Containing Chronic Disease Costs With the Ambulatory Specialty Model

ABSTRACT

On July 14, 2025, CMS proposed and requested comment on establishing the Ambulatory Specialty Model, a mandatory payment model for specialists treating heart failure (eg, cardiologists) and low back pain (eg, anesthesiologists, neurosurgeons, physical medicine and rehabilitation). Comments were due on September 12, 2025, with notable responses from various stakeholders (eg, surgery centers, cardiologists, consulting firms).

The model is notable for several reasons, including strict implementation of a 2-sided risk model, inclusion of specialists typically insulated from involvement in alternative payment models, and a new approach to performance measurement.

In this article, we aim to inform clinicians—specialists in particular—about key aspects of the model, as they are likely to be unaware of its impending mandatory nature, and to provide recommendations for how the model can be improved to achieve its intended goal while mitigating unintended clinical and economic consequences.

Am J Manag Care. 2026;32(10):In Press

doi:10.37765/ajmc.2026.90029

Takeaway Points

The Ambulatory Specialty Model (ASM) has the potential to reduce chronic disease costs by holding specialists accountable for quality and total spending, but its real-world impact will depend on careful risk design and alignment of measurement.

• ASM has the potential to reduce chronic disease costs.
• ASM achieves this by holding specialists accountable for both quality of care and total spending.
• ASM’s real-world impact will depend on careful risk design and the proper alignment of measurement.

Chronic conditions affect the majority of US adults and are a leading driver of the nation’s $4.9 trillion in annual health care costs.¹ CMS payment models have historically faced challenges engaging specialists in value-based arrangements to incentivize cost containment, coordinating fragmented treatment access for chronic conditions, and streamlining quality measures while avoiding an excessive reporting burden. In July 2025, CMS proposed the Ambulatory Specialty Model (ASM) targeting high-cost chronic conditions affecting Medicare patients. Running from January 2027 to December 2031, ASM mandates participation by specialists treating patients with heart failure (HF) or low back pain (LBP) in the outpatient setting across prespecified regions.²

The ASM’s fundamental assumption is that aligning financial incentives between specialists and primary care providers can improve care coordination and the detection and treatment of chronic conditions. A major objective of the model is to test whether it can effectively lower treatment costs for HF and LBP, and to determine whether it can be expanded to other high-cost conditions. The ASM takes bold steps to modify clinician incentives, for instance, by introducing a mandatory, 2-sided risk model into specialist compensation, meaning specialists would be exposed not only to gains from high performance on outcome measures but also to losses from poor performance. In this article, we review key features of the model, assess potential challenges with model implementation, and offer recommendations for improvement.

Model and Clinician Participation

CMS takes a calculated approach to target specialists with limited historical engagement in models by identifying them as participants based on the proportion of Medicare Part B claims attributed to each condition. Specialists for HF include cardiologists, but the model omits subspecialists (eg, electrophysiologists, interventionalists). For LBP, a wider array of specialists is included as management of chronic LBP can involve clinicians from anesthesiology, pain management, interventional pain management, physical medicine and rehabilitation, orthopedic surgery, and neurosurgery.²

Although this approach is thoughtful, it may benefit from expanding eligibility criteria to ensure stakeholders critical to the care of these conditions are included, without overly diluting financial incentives. For instance, in LBP, physical therapy is often the first-line treatment, but physical therapists are not included. For HF, primary care clinicians often play a key role in titrating medicines where standardized treatment regimens exist (eg, guideline-directed medical therapy for HF with reduced ejection fraction), but they are not financially aligned with cardiologists in the model. Recognizing the full scope of care involved in treatment will help CMS strengthen ASM’s alignment with key specialist allies in managing these conditions.

Performance Measures

ASM differs from models that build traditional episode-based payments and total cost-of-care caps, seeking instead to financially reward or penalize specialists based on the quality of care they provide (or meaningfully influence). ASM aims to achieve this goal by building upon the performance measures in the Merit-Based Incentive Payment System Value Pathways (MVP). In MVP, providers choose from a subset of cost- and care-related quality measures against which they will be evaluated, and high performance is financially rewarded. ASM goes a step beyond MVP by defining mandatory HF and LBP quality measures for clinicians to report, narrowing the outcomes of interest to which specialists are held accountable.²

For cost performance, CMS will measure episode-based costs for each condition, comparing a specialist’s cost per defined episode with a risk-adjusted median episode cost that accounts for factors such as comorbidities, prior utilization, and social determinants of health. Note that this model captures all health care costs, including those across inpatient, outpatient, and home care settings, as well as drug costs.²

From these performance measures, a final score between 0 and 100 is calculated to rank clinician performance. The score awards up to 50 points for care quality and cost. Negative adjustments of up to 10 or 20 points in the final score are possible unless clinicians complete improvement activities and comply with interoperability requirements, respectively.²

CMS intends to stratify final-score performance at the individual clinician level, distinguishing ASM from other payment models.² This requirement for granular performance reporting will likely result in a significant administrative reporting burden, particularly for smaller practices. CMS could consider allowing clinicians to participate at the group practice level or an equivalent (eg, Taxpayer Identification Number) to reduce reporting burden and allow practices to use clinician-level feedback to address care inefficiencies that require practice-level change.

