Creating Loose Alternative Payment Model Guiding Principles: A Brief Overview

The process of developing an alternative payment model (APM) can be daunting for any entity seeking this goal. Finding information that outlines the specific details that guide the effective technical boundaries of an APM can prove difficult for providers and managers on the frontlines of clinical medicine. Due to the vague nature of the regulations set forth in the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), which was intended to defer decision-making to CMS, it is a surprisingly trying task to find any sort of landmark to base actionable targets for APM development in the legislation itself or on the CMS website. In an attempt to alleviate some of the mystery surrounding this process, we have compiled the loose principles that have guided the development of currently widely accepted APMs, including Accountable Care Organizations (ACOs), Patient-Centered Medical Homes (PCMHs), and bundled payment models (BPMs). With this intentionally loose set of definitions, it may be possible for interested providers newly entering this national conversation or other key stakeholders in an organization to develop and propose their own unique APM that both ensures ongoing financial viability and improves patient outcomes under the new system introduced through MACRA.(1)

Stated Development Guidelines

As defined in MACRA, a fully qualifying APM is:

. . . a participant in the Comprehensive Primary Care (CPC) initiative through the Center for Medicare and Medicaid Innovation (CMMI), a model expanded under the CMMI which does not include Health Care Innovation Award recipients, a Medicare Shared Savings Program Accountable Care Organization (ACO), or is approved in a Medicare Health Care Quality Demonstration Program or Medicare Acute Care Episode Demonstration Program.

Also, an APM must use:

. . . quality measures comparable to measures under MIPS . . . , use a certified Electronic Health Record (EHR), bear more than ‘nominal financial risk’ [presumptively far less than the CMS’s ‘substantial risk’ definition of 25% of revenues] or is a medical home expanded under the CMMI, and has increasing percentage of payments linked to value through Medicare or all third party payer APMs (which can range in time to between 25-75% of all-payer reimbursements).(2)

Creation and Adoption of Novel Alternative Payment Models

As the legislation specifically cedes decision-making authority in less defined areas to the Secretary of Health and Human Services (HHS), it is best if we look at the HHS’ interpretation of an APM in regard to seeking further APM guiding principles. The Secretary identifies a softer definition of an APM as a provider-specific reimbursement system in which the “provider is accountable for the quality and cost of care for the people and populations they serve.”(3) This somewhat succinct and nontechnical definition of an APM generates more confidence in our assertion that an APM is guided by a loose set of “value-based” guiding principles with some hard limits, as defined by MACRA and cited earlier.

Hence, it becomes prudent to look to CMS and commenting organizations such as the American Medical Association (AMA) and other physician lobbying groups to determine the more technical requirements. Despite the clamor about these models in the media, few specific guides for developing an APM exist, and most publications address only technicalities associated with current models. Thus due to the weight these two organizations hold in guiding effective interpretation of the legislation and a lack of further detailed sources, we offer a modified and summarized version of the AMA’s five steps to creating an APM,( 4) and a 19-point checklist of key model design factors(5) to assist in further guiding APM development in Tables 1 and 2.

Note that more rigorous technical criteria for becoming an APM are left out of the CMS checklist, reinforcing the point that an APM does not necessarily have to be defined through a certain “cookie cutter,” hardline, standardized solution to the traditional reimbursement schema. This is further reinforced in a publication by Dr. Harold Miller that explains in great detail the rationales behind the APMs and the vague legal jargon of MACRA.(6) A resource included in the references details the cornerstones of payment reform and is recommended for interested readers to better understand the key principles driving the recommendations for alternative reimbursement models.(7) Thus it can only be concluded that an APM can be as unique as the provider(s) suggesting/adopting it for CMS certification and approval.

The Benefits of Alternative Payment Model Development

Despite the upfront work of generating a finalized and scalable APM, the investment may be of substantial benefit to organizations large enough or providers insightful enough, across any specialty, to identify sources of both payer savings and quality improvement that would not undermine practice financial position in the face of ongoing payer constraints. The power to determine the conditions of reimbursement is not one that should be readily dismissed in the face of opportunity in many fields to establish a “win-win” situation, with inevitable reductions in national healthcare spending otherwise looming. It becomes obvious from a strategic policy standpoint that alterations of the reimbursement system favoring APMs suggest that this is the preferred system for CMS going into the future. Thus, industry stakeholders willing to contribute to this national goal may find themselves at a particular advantaged if they are willing to help pioneer further APM development that proves both sustainable and scalable. Through a desire to promote APM sustainability without threatening the ability of practices to remain viable in continuation of their provision of services, CMS continues to embrace the idea of “win-win” APM models that allow for provider scenarios more likely to be financially beneficial to practices in lieu of “nominally or substantially” stated financial risk.(8)

