The American Journal of Managed Care
September 2019
Volume 25
Issue 9

Physician-Initiated Payment Reform: A New Path Toward Value

Physician groups have begun designing alternative payment models for their own specialties, proposing that CMS include financial risk, funding for new technologies, and legal waivers.


Objectives: In the move toward value-based payment, new payment models have largely been designed by payers and focused on the role of primary care providers. We examine a new phase of payment reform wherein providers, mostly specialists, are designing alternative payment models (APMs) for their own practices through a task force, called the Physician-Focused Payment Model Technical Advisory Committee, created by the Medicare Access and CHIP Reauthorization Act of 2015. Although it is a potentially notable shift in payment reform, little is known about the content of these proposals to date.

Study Design: Qualitative systematic review of physician-focused payment model proposals submitted to CMS.

Methods: We analyzed the first wave of new payment models proposed. For each of the 24 proposals submitted by physicians and physician groups, we assessed the models on their 10 key dimensions and evaluated underlying themes across all or many of the models to gain insights into what providers are looking for in APMs within the constraints of the rules established by the HHS secretary.

Results: Key features of the models and our analysis include bearing financial risk, a reliance on case management, embrace of new technologies, and consideration of legal barriers.

Conclusions: We discuss how specialists may help lead in the evolving payment landscape and recommend how these models might be improved. Payers and policy makers could benefit from our findings, which reflect how providers view financial risk in APMs and provide guidance on the types of payment reforms that they may embrace in the journey toward value.

Am J Manag Care. 2019;25(9):431-437Takeaway Points

  • In proposals of new payment models to the Physician-Focused Payment Model Technical Advisory Committee, specialists and other providers have indicated that they would be amenable to assuming financial risk.
  • Collectively, the payment models that the providers have designed suggest that many providers see investment in new technologies and increased time spent on case management as strategies to succeed in a value-based framework.
  • Policy makers should critically consider which proposals may slow healthcare spending and should consider how antikickback provisions might hinder the formation of value-based arrangements, as well as how the newly proposed payment models might interact with existing alternative payment models.

Historically, policy efforts to slow healthcare spending centered on changing the way providers are paid—especially those imposed by payers—have not always been met with enthusiasm by the provider community. Medicare’s mandatory episode-based payment models for cardiac and orthopedic care, for example, met substantial resistance from providers and were ultimately scaled back.1 Physician groups, including the American Medical Association (AMA), have in turn called for voluntary, physician-led payment innovations as an alternative to top-down payment reform. CMS, in a “New Directions” vision statement for its Center for Medicare and Medicaid Innovation, also highlighted voluntary payment models—including for specialty physicians—as a new focus.2

To date, little is known about the appetite of physicians, particularly specialists, to design their own payment models aimed at achieving higher quality at lower cost. Payment innovations by public and private payers have largely focused on the role of primary care physicians and the quality of primary care decisions or outcomes. Specialists thus far have had fewer opportunities to design or implement alternative payment models (APMs) directly pertaining to their scope of practice.3

In this paper, we examine the first broad, large-scale effort by providers to design new payment models for their own specialties. We evaluated the payment models submitted to the Physician-Focused Payment Model Technical Advisory Committee (PTAC)—a task force created by the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). The PTAC reviews payment models submitted by providers and submits recommendations to the secretary of HHS, who may reject, revise, or implement each proposal. The recommendations are structured around 10 PTAC criteria (Table 14).5

First Wave of New Payment Models

As of November 2018, physicians and provider groups submitted 24 of 25 total PTAC proposals,4 which vary in scope, clinical focus, and economic dimensions. These proposals reflect how providers wish to be paid in a manner that generally departs from pure fee-for-service (FFS). Collectively, the submitters are composed of 6 professional societies, 13 provider groups, a state government agency, 2 academic medical centers, a nonprofit association, and an individual physician. In most of these proposals, specialists came forward with new reimbursement models involving financial risk for core services provided by their specialties, which is a stark contrast from the largely primary care—based APMs thus far. Although CMS has not yet launched demonstrations for PTAC proposals, this novel trend and the requests of enterprising providers and their organizations offer insights into possible future directions of payment reform and the challenges that such models may face.

