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Some Lessons Learned Around Alternative Payment Models

MHE PublicationMHE June 2023
Volume 33
Issue 6

Experts say the successes and failures of alternative payment models (APMs) over the past decade have taught us a few things.

Upside vs. downside risk

The more successful programs include those with a path to risk. With upside risk, providers only gain if they exceed expectations on quality, cost or other metrics, says Corinne Lewis, program officer for delivery system reform at the Commonwealth Fund. Providers can lose revenue if they fail to meet goals with downside risk. “Evidence suggests that models using both have better outcomes,” Lewis observes, because the risk of losing revenue can be a strong influence and “more motivation than a carrot.” In Lewis’ opinion, when designing a program, downside risk should be voluntary because it can prevent a provider from joining the program. Payers can create on-ramps to increase participation in these programs, easing providers in and providing the right incentives for meaningful change, Lewis says.

Related: Reality Check on Alternative Payment Methods

CMS is committed to moving more providers to downside risk arrangement, says Andréa Caballero, M.P.A., program director and interim co-executive director for Catalyst for Payment Reform, a nonprofit working with purchasers. Even though commercial insurers’ APMs may mirror some CMS programs, they usually can’t go as far as CMS APMs and must rely on upside-only arrangements. “What is going to push a provider system to negotiate lower prices and take an APM? They have very little incentive to do that,” says Caballero.

Primary care adoption

The U.S underinvests in primary care, which can result in higher specialist and hospitalization costs. A report from Milbank Memorial Fund showed that in 2020, primary care spending in the U.S. across payers was 4.6% compared with 7.8% of primary care expenditures by Organization for Economic Cooperation and Development nations in 2016.

Although spending on primary care services accounts for a relatively small proportion of healthcare spending, “the primary care physician calls actually direct the vast majority of the total,” says Miles Snowden, M.D., M.P.H., chief growth officer and executive vice president of physician strategy at Navvis. The population health value-based care company helps practices, mostly in primary care, adopt APMs. He says the practices they work with are experiencing success “and significant financial rewards” from directing overall patient care and doing it well.

Failure in these models occurs when primary care physicians don’t comply with the common governance and single compensation model that relies on physicians doing the same thing, according to Snowden. Physicians need to stay accountable to a common uniform process instead of going their own direction. “That’s really common when a group of physicians who are fiercely independent stay fiercely independent,” he says. If the providers or practices tweak their population health management interventions, it can result in inefficient operations. “Consistency, uniformity, scale. These are the things that are necessary,” Snowden says.

Primary care may do better with a mix of capitation and fee-for-service models, says Caballero, noting the devastation experienced by some primary care practices during the early pandemic. Some had to close practices or lay off staff in large part because they relied on the delivered services payment method, she says. “When people stopped seeing them, they didn’t get paid.” Primary care has a good motivation to use APMs.

Specialist care and mixed provider models

The greatest success has been seen in accountable care organizations, with a contained system of inpatient, outpatient and specialty care. “If you’re going to try to address total healthcare spending for a population, you need to include all components,” says Caballero. But as long as providers coordinate with each other, they do not have to be in the same organization, and the accountable care organization can still address utilization.

Independent specialists have less of an incentive to get involved in APMs than primary care or multidisciplinary groups because they have leverage. “They don’t have a reason or motivation to change how they’re paid,” Caballero says. As part of a system, when they have the same interests as primary care physicians and hospitals, the interests may align.

Quality metrics alignment

A big challenge in implementing APMs is alignment across payers. Providers treat patients covered by a variety of insurance types. “Providers, understandably, don’t want to provide different standards of care for different patients,” says Robert Berenson, M.D., a fellow at the Urban Institute Health Policy Center and former vice chair of the Medicare Payment Advisory Commission. There needs to be a tipping point, enough market share to entice them to adopt a new model.

Part of the confusion is over quality metrics. “Today we manage over 500 distinct quality metrics. That’s ridiculous,” says Snowden. When each payer has its own model with distinct metrics, it is difficult to administer. “Getting down to the few that matter is foundational to being successful in these models.”

Determining the right quality targets for each practice is also important if high-performing providers want to move into downside risk or shared savings arrangements. Determining those quality benchmarks are important, says Caballero, especially for practices for which there is little room for improvement.

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