Here to Stay: Alternate Payment Models

Carol McCall
June 3, 2021

This article originally appeared on Healthcare Business Today:

March 23, 2020, marked the 10th anniversary of the Affordable Care Act (ACA), whose passage ignited the most comprehensive set of changes in US healthcare.  Ever.  The industry had been changing for decades, but the ACA accelerated both the speed and the magnitude of change consuming the industry.  

When measured in ‘legislative years,’ the ACA is still young.  Even so, it has already left its mark.  It created game-changing progress on coverage, rewrote the rules of the insurance market, showed evidence of real impacts on health, and transformed the policy and legal landscape.  Despite being sometimes hailed as a ‘big deal’ while at other times cursed that it simply didn't work, no recent legislation has provoked more controversy or been as resilient. The ACA has survived more than 70 ‘repeal and replace’ efforts and has been to the Supreme Court five times, including watershed disputes involving Congress's power to regulate economic activity, Congress’s obligations when using states and private implementers, the appropriate way to interpret Congress’s wordings, and the extent to which ACA could press against religious freedoms.¹

The ACA has also shifted the baseline of public attitudes and with it, future policy making.  One such attitude is that Americans should not lose health coverage because of pre-existing health conditions.  The litmus test of policy alternatives is now a comparison of coverage numbers, with proposals judged on whether they cover roughly the same population. Given how recently ACA was passed, the significance of this cannot be overstated.  Protections for pre-existing conditions are now table stakes. The debate has moved on.

Alternate Payment Models Change Everything

The more visible effects can be seen in the delivery system where ACA has accelerated the arrival of value-based healthcare that is aligned with – and paid based on – health outcomes.  The ACA contained several such initiatives, including the Hospital Readmissions Reduction Program, Bundled Payments for Care Improvement, Medicare Shared Savings Program (MSSP), and Accountable Care Organizations (ACOs), which have seen remarkable growth.  It has grown tremendously.  As of June 2019²:

●      Nearly 1,000 ACOs now cover almost 44 million lives  

●      ACOs are now physician-led (43%) more than hospital- or jointly- led, a reversal from early on

●      More ACOs are starting to take downside risk, with physician-led ACOs taking downside risk more often than hospital-led ACOs

This growth is not a surprise, since part of reform included the funding of the Center for Medicare & Medicaid Services Innovation Center (CMMI), a $10 billion investment in developing and testing multiple payment and delivery model innovations and alternate payment models (APMs).  Since then, CMMI has devised 90 alternate models, ranging from P4P, bundles, and global payments.³ 

To help drive APM adoption, CMS established the Health Care Payment Learning & Action Network (LAN) in 2015.  The LAN’s mission has been to accelerate the transition to APMs by combining the innovation, power, and reach of the public and private sectors.  The LAN’s landmark achievement has been the APM Framework (see graphic, below). The APM Framework establishes core APM design principles, classifies APMs into distinct categories, and establishes a common vocabulary and pathway for measuring successful models.⁴ 

The framework also forms the basis of the annual APM Measurement Effort which measures progress in the adoption of APMs. In 2018, APM Measurement reported 36% of healthcare payments flowing through Categories 3 & 4.⁵  Despite significant uptake, nearly two-thirds of payments remain rooted in fee-for-service (FFS).  Experts agree this will fail to drive fundamental change and that the next stage must focus on APMs that support population health management, community engagement, and other value-adding activities.

CMS intends to accelerate the percentage of payments made under two-sided APMs even further, with targets of 100% of Medicare and 50% of Commercial and Medicaid by 2025.⁶  To drive adoption, CMS made one of the largest changes to the Medicare ACO program since its inception.  Dubbed Pathways to Success, it includes a major overhaul of MSSP. 

They also launched several new models. One is the Primary Cares Initiative, a set of APMs that create options for primary care physicians to be paid for keeping patients healthy and out of the hospital. The agency considers these to be potential game-changers and hopes they will transform primary care.⁷ In fact, when introducing them, CMS said the goal was to dismantle fee-for-service payments. They have aggressive goals for this program and are targeting to cover 11 million Medicare beneficiaries.⁷𝄒⁸ 

Another new model is the Community Health Access and Rural Transformation (CHART) Model with a focus to accelerate opportunities in rural communities.⁹  This effort makes investments that enable rural communities to pursue innovative financial arrangements and gain the operational and regulatory flexibility they need to pursue value-based arrangements.

Irrespective of details, the transformation to value-based care is disrupting nearly every aspect of how care is organized, delivered, measured, and reimbursed.  It is reshaping the industry and its key segments, including where profit pools lie and who gets them. Today’s healthcare organizations, including its leaders, need to aggressively adapt or risk long-term viability.¹⁰

End Notes

1. Emanuel E, Abbe G. The ACA at 10: Health Care Revolution | Health Affairs. February 2020.

2.  Muhlestein D, Bleser W, Saunders R, Richards R, Singletary E, McClellan M. Spread of ACOs and Value-Based Payment Models in 2019: Gauging the Impact of Pathways to Success | Health Affairs. October 2019.

3.  EHRIntelligence. Decade-Defining Moments in Healthcare Innovation, Reform. EHRIntelligence. Published December 20, 2019

4.  HCP-LAN. Alternate Payment Model - APM Framework. The MITRE Corporation; 2017:1-45.

5.  HCP-LAN. Roadmap for Driving High Performance in Alternative Payment Models - Health Care Payment Learning & Action Network. Published December 18, 2019.

6.  Muhlestein D, Bleser W, Saunders R, Richards R, Singletary E, McClellan M. Spread of ACOs and Value-Based Payment Models in 2019: Gauging the Impact of Pathways to Success | Health Affairs. October 2019.

7.  Centers for Medicare and Medicaid Services (CMS. HHS To Deliver Value-Based Transformation in Primary Care. Published April 22, 2019.

8. M. Brady, “Americans ‘fed up’ with high healthcare costs, surprise billing, Verma says,” Modern Healthcare, September 10, 2019

9.  CMS Innovation Center. CHART Model | CMS Innovation Center. Published 2020.

10.  PwC Health Research Institute. Top Health Industry Issues of 2020: Will Digital Start to Show an ROI? PwC Health Research Institute; 2019:1-53.

Interested in learning more about upcoming payment models and the importance of AI to succeed under value-based care? Check out these resources:

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