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Beneficiary Engagement in Medicare's Alternative Payment Models: From Serendipity to Active Choice

The American Journal of Accountable Care®March 2017
Volume 5
Issue 1

This article explores elements of patient and consumer engagement implicated by Medicare’s alternative payment models, emphasizing the potential for shopping and use of cost information.

As CMS accelerates payment and delivery system reform, it is time to reassess the degree to which alternative payment models (APMs) engage beneficiaries. Fee-for-service (FFS) Medicare was created in an era when patient engagement rarely included informing a patient with cancer of his or her diagnosis, nor allowing pharmacists to discuss with patients the medicines they dispensed. Over the past decades, commercial and public insurance offerings have increasingly featured transparency tools, shared decision making, wellness incentive programs, and other innovations. All these techniques are predicated on consumers, patients, and caregivers making informed choices about their coverage and care.

CMS continues to roll out new alternative payment methods, both voluntary and mandatory. Yet, beneficiary choice is neither being marshaled nor promoted through any national awareness campaign to drive volume to APM-participating providers.

Dimensions of Patient Engagement

Patient and consumer engagement in healthcare encompass many dimensions. Langston et al1 offer a continuum in which patient satisfaction, informed choice, shared decision making, partnering with patients, and ownership of one’s health are prominent. Carman et al2 propose a matrix with 3 “levels of engagement”—direct care, organizational design and governance, and policy making—and 3 degrees of engagement, ranging from consultation to partnership. Carman et al3 further refine the matrix to include such discrete elements as patient education, shared decision making, support for self-management, organizational partnership, and transparency and public reporting. Fronstin and Elmlinger4 add cost-conscious behavior to the mix—a concept encompassing plan choice decisions, use of cost information, and participation in wellness programs. Drawing on Judith Hibbard’s patient activation work, Mittler et al5 developed 4 categories of engaged behaviors: self-management, healthcare encounter, shopping, and healthy behaviors.

In synthesizing the literature to develop a taxonomy relevant to Medicare APMs, dimensions are categorized here as: clinical, collective communication, transparency, and enrollment. Each dimension is implicated in unique ways by Medicare APMs. On the first 2 of these dimensions, appropriate means of engaging patients are well developed; but on the latter 2, inadequate attention has been given to informing and promoting consumer choice.


The most important dimension of patient engagement is the clinical dimension: enlisting the patient as a care partner to optimize outcomes, sharing in decision making when clinically practical and prudent, and, where possible, undertaking some degree of self-management. APMs that are premised on saving money through minimizing or avoiding complications of illness, such as the accountable care organization (ACO) and patient-centered medical home, depend on patients to adhere to both treatment plans and, ideally, a subset of designated, ACO-affiliated providers.

The host organization can add case managers, health coaches, and others to its care team, and adopt a program, such as OpenNotes, to help enhance patient communication and engagement; however, if the beneficiary is not motivated to stay healthy, additional infrastructure investments be for naught. APMs that save money by limiting low-value care6 are vulnerable to marketing influences that might lead a beneficiary to visit providers outside the ACO, or otherwise demand more intensive treatment. Because FFS Medicare permits beneficiaries to use any provider, an ACO clinician must engender trust and confidence among patients to help keep them in the (ACO) fold. Research has already shown this to be a problem, with nearly one-tenth of Medicare’s earliest ACO beneficiaries seeking primary care, and two-thirds seeking specialty care, outside their ACO.7 More recently, nearly 90% of beneficiaries in a Medicare Shared Savings ACO had expenditures outside of the ACO; and about one-third of total expenditures were paid to non-ACO providers.8

At least 1 clinical aspect is incentivized by a provider’s participation in an APM: shared decision making. In a purely FFS environment, a financial incentive may be lacking for a physician to employ shared decision-making tools or take time to discuss alternative treatment options.9 Providers facing a target budget may be disincentivized to suggest expensive treatments for some patients.

Collective Communication

Collective communication between Medicare patients and providers, mediated by CMS, substitutes for the type of market relationships that bind these 2 parties in the commercial insurance sphere. In the traditional market setting, consumers register their satisfaction through annual enrollment choices. With APMs, consumer representatives provide “system-level engagement”10 or “organizational partnership” 3 on behalf of the patient population. Medicare Shared Savings Program ACOs must include a beneficiary representative on their governing body.11 Further, patient experience surveys from a sample of the population served by APM clinicians permit collective feedback.