We conducted a systematic review of the 24 physician-focused payment model proposals along 10 dimensions: patient population, population size, physician specialty, specialty size, services covered, payment type, duration of payment coverage, upside financial incentives, downside risk, and technological innovations in care delivery. These were selected to provide a combination of both broad and specialty-specific insights into the types of payment models that physicians are seeking. In addition to proposing novel APMs, the proposals also include requests to change the Medicare fee schedule, along with minor technical changes to payment rules. We excluded 1 proposal submitted by a non—healthcare provider.

Of the 24 proposals, 19 focused on new payment models for specific specialties, including surgery, gastroenterology, pulmonology, nephrology, neurology, oncology, urology, palliative care, interventional cardiology, and emergency medicine. Several key attributes of the proposals are depicted in the Figure.4,6 A detailed table describing the 24 proposals across all 10 dimensions is included in the eAppendix (available at Although the proposals differed in the patients, providers, and clinical scenarios that they concerned, we observed important common features across the models.

Financial Risk

Given the HHS secretary’s criteria to improve value, most of the proposals chose to demonstrate greater value through an arrangement that required the provider to accept some financial risk for costs of care of their patients. The ways that the proposals structured that risk provide insight into the terms that were considered acceptable. In 21 of 24 proposals, provider entities asked for a shared savings and shared losses (ie, “2-sided”) payment model wherein physicians are rewarded if spending is below a prospective risk-adjusted payment benchmark and penalized if spending exceeds the benchmark. In addition, providers asked for payment adjustments, including varying degrees of bonuses, based on performance on quality measures. The 21 proposals generally capped financial gains and losses with stop-gain and stop-loss limits that varied from 4% to 20% and were frequently about 8% and 9%.

Most accountable care organizations (ACOs) in Medicare have thus far operated without downside risk. The fact that these specialists are proposing to assume risk suggests a willingness to coordinate care, manage population health, and engage in other activities typically performed by primary care or other allied providers (eg, longitudinal follow-up). Although the submitters are a self-selected group, it is likely that recent experiments with downside risk, through Next Generation ACOs and other advancements in private payer contracts, have provided some level of familiarity with or confidence in such an approach. Another motivator may have been the potential for the providers to achieve “Advanced APM” status under MACRA to earn the 5% bonus while avoiding reporting requirements and payment adjustments under the Merit-based Incentive Payment System (MIPS). Although these models have some degree of risk-bearing, many left important payment details unresolved (eg, how payment adjustments will be calculated or how they will be distributed among providers within the APM), making it difficult to determine how much risk individual providers would bear. A recurring challenge is the trade-off between the technical difficulties of limiting financial risk to disease-specific spending (ie, attributable to the specialist) and the risk of accountability for total costs of care, which is more straightforward to calculate but more difficult to expect a single specialty to manage effectively.

The most frequently proposed mechanism for risk-bearing was bundled payments for episodes of specialty care, ranging from surgeries and dialysis to home hospitalizations and hepatitis C treatment. A common challenge among these bundled payment approaches is identifying the triggering event for an episode. For instance, the end-stage renal disease (ESRD) proposal grappled with whether starting dialysis or declining biomarkers of kidney function is the appropriate trigger for the bundle. This is a key issue, as evidence from Medicare’s voluntary bundled payment program for lower extremity joint replacements highlighted the possibility that savings may be offset by an increase in the number of bundles triggered, especially among healthier patients. (However, it should be noted that this concern has not materialized in evaluations to date of the CMS mandatory bundled payment program for lower extremity joint replacements.7) CMS should monitor how the design of the triggering event might lead to inappropriate initiation of bundles. Mitigating inappropriate triggering is likely important for its intended purpose of slowing spending. Further, although bundled payments have been shown to reduce spending for surgical episodes like joint replacements, a recent evaluation of Medicare’s bundled payment initiatives for medical conditions (including congestive heart failure, chronic obstructive pulmonary disease [COPD], sepsis, and acute myocardial infarction) found no significant changes in Medicare payments, length of stay, emergency department use, hospital readmission, or mortality.8 Policy makers should thus critically assess the cost-saving potential of proposals that bundle services for chronic medical conditions, such as ESRD.