Another important factor is specialists’ uptake of electronic health records (EHRs) and their ability to comply with interoperability requirements. A July 2025 survey of ambulatory surgery centers found that only 76% used an EHR, of which 40% reported concerns about exchanging patient information.³ CMS should consider an on-ramp period before committing to applying the interoperability adjustment to allow certain specialty practices to develop the necessary infrastructure for compliance.

Cost and Risk Arrangement

ASM applies a mandatory, 2-sided risk structure, meaning participants must take on both upside risk, with potential bonuses that can be earned based on cost savings, and downside risk, with potential penalties based on excess costs. In ASM, providers face payment adjustments of –9% to 9% of future Medicare Part B claims, meaning their revenue could vary up to 18% depending on performance.²

Although 2-sided risk is a key aspect of the model, its merits are still up for debate. Proponents argue that it strengthens the financial incentive for cost accountability.⁴ Critics argue that many practices lack sufficient margins to absorb downside risk, potentially leading to macroeconomic consequences. For example, fear of a –9% penalty among smaller specialty practices may catalyze their consolidation with larger groups or systems. Compounding this for specialty practices is their inability to diversify risk across multiple service lines, leaving them particularly vulnerable. Changes in specialty practice structure in health care provider shortage areas should be monitored if the model is implemented in its current form. Otherwise, CMS could consider a transition period in which the model begins as an upside risk–only model and implements the downside risk portion later, once practices have gained experience with the model.

Interaction With Existing Payment Models

ASM is being introduced as CMS continues to adjust its already-crowded suite of payment models. By design, ASM is narrow and condition specific, establishing accountability for specific outcomes and costs, but it is important to consider how these incentives align with broader population-based cost-of-care models, like accountable care organizations (ACOs).⁵ Theoretically, having multiple overlapping models risks fragmented accountability for clinical and administrative efficiency and increased operational complexity for participating providers, diluting incentives and affecting outcomes.

CMS emphasizes that ASM is purposefully designed to coexist with Advanced Alternative Payment Models and ACOs to increase specialist engagement.² Historically, specialists have had little engagement in alternative payment arrangements, likely due to limited financial incentives. CMS suggests that targeting ASM to specialists could better engage them in areas like care coordination, which have traditionally been incentivized within broader population-based cost-of-care models. CMS further argues that incentives for care transformation would be stronger because ASM includes Medicare patients across the specialist’s entire practice, not just the subset of patients assigned to the ACO.² 

This design rationale has merit. However, model participants should be able to reasonably affect outcome metrics or motivate key stakeholders to align with CMS’ model incentives. For instance, adherence to guideline-directed medical therapy for patients with HF and left ventricular systolic dysfunction, such as β-blockers and angiotensin-converting enzyme inhibitors, angiotensin receptor blockers, or angiotensin receptor–neprilysin inhibitors, represents 1 of the quality measures evaluated under ASM, but these medications are often managed by primary care clinicians rather than specialists. During the model period, CMS should monitor whether expanding participant inclusion criteria or additional alignment mechanisms may be necessary to further engage specialists.

Medical Considerations

The term disease—from a medical definition—implies a clear, unifying etiology (eg, type 1 diabetes characterized by autoimmune destruction of pancreatic β-cells resulting in absolute insulin deficiency),⁶ but in the cases of HF and LBP, there is no unifying underlying etiology. HF is a syndrome (ie, a collection of symptoms that occur together to reflect a common clinical state), whereas LBP is a symptom (ie, a single, patient-reported experience), and both can have numerous possible causes. Caution is warranted when validating and applying evolving performance measures for such conditions. In the case of LBP, use of high-risk medications (eg, opioids) is a performance measure under ASM. However, these patients may have legitimate indications for such therapies (eg, metastatic cancer involving the spine). It is difficult to effectively implement episode-based cost mechanisms for conditions with heterogeneous presentations and treatment regimens.⁷ Performance measure designs that align with clinical care standards may be best achieved by focusing payment efforts on diagnoses clearly linked to specific diseases (eg, LBP [symptom] vs cancer of the spine [disease]).

CMS leverages ASM to address high-cost chronic conditions while engaging specialists. Clinicians must be aware of the changes ASM brings, including its mandatory nature, attribution methodology, and performance measures, to ensure they are advocating for appropriate modifications to the model structure. With thoughtful refinement, CMS can mitigate unintended consequences of rollout and promote higher-value care for patients. n

Author Affiliations: Independent Scholar (AK), New York, NY; Department of Psychiatry, Yale School of Medicine (JTK1), New Haven, CT; Department of Medicine, Johns Hopkins University School of Medicine (JTK2), Baltimore, MD

Source of Funding: None

Author Disclosures: Mr Kumar reports receiving a salary from ThoroughCare, Inc, outside the submitted work.

Authorship Information: Concept and design (AK, JTK1, JTK2); analysis and interpretation of data (JTK2); drafting of the manuscript (AK, JTK1); critical revision of the manuscript for important intellectual content (AK, JTK1, JTK2); administrative, technical, or logistic support (AK, JTK2); and supervision (AK, JTK1).

Address Correspondence to: Ashwanth Kumar, MS, 390 First Ave #2B, New York, NY 10010. Email: ashwanth.kumar@alumni.duke.edu
Key: JTK1, Jacob T. Kannarkat, MD; JTK2, Joseph T. Kannarkat, MD, MPP

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