Thursday, December 19, 2019

How Should We Pay for Cancer Care?

In November, the Center for Medicare and Medicaid Innovation (CMMI) released the initial details of “Oncology Care First,” its proposal for a new Alternative Payment Model (APM) for cancer care that would replace the current Oncology Care Model. Cancer patients and those who care about them should be worried, because if Oncology Care First is actually implemented, it could prevent cancer patients from receiving the treatments they need and cause community oncology practices to close.

Over the past three years, the CMMI Oncology Care Model (OCM) has helped many Medicare beneficiaries with cancer to receive better care by filling in a key gap in the Medicare fee-for-service system — the lack of payment for care management services. The Monthly Enhanced Oncology Services (MEOS) payments provided in OCM represent more than $1,000 per patient in additional revenue for the nearly 200 oncology practices across the country participating in OCM, and the physicians have used that revenue to provide greater support for their patients and to respond more quickly and effectively when patients experience side effects from their treatment so they don’t need to go to an emergency department or be hospitalized.

But there is a second part to the Oncology Care Model — the “Performance-Based Payment” — and it has a very problematic structure:

  • OCM Creates a Financial Incentive to Withhold Needed Treatment.  An oncology practice can receive a bonus through the Performance-Based Payment (PBP) for withholding the delivery of an expensive treatment that a patient needs.  The quality component of OCM does nothing to prevent an oncology practice from stinting on care.
  • OCM Penalizes Practices for Using Evidence-Based Care and Encourages Practices to Avoid Patients Who Need More Expensive Treatments.  The methodology CMS uses to set Target Prices fails to adjust for important clinical differences between patients, changes in evidence about effective treatments, and large increases in the prices of drugs, and CMS reduces all Target Prices by an arbitrary “discount.”  This means that if a practice treats patients based on the most current evidence, spending will likely exceed the Target Prices, which would penalize the oncology practice financially.
  • OCM Rewards Practices for Delays in Completing Treatments.  In OCM, CMS pays for services in six-month “episodes,” which means they will receive significantly higher payments if they stretch out patient treatments to last longer than six months.
  • OCM Encourages Oncology Practices to Avoid Patients Who Have Health Problems Unrelated to Cancer Treatment.  The Performance-Based Payment in OCM is determined based on total spending on all services that an oncology practice’s patient receives for all of their health issues, not just services related to their cancer.  An oncology practice will be less likely to receive a Performance-Based Payment, and more likely to have to pay a penalty, if it has a higher-than-average number of patients with other health problems.

Even though the OCM Performance-Based Payment creates these undesirable incentives, oncologists were able to safely ignore them in the initial years of the demonstration project because none of the oncology practices signed up for the “downside risk” tracks in OCM.

However, that is now changing. Oncology practices are being forced to either (a) join one of the downside risk tracks where they would have to pay penalties to CMS based on this flawed methodology, or (b) exit the OCM program altogether and lose the additional MEOS payments they have been receiving.  Either way, the loss of revenues will likely result in reduced services and poorer outcomes for patients. 

Rather than building on the success of OCM by filling in additional gaps in fee-for-service payments and fixing the problematic Performance-Based Payment methodology, “Oncology Care First” would go in the exact opposite direction. It keeps the same Performance-Based Payment Methodology, forces every practice to pay penalties to CMS if spending on their patients exceeds the unrealistic Target Prices set by CMS, eliminates the MEOS payments and replaces them with unspecified new “Enhanced Services Payments,” and eliminates the payments all practices receive for office visits and chemotherapy administration, replacing them with a complex new “Monthly Population Payment.”

As a result, Oncology Care First has the potential to make cancer care worse by penalizing physicians for using new cancer treatments and paying them bonuses if they withhold the treatments that cancer patients need. The magnitude of the potential penalties is so large that they could force oncology practices out of the program or out of business entirely.

Cancer patients and their physicians shouldn’t be forced to choose between the flawed fee-for service system and an even more flawed alternative payment model like Oncology Care First. Fortunately, there’s a better way. Instead of Oncology Care First, CMS should implement Patient-Centered Cancer Care Payment with the two key components of a good APM: .

  1. New payments specifically designed to support the kinds of high-value services cancer patients need; and
  2. Accountability for reducing avoidable spending, so that savings can be generated without harming patients.

The details of how to create Patient-Centered Cancer Care Payment are explained in A Better Way to Pay for Cancer Care: The Problems with CMS Oncology Payment Models and How to Create Patient-Centered Cancer Care Payment. This report also describes the problems with current fee-for-service payments that need to be fixed and provides more detail on the serious problems with the Oncology Care Model, Oncology Care First, and the CMS Radiation Oncology (RO) Model.

