What Will New Alternative Payment Models Look Like?

The Administration is slowly but surely painting a picture of what the post-Sustainable Growth Rate (SGR) world will look like. With the passage of Medicare Access and CHIP Reauthorization Act of 2015 (MACRA), we know that the Medicare program will move towards two new payment systems by 2019.

One of the systems, the Merit-based Incentive Payment System (MIPS), combines the three existing Medicare quality programs into one system in which providers will report quality data and be scored based on their performance. Under the second system, providers will also be able to fully, or partially participate in alternative payment models (APM). APMs already exist in some forms but MACRA fosters the development of many new versions.

To aid in these efforts, the Centers for Medicare and Medicaid Services (CMS) formed a partnership of public and private stakeholders to advise the agency on how to achieve this transition. This partnership, called the Health Care Payment Learning and Action Network (HCPLAN), has been working to lay out a framework for what new APMs will look like in the form of a white paper. Earlier this month, the HCPLAN released the final version of its white paper on its vision for APMs. This white paper is its first “deliverable” of the HCPLAN. It is not clear how much influence this paper will have on those in the process of developing APMs.

As described in the paper, an APM will essentially be a payment methodology that is (1) not fee for-service and (2) also includes a system for measuring the quality of care provided while also tying said quality performance to some amount of financial risk and/or gainsharing. This is a rather broad definition that allows for many different forms of new payment models. The paper classifies APMs into four different categories of payment models.

1. Fee-for-service with no link to quality and value

2. Fee-for-service that is linked to quality and value

a. Foundational payments for infrastructure and operations
b. Pay for reporting
c. Rewards for performance
d. Rewards and penalties for performance

3. APMs build on fee-for-service architecture

a. APMs with upside gainsharing
b. APMs with upside gainsharing and downside risk

4. Population-based payments

a. Condition-specific, population-based payments
b. Comprehensive population-based payment


The first category describes the historical way of paying for physician services with no link between payment and performance. The second category is where we have been more recently. Programs such as the Physician Quality Reporting System, the Value-based Modifier, and the EHR Meaningful Use Incentive Program are examples of programs that link payment to some quality reporting or data reporting mechanism. MIPS will be the newest iteration of this category.

Bundled payments and Episode of Care Payments are examples of the third category. CMS has been playing in this space over the past few years and is still looking to build this category. The recently announced Comprehensive Care for Joint Replacement model for hip and knee replacements is an example of this type of payment. The physician-focused payment models (PFPM) being developed by medical specialty societies are also examples of physicians working to build their own condition-specific bundles for the conditions they treat.

The fourth and final category has only just begun with Accountable Care Organizations (ACO) being the most recent example. Population health will generally involve population based payments (i.e. capitation or other per person/per month payment) with the Entity to whom payments are made (ACO, HMO, MCO) assuming financial risk for the population being covered.

Some have suggest that the population health category is the most uncharted of the four categories and it is here that many of the “new” APMs will be found. Others, however have suggested that this is just a new iteration of the old HMO/managed care model with the word “accountable” thrown into the nomenclature.

A major goal of APMs, regardless of type, is to foster collaboration among health professionals to provide comprehensive care management as opposed to a “siloed” approach. The hospital Prospective Payment System where hospitals are paid based upon the patient’s diagnosis is an example that works. Now, CMS wants to expand that model to the follow-up care that occurs after discharge creating a “Super DRG” payment. This could work for hospitals because they may be able to bring all of the providers (physicians, home health, skilled nursing, rehabilitation, etc.) under a single entity. Such a system would be difficult to implement outside of the hospital because each physician practice is its own entity. ACOs are an attempt to bring different entities together under one financial roof. The new APMs are also going to have to include a mechanism on how to get physician practices to work together to provide care and to share risk/savings. Depending on the model, this could pose a significant operational and administrative challenge to each practice.

As always, ADVOCATE will keep you up to date on this and all issues impacting radiology as they become available.

Best regards,
Kirk Reinitz, CPA