Given the dearth of specialty-based quality measures used by payers today, it is notable that these specialists embraced the HHS secretary’s quality measurement criterion and are willing to subject their payments to quality measures specific to their domain of practice. It is worth noting, however, that many of these specialty-specific quality measures have not been previously implemented on a broad scale. Although expanding quality measurement into specialty care is a meaningful innovation, to the extent that untested measures may be poor markers of improved quality, payment adjustments may not accurately reward specialists for their efforts. Further, given that quality measures play the important role of protecting against underprovision of care (ie, skimping) in the setting of prospective payment contracts, untested quality measures may pose a patient safety risk if they fail to ensure proper care. This concern of skimping is particularly relevant in the case of vulnerable populations, who may be harmed by models that, in tying reimbursement to quality, inadvertently encourage physicians to avoid caring for those patients with the greatest medical and social needs.9 Using evidence from other countries is one approach taken by some proposals to demonstrate the validity of their measures. Experience and learning gained by testing novel quality measures designed by specialists will likely provide valuable evidence for future payment models. Finally, the process of incorporating novel measures might also allow payers to assess the effectiveness of such measures in changing provider behavior.

Case Management

The proposals also frequently featured case management, often as a key contributor to savings. Twelve of the 24 proposals requested a payment for tasks such as patient monitoring and surveillance. For example, one model10 proposed payments for population health management of elderly patients with chronic conditions, and another11 proposed bundled payments for services that would include home visits and follow-up for patients recovering from acute incidents. Today, patient engagement and monitoring—which are often considered valuable and cost-effective—are not typically reimbursed by CMS. For instance, the Government Accountability Office showed in a report12 that provider groups frequently cite inadequate payment as a significant barrier to the use of telehealth in Medicare. At least half of the proposals advocated for lowering that barrier.

Most of the new models proposed per-member per-month (PMPM) payments to cover the cost of these services. The COPD and Asthma Monitoring Project (CAMP) proposal,13 for example, requested a $175 PMPM fee for remote monitoring of high-risk patients with COPD and asthma, citing studies whose findings suggest that Medicare will ultimately save money.14-16 Proposals that featured case management similarly argued for monitoring and surveillance of patients with ESRD,17 prostate cancer,18 and inflammatory bowel disease,19 as well as in other clinical scenarios, such as palliative care.20 Table 24 includes selected case management features and proposed funding mechanisms.

These proposals requested that CMS reward them for preventing unnecessary interventions through monitoring and incremental adjustments in care. For the providers, the proposed PMPM payments offset the costs of the time and resources required to engage in these functions. For CMS, these requests present an interesting alternative path toward potential cost control and quality improvement outside the centralized development of APMs. However, PMPM payments involve no risk sharing and are subject to the same FFS-based incentives that policy makers are looking to mitigate.

To enhance the effectiveness of case management, many proposals sought to engage allied professionals, including nurses, social workers, nutritionists, pharmacists, midwives, physical therapists, and others, in care delivery. For instance, the Annual Wellness Visit proposal21 requested that nurses be allowed to perform Medicare-billable annual wellness visits under physician supervision to increase the capability of understaffed rural health clinics. These providers already play critical roles today, but formalizing their contributions within specialty-based APMs at the request of physicians themselves is a notable development. For example, the Patient-Centered Headache Care Payment proposal,22 submitted by the American Academy of Neurology, includes a patient care coordinator as part of the Headache Care Team who is responsible for periodic patient follow-up with questionnaires, headache diaries, and referral tracking and management—important tasks that are not currently paid for by Medicare.

An issue that surfaces in the proposals is whether models based on case management services can be effective in smaller group practices with fewer patients and allied providers. These new payment models may encourage provider consolidation, as larger organizations are likely in a better position to manage financial risk and comply with quality reporting and health information technology (IT) requirements. Nonetheless, most of the proposals attempt to address how small practices could participate in the new APMs. Some, such as Project Sonar,18 propose that small practices form larger purchasing coalitions to contract with shared service providers.23 The contracted services may include quality and outcomes reporting, IT requirements, and care management, allowing small group and solo providers to engage in these important functions. The proposals indicate that this approach is being piloted in various settings across the country. The proposed models could further encourage participation among small practices by facilitating integration with MIPS—a feature that is often overlooked by models that focus on the Advanced APM track of MACRA—which is otherwise less accessible for small practices. Lastly, proposed models that rely on a specific quality management or accounting system may struggle to engage small practices, as they may face high switching costs for infrastructure and need more flexibility.

