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Evidence-Based Oncology April 2017

How to Create Successful Alternative Payment Models in Oncology

Harold D. Miller
By identifying ways to improve cancer care and then designing alternative payment models (APMs) to overcome current payment barriers, APMs can enable oncology practices to deliver better care to patients and save money for payers in a way that is financially sustainable for the practices.
The term “Alternative Payment Model” (APM) was added to the healthcare lexicon as a result of the passage of the Medicare Access and CHIP [Children’s Health Insurance Program] Reauthorization Act (MACRA) in 2015.1 Although MACRA is best known for repealing the Sustainable Growth Rate formula and creating the Merit-based Incentive Payment System (MIPS), Congress expressed a preference for APMs rather than MIPS by offering physicians a 5% bonus, higher annual updates, and exemption from MIPS if they participate at a minimum level in certain types of APMs.

What Is an APM?
MACRA defines an APM as “a model under section 1115A, the shared savings program under section 1899, a demonstration under section 1866C, or a demonstration required by Federal law.” Section 1115A is the part of the Affordable Care Act (ACA) that created the Center for Medicare & Medicaid Innovation (CMMI).2 It requires testing “payment and service delivery models…where… there is evidence that the model addresses a defined population for which there are deficits in care leading to poor clinical outcomes.” The focus is to create models that are “expected to reduce program costs…while preserving or enhancing the quality of care received…” The law lists 24 models that CMMI is authorized to pursue, such as:
  • “Establishing care coordination for chronically ill applicable individuals at high risk of hospitalization through a health information technology–enabled provider network that includes care coordinators, a chronic disease registry, and home telehealth technology,” and
  • “Aligning nationally recognized, evidence-based guidelines of cancer care with payment incentives…in the areas of treatment planning and follow-up care planning for… individuals…with cancer.”2
Terms such as “bundle,” “episode,” “global payment,” and “shared savings” do not appear anywhere in Section 1115A. It allows any payment model that will “improve the quality of care without increasing spending,” “reduce spending …without reducing the quality of care,” or “improve the quality of care and reduce spending.”

Section 1899, which authorized the Medicare Shared Savings Program, states that its purpose is to create a program that “promotes accountability for a patient population and coordinates items and services under parts A and B, and encourages investment in infrastructure and redesigned care processes for high quality and efficient service delivery.”3 Most people are not aware that this section authorizes use of partial capitation and “other payment models” as well as shared savings, because CMS has not implemented these other approaches.

The law clearly indicates that the core element of a “model” is a method of improving care delivery, not simply a different method of payment.2 It’s called an “alternative” payment model because a) it must demonstrate it will not increase Medicare spending, and b) savings in Medicare Parts A or D can be counted, not just savings in Medicare Part B or physician fee-schedule services. The current requirement that new physician service payments must be accompanied by reduced payments for other physician services does not apply to APMs.

Why Would Physicians Want to Be Part of an APM?
Two important misperceptions about APMs are: 1) they are needed so physicians will have “incentives” to deliver care differently and 2) the only reason physicians would want to be in an APM is to be exempt from MIPS or to receive the bonuses Congress authorized. The reality is that many physicians want to deliver care in different and better ways, but cannot do so due to barriers in the current payment system. Two major barriers4 are:

Lack of payment or inadequate payment for high-value services. Medicare and most health plans do not pay physicians for many services that would benefit patients and reduce spending, such as responding to patient phone calls or using nurses to help patients manage their health problems.

Financial penalties for delivering a lower-cost mix of services. Under fee-for-service (FFS) payment, physician practices that perform fewer or lower-cost procedures may no longer receive enough revenue to cover their practice costs. Today, physician practices are paid less when they help patients stay healthy enough to require fewer services.

A well-designed APM can overcome these barriers by paying adequately for high-value services and basing payment on the conditions or symptoms being managed and the outcomes achieved, rather than on the specific treatments used.

Another misperception is that physicians and other providers must accept significant financial risk for Medicare spending as part of an APM. Many physicians have been unable or unwilling to participate in existing APMs because of the high level of financial risk involved. However, sections 1115A and 1899 do not require that APMs impose financial risk on physicians. One of the only 2 models developed under Section 1115A that has been certified by the CMS Actuary for national expansion is the Diabetes Prevention Program, and there is no financial risk for providers in that model.5

What MACRA requires is that some entity accept “more than nominal financial risk” under an APM in order for a physician to receive a 5% bonus, higher annual update, and MIPS exemption. CMS was widely criticized for setting the “more than nominal” standard too high in its proposed regulations, and a more reasonable standard was included in the final rule. This will make it easier for physicians to participate in APMs that qualify for bonuses and the MIPS exemption. However, there can still be significant advantages to APMs that do not meet the risk requirements. 

Copyright AJMC 2006-2018 Clinical Care Targeted Communications Group, LLC. All Rights Reserved.
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