As DeCamp et al note, “system-level engagement should help ACOs design care programs and set priorities (eg, about which quality or cost areas to target) in ways that help them meet quality and cost goals. It also has the potential to improve trust in the organization and create a more positive organizational culture.”10 Although there are practical barriers to identifying beneficiary representatives—especially given many patients’ fluid relationship with an ACO—the representation requirement permits an avenue of communicating to providers that would not otherwise exist.


APMs raise unique transparency issues because they change provider incentives from the paradigm beneficiaries expect in a traditional Medicare setting; unlike the FFS paradigm, physicians may be incented to do less rather than more. With beneficiary notices about sharing ACO claims information comes the reassurance that they may see providers outside the ACO, too; however, that admonition lacks context.

Providers can be transparent about new processes put in place to respond to altered payment incentives. For instance, when UnityPoint Health-Meriter, a participant in CMS’ Bundled Payment for Care Improvement program, developed guidelines to help determine what type of postacute care a patient would be referred to, the guidelines—in the form of a checklist—were disclosed to patients before surgery and posted in their rooms as well.12

Information about ACOs’ and associated providers’ quality is publicly available for beneficiaries to consult in determining whether to stay with ACO-participating primary care providers, and to follow their referrals to other providers.


A fourth category of potential engagement techniques, common in the commercial context, has yet to be deployed in the APM Medicare context. Although enrollment usually connotes a contractual relationship between a consumer and a health plan, Donald Berwick uses the term to encompass “a commitment to a healing relationship” for purposes of specifying the “population” for which providers are accountable.13

The irony of the APM in an era when person-centered care is the watchword is that a beneficiary’s primary role in a new payment model is statistical: beneficiaries are, unwittingly, either members of an intervention group or a comparison group based solely on whether their provider has voluntarily adopted or been randomly assigned to an APM. Shopping and cost-conscious behavior are integral to consumer engagement, but these elements are absent from most Medicare APMs. Although Next Generation ACOs will be permitted to have beneficiaries align voluntarily in advance of subsequent performance years, this is but one component of potential enrollment activities advocated in 2014 by the Brookings Institution. Other activities included creating “behavioral levers,” such as reduced co-pays and deductibles, to encourage seeking care within the ACO and allowing shared savings for beneficiaries.14

Case Study Example

Imagine four 60-something patients undergoing a joint replacement at a prominent hospital in Seattle. Ann, Bob, and Carla are employed and have commercial insurance, whereas David, a retiree, is an FFS Medicare beneficiary. Why is each individual at this particular hospital? Ann is a managed care plan enrollee; all the plan’s joint replacement patients are referred to this hospital. She chose her provider when she chose her plan during open enrollment, having weighed the costs of various plan options against the array of providers in the plan network. Bob selected this hospital because his Blue Cross Blue Shield plan deemed this facility a “Blue Distinction” provider for joint replacement, guaranteeing no “surprise bills” from out-of-network physicians based at its facility. Carla is employed by Home Depot, which participates in the Pacific Business Group on Health’s Employers Center of Excellence Network. Although Carla is not a Washington resident, she travelled to Seattle because her employer has a bundled payment arrangement with the hospital and waived her associated cost-sharing for this procedure.

David, the Medicare beneficiary, is at this hospital because the surgeon to whom he was referred practices there. Although Medicare has bundled payment arrangements with providers in the region through CMS’ Bundled Payment for Care Improvement (BPCI) program, he is both ignorant of and indifferent to Medicare’s payment methodology. Had David undergone surgery at a BPCI site it likely would have been happenstance. If his procedure was reimbursed under the Comprehensive Care for Joint Replacement model, it would have been because the hospital’s zip code had been drawn by lot.

It is still very early in APM implementation, but it is nonetheless disappointing that beneficiary participation in APMs is a matter of serendipity rather than choice, because experience tells us that elements of APMs can be either attractive or concerning to consumers. A bundled payment can be akin to a warranty—Geisinger’s “ProvenCare” bundles have been marketed as such15—which is something that consumers value. Aetna advertises its ACOs’ cost savings directly to the public. On the negative side, the managed care backlash of the late 1990s demonstrated consumers’ fears about possible stinting when providers are bound by a budget target. The remainder of this article discusses in greater depth the shopping and cost-consciousness elements of consumer engagement with APMs.