Many proposals emphasized care coordination, suggesting that additional revenues through chronic care management codes may not be adequately offsetting practice costs of coordination. However, specialty-based models inherently face challenges in coordinating across a range of specialists caring for a given patient, particularly compared with a primary care—based APM in which an internist or family physician naturally coordinates the care team. This challenge may be exacerbated by the lack of well-accepted standards for what roles specialists should play in cases where specialists and primary care physicians both coordinate care; the potential for disrupting team dynamics and confusing patients is not trivial. Therefore, the proposed models could be improved by more specific delineations of provider roles and responsibilities, particularly with respect to how the patient’s primary care provider fits into the model. Moreover, the models would benefit from clearer guidance on how savings could be shared among members of the care team. Given the lack of precedent, establishing standards for the distribution of responsibilities and incentives across specialties could be a meaningful contribution of PTAC. That said, policy makers should be cautious about the potential of coordination to generate savings, given sparse evidence that care coordination actually lowers spending (although it may improve patient care).24

Technological Innovations

Several groups proposed the implementation of innovative technologies to support care delivery. For example, Project CAMP12 proposed a smartphone application to track patient-reported symptoms, computerized decision support and “smart alarms” for pulmonologists, and Bluetooth-enabled digital peak flow meters that transmit clinical data to providers in real time. The Home Hospitalization proposal25 relies on Bluetooth-enabled medical devices (eg, blood-pressure cuff, pulse oximeter, scale, stethoscope) for biometric data tracking as part of its tablet-based telehealth platform that also features video communication. Selected technological innovations in the proposed models are described in Table 3.4

Providers view new technologies as a way to improve patient engagement and increase the value of care. However, a central question remains as to who will pay for such technologies. Five of the proposals requested payments for the use of new technologies. However, CMS does not usually fund start-up costs behind new technologies, especially those not approved by the FDA. HHS, in a recent comment on this matter, indicated that payment models testing proprietary technology, such as Project CAMP’s peak flow meter, will not be pursued.26 Thus, whether paying for such new technologies will induce investment in telehealth and whether it can save money remain open questions. The risk of underinvestment in technologies that benefit patients through improved monitoring or decision making also continues to exist. To this end, CMS might consider increasing chronic care management fees to account for the technologies needed to manage patients in the digital age. That aside, the proposed models would benefit by considering more creative ways to support new technologies than simply requesting new billing codes. Innovative strategies may include folding the start-up costs into an enhanced bundled payment or sharing risk with the companies that manufacture the technologies, which are approaches taken by a few proposals.

Legal Considerations

Five of the proposals requested safe harbor designations from Stark laws, suggesting that these laws—which exist at both the federal and state levels and prohibit physicians from making referrals to those with whom a financial relationship exists—may act as unintended barriers to improving value in care delivery. The American Hospital Association advocated in Congressional testimony for exceptions under the antikickback statute to advance new APMs, arguing that the statute’s strict liability penalizes providers seeking to collaborate and create efficiencies.27 The AMA currently supports a US Senate bill that would allow such exceptions.28 Most recently, 2 former HHS secretaries called for safe harbor exceptions to Stark laws, which they argue have become roadblocks in the move toward a value-based system by making hospitals reluctant to reward physicians for best practices and causing confusion from inconsistent interpretation.29 Given that APMs rely on more teamwork among providers across specialties, exemptions from antikickback statutes may facilitate contractual agreements among providers. Whether such relief may be generalized in APMs through federal regulation or whether decisions will be made on a case-by-case basis is unknown. A recent Request for Information from CMS calling for ideas on Stark law reform signals momentum on this issue.30 However, although safe harbor designations and other waivers of antikickback provisions may facilitate the formation of APMs that span the care continuum, policy makers should continue to critically assess financial relationships that have the potential to create perverse incentives for overutilization.