Although changes are clearly needed in current payment systems to achieve higher-value healthcare, the cure shouldn’t be worse than the disease. Forcing physicians to take financial risk for the total cost of care for cancer patients will harm the patients and accelerate the loss of high-quality physician practices. It’s time to embrace a different approach to value-based payment for cancer care– a patient-centered approach instead of an payer-centered approach focused solely on reducing spending. 


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Monday, May 13, 2019

The Disappointing Details About the CMS “Primary Care First” Payment Model

The most important element of a truly “value-based” healthcare system is strong primary care.  The reason is simple – the lowest spending and the best outcomes occur when patients stay healthy, and primary care is the only component of the healthcare system that is specifically designed to help patients prevent health problems from occurring and to identify and treat new problems as early as possible.

Unfortunately, the nation’s primary care system is at risk of collapse.  There is a large and growing shortage of primary care physicians in the country; many primary care physicians are burning out, and most medical students don’t want to go into primary care.  Although there are multiple causes for this, a major reason is the failure of the current payment system to provide adequate resources to support high-quality primary care services.  The problems are particularly severe for small primary care practices, which deliver most of the care in rural areas of the country.

In April 2019, the U.S. Department of Health and Human Services announced the “CMS Primary Cares Initiative,” consisting of five new payment model options intended to “transform primary care to deliver better value for patients throughout the healthcare system.”  The full specifications of the new Primary Cares Initiative options have not yet been released, but based on the details revealed so far, it appears they may fall far short of what is needed to fully address the problems facing primary care and to successfully sustain a high-value primary care system. 

The Problems with Primary Care First

Among the five options in the Primary Cares Initiative, “Primary Care First” is the only option that a small primary care practice will be able to participate in.  The “Direct Contracting” options are only available to practices that have at least 5,000 Medicare patients, which is far more patients than solo and small primary care practices will have.  In fact, most of the counties in the United States don’t even have 5,000 Medicare beneficiaries living in them.

Unfortunately, there are nine major problems with Primary Care First that prevent it from creating the kind of payment system that small primary care practices need in order to deliver high-quality care to their patients and stay afloat financially:

1. Practices Would Still Receive a Significant Portion of Revenues Based on the Number of Face-to-Face Office Visits.  Primary care practices have called for elimination of a payment system that pays for office visits and little else, but instead of doing this, Primary Care First actually creates a brand-new $50 fee for each face-to-face office visit.  Although it also would provide a flexible $24 per-patient per-month payment, more than 40% of a typical practice’s payments would still be tied to face-to-face visits.  Under Primary Care First, a practice that is able to care for patients effectively with fewer office visits will lose revenue and could be unable to cover its costs.

2. Payments for Many Patients Would Not be More Flexible at All.  A practice would only receive the new, flexible monthly payment for patients who are “attributed” to the practice based on where they received care in the past, and new patients would not be attributed for up to two years.  Patients could “voluntarily align” with the practice, but this requires the patient to create an account on the CMS website and go through a multi-step process to designate the PCP as their primary clinician.  Even if the patient successfully completes this process, the practice will have to wait 3-6 months to begin receiving the new payments. 

3. Practices Would No Longer Receive a Higher Payment for a Patient Who Has Greater Needs.  In the current fee-for-service payment system, a primary care practice receives more payment when it provides care to a patient with greater needs.  But under Primary Care First, a primary care practice would receive the exact same monthly payment and the same office visit payment for a patient regardless of how sick or healthy the patient is. 

4. Most Practices Would Receive No More Revenue Than They Do Today, and Less Revenue Than Under Other CMS Primary Care Models.  While opinions differ about the best methodology for paying for primary care, there is widespread agreement that primary care practices need to be paid more than they are paid today.  But CMS has indicated that the combination of the PBPM payments and office visit fees in Primary Care First are intentionally designed to provide no more revenue than current fee-for-service payments.  Despite receiving no additional revenue, however, a Primary Care First practice would be expected to deliver expanded services, including 24/7 access to a care team member, care management services, and integrated behavioral healthcare services.

5. Most Practices Would Receive Little or No Reward Based on Their Performance.  The “Performance-Based Adjustment” in Primary Care First could increase the amount a practice is paid by as much as 50%.  However, it appears that the majority of practices would only be able to receive a 3.5% increase in their total payments.  At most 10% of participating practices would be able to receive a 50% increase in payment, while every practice could have its payments cut by 10% if it fails to achieve high scores on quality measures or if its patients are hospitalized frequently. 

