Monday, December 17, 2018

How Can You Tell a Good Alternative Payment Model From a Bad One?

Most current Alternative Payment Models have failed to achieve significant savings or improvements in quality because they are badly designed – they don’t correct the problems with current fee-for-service payment systems, and they have the potential to harm vulnerable patients and force small healthcare providers out of business. 

How can you tell a good APM from a bad APM?  Here are the eight criteria you should use to evaluate whether a proposed APM is likely to be successful:

  1. Does the APM pay for the high-value services needed to improve patient care?  To be successful, an APM can and must make any changes needed in the way physicians, hospitals, and other healthcare providers are paid so they are able to deliver high-value services that will improve outcomes and reduce spending.  Most current APMs do not make any changes in the basic ways that providers are paid, but merely provide “incentives” to reduce spending or improve quality.
  2. Does the APM align the payment amount with the cost of delivering high-quality care?  To be successful, an APM must align payments with the actual costs of delivering high-quality services, particularly when the volume of services is reduced.  Many current APMs actually widen the gap between payments and costs rather than narrowing it. 
  3. Does the APM assure each patient they will receive appropriate, high-quality care?  In order to protect patients, an APM should be designed with patient-level quality standards and targets that assure each patient they will receive high-quality care and achieve good outcomes.  Most current APMs only assess whether quality has changed on average for a group of patients, not whether it has improved or worsened for individual patients. 
  4. Does the APM make the cost of diagnosing or treating a health condition more predictable and comparable?  An APM can and should specify in advance the amount that will need to be paid for treatment of a particular condition or combination of conditions so that patients can compare the costs of care across providers.  Many current APMs do not set spending targets until after services are already delivered, and most do not even make final determinations as to which patients are eligible for the APM until after services are delivered, making it impossible for a patient or their payer to know in advance how much will be spent on the patient’s care.
  5. Will a provider only be paid under the APM if a patient receives services?  Although there are clearly serious problems with the quality and cost of the services delivered under fee-for-service payment, fee-for-service at least gives patients and payers the confidence that they will only pay something if they receive something in return.  Under many “population-based payment” APMs, providers are paid even if they do nothing for patients. 
  6. Are payments under the APM higher for patients who need more services?  Although fee-for-service payment is criticized for rewarding “volume over value,” any payment system that doesn’t adequately support a higher volume of services when patients need more services can result in worse outcomes for patients and higher long-run costs.  Many APMs fail to adjust payments for important differences in patients that require more services or different types of services.
  7. Is a provider’s payment under the APM based on things the provider can control?  Although fee-for-service payment fails to hold physician, hospitals, and other healthcare providers accountable for problems they caused or could have prevented, it also does not penalize them for things outside of their control.  Many current APMs go too far in the opposite direction – placing healthcare providers at financial risk for the total cost of care even though they can only control or influence a small part of it. 
  8. Will a provider know how much they will be paid under the APM before delivering services?  Under fee-for-service payment, physicians, hospitals, and other providers know exactly what they will be paid for delivering a service before they deliver that service, so they can determine whether they are likely to receive sufficient revenue to cover their costs before they incur those costs.  Under many APMs, it is impossible for the participating providers to predict how much they will be paid for the services they will deliver, and they may not know for sure how much they will receive until many months after the services are actually delivered. 

As the chart below shows, the shared savings/shared risk and “population-based payment” designs used by most current APMs fail to meet the majority of these criteria.  (You can download a copy of the Criteria chart here.) 

Fortunately, there are ways to design APMs so they meet all eight of the criteria.  Four general designs will likely meet the need for an APM in most circumstances:

Option 1A: Accountable Payment for Service.  Under this APM design, a provider receives a new or revised payment for delivering a specific service to patients, and the payment is reduced if targets for spending on specific services and for performance on quality measures are not achieved.

Option 1B: Accountable Bundled Payment.  Under this design, a provider or team of providers receives a bundled payment to enable delivery of a group of services to patients or to treat a particular condition, and the payment is reduced if targets for spending on specific services and performance on quality measures are not achieved.

Option 2: Outcome-Based Payment.  Under this design, a provider is paid for a service or group of services only if standards or targets for quality and spending are achieved.

Option 3: Bundled/Warrantied Payment.  Under this design, a provider or team of providers receives a bundled payment to deliver a group of services to patients, and the provider team is responsible for using the payment to cover the costs of necessary services and also to pay for avoidable services or services needed to address complications of treatment.

The components of these four APMs are summarized in the Framework for Alternative Payment Models that can be downloaded here

The details on how to design each of these Alternative Payment Models are available in CHQPR’s report How to Create an Alternative Payment Model.


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