Future Outlook

The Affordable Care Act commenced a move toward value-based payments. In the last decade, new payment models have largely been designed by payers and policy makers and mostly focus on the role of primary care providers. The payment models submitted to the PTAC, in contrast, were designed by providers themselves with an explicit goal of improving the value of care in specialty care settings. Among these are some potentially innovative ideas, such as longitudinal accountability centered on specialty care, more granular measurement of quality using clinical data, care coordination for chronic illness, and novel technology that aids in patient monitoring and communication. These models propose to increase value through financial risk on the costs of care, albeit with limited downside risk. As of November 2018, 13 of these proposals had been recommended for testing or implementation, 5 had not been recommended, and others were still being considered. More than a dozen additional letters of intent have been submitted to the PTAC, indicating continued momentum in this effort. Most of these future proposals will also focus on specialties, such as radiation oncology, orthopedic surgery, and allergy, asthma, and immunology.5

Of note, it is unclear how these proposed models would interact with existing APMs. Many of the proposals overlap clinically with existing models, such as Bundled Payments for Care Improvement models and the Medicare Shared Savings Program (MSSP). This overlap raises 2 issues. First, it may be unclear how to reconcile costs of care when the same patient is included in different models. Second, when participating in parallel programs, evaluation of the impact of each model becomes more challenging methodologically. Some have called for more guidance from CMS on potential interactions and if certain models may take precedence in financial reconciliation or distributions of shared savings or losses.31 Several models considered this overlap in their APM design. For example, the Comprehensive Care Physician Payment Model indicated how its proposals could be added as supplemental payments or penalties on top of MSSP ACOs.32 However, most proposals did not address possible model interactions.


These payment model proposals by healthcare providers offer initial insight into the characteristics of value-based payment arrangements that specialists in the United States may be willing to accept. In addition, they provide guidance on where physicians may see opportunities to improve the delivery of care. They may help inform the future direction of payment reform—toward more risk for specialties, a focus on case management, and new technologies to improve patient engagement. Many of these models face obstacles, from the reorganization of provider organizations to legal barriers, and pose certain risks that need to be mitigated, including safety concerns around untested quality measures and preservation of some FFS incentives. Regardless, these models suggest that some providers, especially specialists, might support payment reform if it is done in a way that incorporates their input. Ultimately, the road from payment reform to delivery system improvement is lengthy—requiring ingenuity, diligence, and commitment from providers willing to challenge the status quo. This new work by forward-thinking providers to shape payment and accountability for themselves is an important step in this journey.Author Affiliations: Harvard Medical School (SG, TGF, ZS), Boston, MA; Massachusetts General Hospital (TGF, ZS), Boston, MA; Johns Hopkins Medicine (KKP), Baltimore, MD; The Brookings Institution (KKP), Washington, DC.

Source of Funding: Supported by a grant from the Office of the Director, National Institutes of Health (NIH Director’s Early Independence Award, DP5 OD024564, to Dr Song).

Author Disclosures: Dr Ferris is a member of the Physician-Focused Payment Model Technical Advisory Committee (PTAC), to which the proposals analyzed in this study were submitted. Dr Patel is a vice president of Johns Hopkins Health System, a member of PTAC, and a board member of Dignity Health, SSM Health, and Paladina Health. Dr Song reports speaking fees from the International Foundation of Employee Benefit Plans, outside the submitted work. Mr Gondi 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 (SG, TGF, KKP, ZS); acquisition of data (SG, ZS); analysis and interpretation of data (SG, TGF, KKP, ZS); drafting of the manuscript (SG, KKP); critical revision of the manuscript for important intellectual content (SG, TGF, KKP, ZS); obtaining funding (ZS); administrative, technical, or logistic support (SG); and supervision (TGF, ZS).

Address Correspondence to: Zirui Song, MD, PhD, Department of Health Care Policy, Harvard Medical School, 180A Longwood Ave, Boston, MA 02115. Email:

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2. Centers for Medicare & Medicaid Services: Innovation Center new direction. CMS website. Accessed November 25, 2017.

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10. Coalition to Transform Advanced Care. Advanced Care Model (ACM) service delivery and advanced alternative payment model. Office of the Assistant Secretary for Planning and Evaluation website. Published February 7, 2017. Accessed November 30, 2017.