6. Accountability Measures Are Not Patient-Centered.  Under Primary Care First, delivering high-quality care would merely enable the practice to avoid a reduction in payment; the practice would only qualify for an increase in payment if its patients were hospitalized less frequently than the patients in other practices.  Moreover, a hospital admission for injuries in a traffic accident, for planned surgery to treat cancer, or for complications of chemotherapy administered by an oncologist would be treated the same as an avoidable admission for a chronic disease exacerbation, putting the practice at risk for things it can’t control.  The heavy weight placed on hospitalization rates is presumably designed as an incentive to focus attention on patients who have a high risk of hospitalization, but it could also cause practices to avoid accepting sicker patients or to reduce services to other patients.

7. Practice Revenues Would Be Unpredictable and Uncontrollable.  Because most of the costs in a primary care practice are fixed, a primary care practice needs to be able to predict how much it will receive each month in order to be sure it will have enough revenues to cover the costs of hiring additional personnel to deliver expanded services to its patients.  The current design for Primary Care First will make it impossible for primary care practices to predict how much they will be paid.  For example, in a small practice, one or two unexpected hospital admissions could result in a 7% reduction in payments.

8. Payment Complexity Would Increase and Administrative Burdens Would Remain High.  Although CMS says that Primary Care First will “allow clinicians to focus on caring for patients rather than their revenue cycle,” the practice’s “revenue cycle” will actually become more complex than it is today.

9. Most Primary Care Practices in the Country Will Be Unable to Participate.  Even if a primary care practice wants to participate in Primary Care First, it will not be able to do so if it is located in Alabama, Arizona, Connecticut, the District of Columbia, Georgia, Iowa, Idaho, Illinois, Indiana, Kansas (other than the Kansas City metro area), Kentucky (other than the Cincinnati metro area), Maryland, Minnesota, Mississippi, Missouri (other than the Kansas City area), Nevada, New Mexico, New York (other than the Buffalo and North Hudson regions), North Carolina, Pennsylvania (other than the Philadelphia Region), South Carolina, South Dakota, Texas, Utah, Vermont, Washington, West Virginia, Wisconsin, or Wyoming.  More than 40% of the Medicare beneficiaries in the country will not have an opportunity to receive care from a primary care practice participating in either Primary Care First or the Comprehensive Primary Care Plus initiatives.

The Direct Contracting Options Are Not Options for Most Primary Care Practices

Only large primary care practices with at least 5,000 beneficiaries would be eligible to participate in the new “Direct Contracting” options in the CMS Primary Cares Initiative.  Although they could receive a large, flexible “population-based payment” to deliver primary care services, they would also be required to pay CMS for 50%-100% of any increases in total Medicare spending for their patients beyond whatever benchmark spending level CMS establishes.  Even a small increase in total Medicare spending would represent a large proportion of a primary care practice’s revenue, putting the practice at risk of bankruptcy if it does not have large financial reserves available. 

Changing Primary Care First So It Provides the Support Small Primary Care Practices Need

Fortunately, it would be relatively easy for CMS to modify the details of the Primary Care First initiative to solve the problems described above.  Nine specific changes would enable CMS to create the kind of payment model that smaller primary care practices have been seeking.  These changes are based on the two primary care payment models recommended by the Physician-Focused Payment Model Technical Advisory Committee (PTAC) that were developed by the American Academy of Family Physicians (AAFP) and Jean Antonucci, MD (a solo primary care physician practicing in rural Maine).

1.  Pay practices with a monthly per-patient payment in place of all fees for office visits. 

2.  Pay a higher monthly amount for a patient who has greater needs. 

3.  Set monthly payment amounts at levels adequate to support high-quality primary care.  The monthly payment under Primary Care First should be no less than $65 per patient in 2020, and ideally even higher.  The monthly payment amounts for patients with more complex needs should be higher than this average amount.

4.  Begin paying monthly payments immediately when a patient enrolls for care in the primary care practice.  CMS already does this for Chronic Care Management (CCM) payments under the Medicare Physician Fee Schedule – as soon as a patient consents to receive CCM services, the physician practice can begin delivering the services and receiving payment for them.  A similar approach should be used in Primary Care First.

5.  Create billing codes so that primary care practices can classify patients appropriately and receive timely monthly payments for each patient.

6.  Evaluate performance using patient-centered outcome measures with achievable performance targets. 

7.  Establish performance-based rewards and penalties that create manageable levels of financial risk for small primary care practices.  The total adjustment to the monthly payment based on all aspects of performance should be no more than 15% of the monthly payment amounts, which in turn would be much higher than the payments primary care practices receive today.  Moreover, if every primary care practice performs well, every primary care practice should be rewarded for doing so, rather than limiting rewards to a small subgroup of practices. 

