, capital, and human RAEs) that in turn pay contracted providers on a capitated or fee-for-service basis. The state withholds reduce avoidable hospitalizations and emergency 2 percent of Health Shares overall budget, with payment contingent on the organization and its RAEs million in the first three years In 2013, its first full year meeting cost and quality targets. Future increases in of operations Health Share earned 100 percent of its per-capita payments to Health Share will be reduced performance incentive pool for meeting benchmark by 1 percentage point in the first year and a cumulative or improvement targets set by the state on 12 of 2 percentage points the second year resources, with the expectation that its efforts will department (ED) use and produce savings of $325 16 measures, such as an 18 percent reduction in ED visits, and for enrolling more than 80 percent of its members in Hill Physicians Medical Group and its partners in the The Sacramento ACO reduced spending by $20 Sacramento ACo-Dignity Health and Blue Shield of milion its first year, of which nearly $5 million in California-set a target of reducing spending by $155 million in the ACO's first year to bring premiums for savings reflected reduced unit cost of services as well Blue Shields HMO product in line with or below those as reduced use of services, including a 15-percent of its competitor Kaiser Permanente. Risk and savings reduction in 30-day readmissions: a 15-percent are shared among the medical group, hospital system, reduction in inpatient days per 1,000 members and and the health plan, proportional to each partners a 13 percent decline in the average length of a hospital ability to bear risk and influence spending. was shared among the three partners. Cost stay for ACO patients. In total, the three-year pilot ACO reduced Blue Shield premiums for CalPERS beneficiaries by $59 million, or $480 per member per Marshfield Clinic opted to participate in the Medicare During the five-year Medicare Physician Group Practice Shared Savings Programs one-sided risk model which permits the organization to share in up to 50 percent of the savings it produces for Medicare. million, of which it earned $56 million in shared savings provided it meets or exceeds a minimum savings rate for meeting quality and financial targets. (Results for and prescribed quality performance standards Savings the first year of the clinics participation in the Medicare payments are capped at 10 percent of total benchmark Shared Savings Program are not yet available) Demonstration, a forerunner of the Medicare Shared The clinic reports reductions in hospitalization and readmission rates among patients engaged in its heart Note AC?. accountable care orgnaton CaPERS . Callona Plic Employees Retrement System HMO . health maintenance organiation Under one-sided mk-har anACO receives bonus payments for achevngquality and cost targets but no drect penalty for not dong so Under two-sided (upside and downsidel risk-sharing an ACO eams savings for achieving cost and quality targets and faces a financial penality for

Explanation / Answer

Answer: ACOs should layer a shared savings and shared risk model over and above the existing reimbursement arrangement.The hybrid model or the bundled approach would mean if targets are not achieved ACOs will be warranted only Fee- for service but if savings target is achieved then over and above the fee for service(base payment) they would receive a share of the savings rendering the model extremely robust. For a reimbursement only model the reimbursement targets or for upside only payment model the shared savings targets will be decided basis the historical performance of the ACO ie retrospectively. For reimbursement model the savings realised will be decreased over period of time as well as the captal budget making it more difficut for the ACO to sustain as costs will be on the rise .However for a shared savings and shared risk model the benchmarks will be calculated prospectively rather than restrospectively .This will make them more accountable and responsible for patient helathcare to maximize earnings by innovating healthcare model. Hence a shared savings and risk model( two sided) would help in striking a judicious balance and will be a win-win proposition for all the stakeholders as benchmarks and goals will be revised basis situation on ground. Of course shared savings should be triggered only on the achievement of healthcare quality KPIs and crossing a certain savings threshold ie total cost of care has to be considered (when cost targets for the patients are attained). However this has to be considered in the light of different patient groups assigned to ACOs having different degrees of health complexities,risks and hence different Total cost of care. Hence the TCoC needs to be suitably adjusted along with the saving threshsold for ACO to be eligible for shared saving because a low threshold for a highly inefficient provider or low risk zone patient group could be easily achieved compared to a highly efficient provider or high risk zone patient group.

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