11. Icahn School of Medicine at Mount Sinai. “HaH Plus” (Hospital at Home Plus): provider-focused payment model. Office of the Assistant Secretary for Planning and Evaluation website. Published May 2, 2017. Accessed November 30, 2017.

12. Telehealth and remote patient monitoring use in Medicare and selected federal programs. Government Accountability Office website. Published April 2017. Accessed November 30, 2017.

13. Pulmonary Medicine, Infectious Disease and Critical Care Consultants Medical Group Inc. The COPD and Asthma Monitoring Project (CAMP). Office of the Assistant Secretary for Planning and Evaluation website. Published December 6, 2016. Accessed November 30, 2017.

14. Ho TW, Huang CT, Chiu HC, et al; HINT Study Group. Effectiveness of telemonitoring in patients with chronic obstructive pulmonary disease in Taiwan: a randomized controlled trial. Sci Rep. 2016;6:23797. doi: 10.1038/srep23797.

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17. Renal Physicians Association. Incident ESRD clinical episode payment model. Office of the Assistant Secretary for Planning and Evaluation website. Published May 25, 2017. Accessed November 30, 2017.

18. Large Urology Group Practice Association. LUGPA APM for initial therapy of newly diagnosed patients with organ-confined prostate cancer. Office of the Assistant Secretary for Planning and Evaluation website. Published July 5, 2017. Accessed November 30, 2017.

19. Illinois Gastroenterology Group; SonarMD, LLC. Project Sonar. Office of the Assistant Secretary for Planning and Evaluation website. Published December 21, 2016. Accessed November 30, 2017.

20. American Academy of Hospice and Palliative Medicine. Patient and Caregiver Support for Serious Illness. Office of the Assistant Secretary for Planning and Evaluation website. Published August 15, 2017. Accessed November 30, 2017.

21. Mercy Accountable Care Organization. Annual Wellness Visit billing at rural health clinics. Office of the Assistant Secretary for Planning and Evaluation website. Published August 14, 2017. Accessed November 30, 2017.

22. American Academy of Neurology. Patient-Centered Headache Care Payment: an alternative payment model for patient-centered headache care. Office of the Assistant Secretary for Planning and Evaluation website. Published October 12, 2017. Accessed November 30, 2017.

23. Khullar D, Burke GC, Casalino LP. Can small physician practices survive? sharing services as a path to viability. JAMA. 2018;319(13):1321-1322. doi: 10.1001/jama.2017.21704.

24. McWilliams JM. Cost containment and the tale of care coordination. N Engl J Med. 2016;375(23):2218-2220. doi: 10.1056/NEJMp1610821.

25. Personalized Recovery Care, LLC. Home hospitalization: an alternative payment model for delivering acute care in the home. Office of the Assistant Secretary for Planning and Evaluation website. Published October 27, 2017. Accessed November 31, 2017.

26. Price TE. Letter to Pulmonary Medicine, Infectious Disease and Critical Care Consultants Medical Group, Inc. Office of the Assistant Secretary for Planning and Evaluation website. Published September 7, 2017. Accessed January 2, 2018.

27. AHA comments to House Ways and Means Committee on improving the physician self-referral (Stark) law. American Hospital Association website. Published January 29, 2016. Accessed November 30, 2017.

28. Medicare Care Coordination Improvement Act of 2017, S 2051, 115th Cong, 1st Sess (2017).

29. Sebelius K, Thompson TG. Overcoming health-care challenges by moving from volume to value. The Hill website. Published July 17, 2018. Accessed July 20, 2018.

30. CMS seeks public input on reducing the regulatory burdens of the Stark Law [news release]. Baltimore, MD: CMS; June 20, 2018. Accessed November 30, 2018.

31. Kocot SL, White R, McCutcheon T. What is PTAC’s role in fostering the development of APMs? Health Affairs Blog website. Published March 26, 2018. Accessed July 20, 2018.

32. University of Chicago Medicine. The Comprehensive Care Physician Payment Model (CCP-PM). Office of the Assistant Secretary for Planning and Evaluation website. Published March 1, 2018. Accessed June 12, 2018.

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