The Future of Alternative Payment Methods

Despite all of this advocacy for change, there is still debate over whether moving away from a fee-for-service (FFS) model into alternative model territory will realize the goals that CMS wishes to achieve. Because many nations overseas have less exorbitant national healthcare expenditures and still utilize a FFS system, it is difficult to determine whether the traditional model is actually the primary contributor to skyrocketing healthcare costs.(9) Alongside many issues related to the proper execution of new APMs,(10) many other factors, including the medicolegal environment and precedents being based in tort law, the historical CMS practice of paying “usual and customary charges,” increasing bargaining power of nonprovider industry stakeholders, and the aggregate organizational cultures of healthcare practices and groups in the United States may be contributing to the unique position of the United States on the world stage rather than any particular issue with the reimbursement model traditionally used. For all of our speculation, only the future will tell if these overhaul endeavors by CMS will prove fruitful for the industry and society at large without addressing other issues driving higher costs in the industry.

Regardless of the future for the U.S. healthcare system, it still remains a prudent near-term reality for many providers to consider adopting an already existent APM or, if feasible through leveraging of accessible resources, creating of an APM for their specific circumstance to avoid potential pitfalls on the somewhat unpredictable reimbursement landscape associated with the Merit-based Incentive Payment System post-2019. Since organizational and specialty-specific approved APMs would be most likely to cover the subtle nuances of their clinical reality versus an imported stock solution developed from outside stakeholders, some larger multispecialty practices and medical subspecialties, in particular, may benefit from investigating solutions similar to those developed as bundled payment models proposed by stakeholders in oncology(11) and orthopedics,(12) despite some technical shortcomings that have been observed in these examples.(10) For practices weighing the cost and benefits of these models versus continuation of current billing practices under the fee-for-service model, investigating your specialty professional organization’s specific publications, news releases, and updates, alongside those produced by this publisher, may assist in identifying further practical APMs that may be adopted for a specific circumstance.

References

1. Medicare Access and CHIP Reauthorization Act (MACRA), Pub. L. No. 114-10, 129 Stat. 87 (codified at 42 U.S.C. 1305 (2015)).

2. Comparison of alternative payment models and the merit-based incentive payment system. AAFP.org . www.aafp.org/practice-management/payment/medicare-payment/apm-mips.html . Accessed March 2, 2016.

3. Burwell SM. Progress towards achieving better care, smarter spending, healthier people. HHS.gov . January 26, 2015. www.hhs.gov/blog/2015/01/26/progress-towards-better-care-smarter-spending-healthier-people.html . Accessed March 2, 2016.

4. American Medical Association. Medicare alternative payment models. AMA-ASSN.org . www.ama-assn.org/ama/pub/advocacy/topics/medicare-alternative-payment-models.page. Accessed March 2, 2016.

5. Centers for Medicare & Medicaid Services. Model design factors. CMS.gov . https://innovation.cms.gov/Files/x/rfi-websitepreamble.pdf . Accessed March 2, 2016.

6. Miller HD. Implementing alternative payment models under MACRA. Center for Healthcare Quality & Payment Reform. www.chqpr.org/downloads/ImplementingAPMsUnderMACRA.pdf . Accessed March 2, 2016.

7. Miller HD. The building blocks of successful payment reform: designing payment systems that support higher-value health care. Payment Reform Series No. 3. April 2015; www.chqpr.org/downloads/BuildingBlocksofSuccessfulPaymentReform.pdf . Accessed March 2, 2016.

8. Share your ideas. CMS.gov . https://innovation.cms.gov/Share-Your-Ideas/index.html. Accessed March 2, 2016.

9. Oberlander J, Laugesen MJ. Leap of faith: Medicare’s new physician payment system. N Engl J Med. 2015;373:1185-1187.

10. Doctors and hospitals agree: Medicare is changing payments the wrong way. Center for Healthcare Quality & Payment Reform. September 11, 2015; http://chqpr.org/blog/index.php/2015/09/changing-payments-wrong-way/ . Accessed March 2, 2016.

11. Oncology Care Model. CMS.gov . https://innovation.cms.gov/initiatives/oncology-care/ . Accessed May 5, 2016.

12. Comprehensive Care for Joint Replacement Model. CMS.gov . https://innovation.cms.gov/initiatives/cjr . Accessed May 5, 2016.