Transparency About Financial Incentives

Writing at the close of the managed care heyday of the 1990s, Miller and Sage noted that nearly 20 states had enacted laws requiring insurers to explain physician compensation methods to their enrollees. The rationale was that if physicians were incentivized to limit treatment, it would “help individuals exercise their substantive rights once enrolled in a plan” if they “underst[ood] the basic premises of managed care,” and in particular, gatekeeping and capitation.16

Shared savings and gain-sharing regimes occupy a unique sort of middle ground between capitation and FFS. As with capitation, there is a financial incentive to provide less costly care, although the upside-only risk in most ACO arrangements is not as harsh as the 2-sided risk inherent in capitation. Because Traditional Medicare remains entirely FFS on the beneficiary side, the patient is free to walk away from a provider at any time and obtain care outside an ACO’s virtual network or episode-based payment regime with no questions asked, a situation entirely different than that prevailing within an HMO.

The transparency issue surrounding APMs is not whether the beneficiary understands that he or she retains freedom of choice to see any provider—that is made explicit in the notifications—rather, the question is whether they are given sufficient information to think about when to exercise that right. As Miller and Sage noted, patients need to “understand how different approaches to physician compensation might shape treatment options presented to them.”

Some beneficiaries attributed to an ACO see this language in their notification letter: “ACOs may share in the savings it achieves for the Medicare program when it succeeds in delivering high-quality care and spending healthcare dollars more wisely.” Other letters simply say that the ACO “may be rewarded for providing you with high quality, more coordinated care.” Although the latter verbiage clearly does not meet the Miller/Sage test, arguably, neither does the more expansive but still elliptical language in the former notification.

Most beneficiary advocates view ACOs and other APMs as largely benign, designed to increase the use of underprovided techniques and decrease flat-of-the-curve utilization. But the Center for Medicare and Medicaid Innovation’s Oncology Care Model (OCM) ventures into somewhat more sensitive territory, given the prominence of cancer “horror stories” during the managed care backlash. Cancer care is rife with perverse incentives to offer treatments that are more lucrative to providers. The OCM, like the medical home model, involves an add-on payment to physicians, but in this instance, the additional per member per month payment requires not only a commitment to longitudinal care of the patient but also to adhere to “clinical pathways.”

Clinical pathways (CPs) are evidence-based treatment protocols for delivering cancer care for patients with particular disease types and stages.17 However, even evidence-based guidelines must also apply value judgments in favoring one treatment over another. It appears that some do not take toxicity into account unless choosing between 2 or more treatments of equal efficacy; another approach deducts “points” for toxicity that can offset increased efficacy in determining the favored approach.

Wong et al identify subsets of patients who place a higher value on increased survival and are willing to endure more toxicity, whom they refer to as “Category B” patients; and patients who prefer low toxicity even at the expense of greater survival chances, whom they refer to as “Category C” patients.18 It would appear from the rudimentary information about pathways that is publicly available that most pathway-based APMs will align with the preferences of Category B patients.

Avalere Health notes the “limited public information around the CP development process, incentive structures, and the degree of flexibility clinicians have to adopt treatment plans that deviate from the pathway to meet patients’ needs.”17 Their research found scant information on how CPs are constructed, or about the evidence base employed for making these determinations; and that “patients are often unaware that their physicians participate in CPs and, therefore, may be more likely to offer particular treatments supported by the pathway.”17 It would be worth exploring whether some disclosures should address these concerns, although transparency in the context of a cancer diagnosis may not be actionable in a practical sense.

Fostering Enrollment-Type Engagement: A Role for Supplemental Insurance?

In addition to shopping based on service delivery preferences, activated consumers may also want to shop based on costs. Currently, any financial benefits from a Medicare episode payment or ACO accrue solely to CMS. Proponents of these models ideally would like to use differential cost sharing to attract beneficiaries19 to participating providers and incentivize involvement in care management programs. The principal barrier to this is that most FFS Medicare beneficiaries have supplemental coverage, in the form of Medigap plans with first dollar coverage. These plans are not equipped to offer differential cost sharing.

This issue might be resolved by creating an additional Medigap model plan or plans, similar to the Medicare SELECT option, that incentivize beneficiary engagement with delivery system reforms in exchange for a lower premium. Within the plan, cost-sharing differentials could encourage patronizing providers who have committed to reimbursement through an APM. Two examples include ACOs and episode-based payments/Centers of Excellence.

The Medicare Payment Advisory Commission (MedPAC) has recommended that ACOs be permitted to waive some or all cost sharing for visits with ACO practitioners, as a way of “increasing beneficiary identification with the ACO.”20 MedPAC believes this would allow more effective care management. An ACO-affinity Medigap product could limit or exclude coverage of coinsurance for providers not affiliated with the ACO, or adjust first dollar coverage to incentivize chronic disease management.

Additionally, CMMI is testing the BPCI and many other demonstrations. Although CMS has statutory authority to “expand” an APM to cover all of any selected category of procedures, the extent to which the agency will use this authority remains unknown. Some demonstrations could remain adjunct voluntary APMs; and if so, in the absence of Medigap changes, CMS would have few tools to encourage beneficiaries to patronize an APM site. In the employer market, some plans are waiving cost sharing when patients go to a “Center of Excellence,” an idea that may find an equivalent in a Medigap plan design.

Delineating a new, discounted Medigap “letter” plan to wrap around APMs would be one option for increasing beneficiary engagement with payment reform, as it would marshal voluntary consumer choices in the marketplace. Another potential interplay between APMs and supplemental insurance enrollment could involve Part D prescription drug plans (PDPs). In 2011, CMS staff drew up options for PDPs to wrap around ACOs, with the wrap PDP sharing in an ACO’s savings. This concept would require no legislation and might encourage more generous prescription drug benefits. Such approaches would require balancing competing values—such as beneficiary freedom of choice, uniformity and simplicity of plan designs, and ethical referral practices21 to define virtual networks—against promotion of efficiency through APMs.


It is necessary to engage patients in the core clinical dimension of care delivered under an alternative payment model, but engagement on this single dimension will not suffice to fully realize the promise of payment reforms. Policy makers and beneficiary advocates should explore ways to better inform patients of how altered payment incentives may influence their care. And beneficiaries’ encounters with APMs should not be left purely to serendipity. As APMs become more fully embedded in Medicare, we must consider what role consumer choice should play in their diffusion.


The author wishes to thank N. Lee Rucker, MSPH, principal and founder, Enhance Value, Bethesda, MD, for her valuable contributions to this article.

Author Affiliations: Dialysis Patient Citizens, Washington, DC.

Source of Funding: None.

Author Disclosures: The author is employed by a patient advocacy organization; he reports no relationship or financial interest with any entity that would pose a conflict of interest with the subject matter of this article.

Authorship Information: Concept and design; analysis and interpretation of data; drafting of the manuscript; critical revision of the manuscript for important intellectual content.

Send Correspondence to: Jackson Williams, JD, MPA, Dialysis Patient Citizens, 1012 14th S, NW, Washington, DC 20005. E-mail: Jwilli28@hotmail.com.


1. Langston T, Pattabiraman A, Kaye PE. Patient engagement: a framework for improving health and lowering cost. Regional Primary Care Coalition website. http://www.regionalprimarycare.org/assets/rpcc_patient_engagement.FINAL_.07.2012-2.pdf. Published June 2012. Accessed January 24, 2017.

2. Carman KL, Dardess P, Maurer M, et al. Patient and family engagement: a framework for understanding the elements and developing interventions and policies. Health Aff (Millwood). 2013;32(2):223-231. doi: 10.1377/hlthaff.2012.1133.

3. Gordon and Betty Moore Foundation; American Institutes for Research. A roadmap for patient and family engagement in healthcare practice and research. Patient and Family Engagement in Healthcare Roadmap website. http://patientfamilyengagement.org/roadmap.php. Accessed January 24, 2017.

4. Fronstin P, Elmlinger A. Findings from the 2014 EBRI/Greenwald & Associates Consumer Engagement in Health Care Survey [EBRI issue brief no. 407]. Employee Benefit Research Institute website.https://www.ebri.org/publications/ib/index.cfm?fa=ibDisp&content_id=5470. Published December 2014. Accessed January 24, 2017.

5. Mittler JN, Martsolf GR, Telenko SJ, Scanlon DP. Making sense of “consumer engagement” initiatives to improve health and health care: a conceptual framework to guide policy and practice. Milbank Q. 2013;91(1):37-77. doi: 10.1111/milq.12002.

6. Schwartz AL, Chernew ME, Landon BE, McWilliams JM. Changes in low-value services in year 1 of the Medicare Pioneer Accountable Care Organization program. JAMA Intern Med. 2015;175(11):1815-1825. doi: 10.1001/jamainternmed.2015.4525.

7. McWilliams JM, Chernew ME, Dalton JB, Landon BE. Outpatient care patterns and organizational accountability in Medicare. JAMA Intern Med. 2014;174(6):938-945. doi: 10.1001/jamainternmed.2014.1073.

8. Han MA, Clarke R, Ettner SL, Steers WN, Leng M, Mangione CM. Predictors of out-of-ACO care in the Medicare Shared Savings Program. Med Care. 2016;54(7):679-688. doi: 10.1097/MLR.0000000000000541.

9. O’Malley AS, Carrier E, Docteur E, Shmerling AC, Rich EC. Policy options to encourage patient-physician shared decision making. National Institute for Health Care Reform website.

http://nihcr.org/analysis/improving-care-delivery/prevention-improving-health/shared-decision-making/. Published September 2011. Accessed January 24, 2017.

10. DeCamp M, Sugarman J, Berkowitz SA. Meaningfully engaging patients in ACO decision making. Am J Account Care. 2015;3(2):30-33.

11. Shared Savings Program: frequently asked questions. CMS website. www.cms.gov/Medicare/Medicare-fee-for-Service-Payment/sharedsavingsprogram/faq.html. Updated December 1, 2016. Accessed January 24, 2017.

12. Boulton G. Can fixed payments transform the health care industry? Milwaukee Journal Sentinel website. http://archive.jsonline.com/business/payment-model-shows-potential-to-lower-costs-and-improve-quality-b99706511z1-375951591.html. Published April 16, 2016. Accessed January 24, 2017.

13. Berwick DM, Nolan TW, Whittington J. The triple aim: care, health, and cost. Health Aff (Millwood). 2008;27(3):759-769. doi: 10.1377/hlthaff.27.3.759.

14. McClellan MB, Kocot SL, White R, Mostashari F. How to improve the Medicare accountable care organization (ACO) program. Brookings Institution website.

www.brookings.edu/research/health-policy-issue-brief-how-to-improve-the-medicare-accountable-care-organization-aco-program/. Published June 2014. Accessed January 24, 2017.

15. Geisinger’s renowned ProvenCare program launches three new orthopaedic offerings: total hip, total knee and hip fracture [press release].

www.prnewswire.com/news-releases/geisingers-renowned-provencare-program-launches-three-new-orthopaedic-offerings-total-hip-total-knee-and-hip-fracture-274334131.html. Danville, PA: Geisinger Health System; September 8, 2014. Accessed January 24, 2017.

16. Miller TE, Sage WM. Disclosing physician financial incentives. JAMA.1999;281(15):1424-1430.

17. Avalere Health 2015 Clinical pathways: overview of current practices and potential implications for patients, payers, and providers. Avalere Health website.

http://avalere-health-production.s3.amazonaws.com/uploads/pdfs/1438002728_AH_Pathways_final.pdf. Published July 2015. Accessed January 24, 2017.

18. Wong YN, Egleston BL, Sachdeva K, et al. Cancer patients’ trade-offs among efficacy, toxicity, and out-of-pocket cost in the curative and noncurative setting. Med Care. 2013;51(9):838-845. doi: 10.1097/MLR.0b013e31829faffd.

19. Kocot SL, Hutchinson T, Hastings D, Hall P. The Medicare Shared Savings Program: CMS turns to stakeholders on incentivizing ACO risk. Health Affairs Blog website. http://healthaffairs.org/blog/2014/12/19/the-medicare-shared-savings-program-cms-turns-to-stakeholders-on-incentivizing-aco-risk/. Published December 19, 2014. Accessed January 24, 2017.

20. Improving care for Medicare beneficiaries with chronic conditions. Medicare Payment Advisory Commission website.

www.medpac.gov/docs/default-source/congressional-testimony/testimony-improving-care-for-beneficiaries-with-chronic-conditions-senate-finance-.pdf?sfvrsn=0. Published May 14, 2015.

Accessed January 24, 2017.

21. DeCamp M, Lehmann LS. Guiding choice—ethically influencing referrals in ACOs. N Engl J Med. 2015;372(3):205-207. doi: 10.1056/NEJMp1412083.

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