8.  Create a complementary payment model to support home-based palliative care for seriously ill patients.  Patients with serious illness need home-based palliative care, not just primary care.  Small primary care practices don’t have enough patients with serious illness to enable them to deliver palliative care services cost-effectively, and the payment amounts in the Primary Care First option for Seriously Ill Patients are far below what is needed to support palliative care services alone much less primary care, too.  In addition to an improved Primary Care First program for primary care practices, CMS should implement the payment models for palliative care that were developed by the American Academy of Hospice and Palliative Medicine (AAHPM) and the Coalition to Transform Advanced Care (CTAC), both of which were recommended for implementation by PTAC over a year ago. 

9.  Allow primary care practices in all parts of the country to participate in the revised Primary Care First program.  Every Medicare beneficiary deserves to receive high quality primary care services, and every beneficiary with a serious illness deserves to receive palliative care services.  Primary Care First should be expanded so that every primary care practice in every state has the opportunity to participate, and so that palliative care services can be delivered in every community.

More details on all of these changes are in The Problems With Primary Care First and How to Fix Them.

The Goal of Primary Care is to Improve Patients’ Health, Not Just to Save Money for Medicare

Higher and more flexible payments for primary care will enable primary care services to not only stay afloat but to deliver better services to their patients.  This will result in fewer avoidable hospitalizations, fewer unnecessary tests, and fewer inappropriate referrals to specialists, which in turn will produce significant savings for Medicare on these types of services.  However, it may be unrealistic to expect that these savings will be sufficient to fully offset the cost of the higher payments needed to adequately support primary care, much less to achieve net savings overall, during the 5-year time period typically used in CMS evaluations.  Placing more financial risk on primary care practices is more likely to accelerate the loss of primary care providers than to achieve greater savings for Medicare. 

Because of the need to take a longer-term view of the value of primary care, the Center for Medicare and Medicaid Innovation (CMMI) may not be the appropriate mechanism for successfully addressing the problems facing primary care.  It seems increasingly likely that Congressional action will be needed to create a truly effective primary care payment system.  The biggest benefits of primary care will be seen beyond the five-year time horizon used in CMMI demonstration projects, through slowing the progression of chronic disease and even preventing some diseases from occurring at all, not just trying to avoid hospitalizations for those who already have such conditions.  Only Congress can authorize making investments designed to achieve these longer-run benefits.  Consequently, in addition to revising Primary Care First to make it as successful as possible within current statutory constraints, CMS should ask Congress for the authority to create the kind of primary care payment system that the country truly needs.

NOTE: This post was authored by Harold Miller. Although Miller is a member of the Physician-Focused Payment Model Technical Advisory Committee (PTAC), the comments in this post are his personal opinions, and are not intended to represent the position of the PTAC as a whole or of other individual members. PTAC’s statutory charge is limited to reviewing proposals for payment models that are submitted to it by stakeholders, and it has no role in advising HHS or CMS other than submitting comments and recommendations on the proposals it receives.


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Tuesday, January 22, 2019

Why CMS Alternative Payment Models Are Failing

The reason CMS Alternative Payment Models (APMs) are failing to significantly reduce spending in Medicare is that none of the major APMs meets the majority of the eight criteria for a successful APM.  The Problems with Medicare’s Alternative Payment Models and How to Fix Them details the serious weaknesses in the six major Advanced APMs that have been implemented by CMS and the CMS Innovation Center:

  • Bundled Payments for Care Improvement Advanced (BPCI-A);
  • Comprehensive Care for Joint Replacement (CJR);
  • Comprehensive End Stage Renal Disease Care (CEC);
  • Comprehensive Primary Care Plus (CPC+);
  • The newly adopted Basic Track Level E and Enhanced Track in the Medicare Shared Savings Program (MSSP); and
  • The Oncology Care Model (OCM).

As shown in the chart, not only do these APMs fail to meet the majority of criteria for a successful APM, most of the APMs fail to correct any of the problems with fee-for-service payment.  The reason is simple – most CMS APMs don’t actually change the way physicians, hospitals, and other healthcare providers are paid.  Most of the APMs don’t pay for high-value services needed to improve care nor do they ensure the amounts paid for key services match the costs of delivering those services.  Only CPC+ and OCM provide new payments to physicians so they can provide different services than they do today. 

What is even more problematic is that the spending accountability mechanisms included in most CMS APMs penalize healthcare providers for treating sicker patients and patients who need more expensive treatments, while providing no assurance to individual patients that necessary services won’t be withheld in order to meet spending targets.  Although all of the APMs include quality measures, the bonuses and penalties under the APMs are based on the average quality of care for all patients, not the quality of care for individual patients.  Moreover, the risk adjustment systems used in the APMs fail to recognize some of the most important reasons why patients may need more services or more expensive services to successfully treat their health problems.  As a result, under most of the APMs, physicians and hospitals could actually receive financial bonuses if they give some patients less treatment than they need, and providers could be penalized when they provide the most effective care for complex patients. 

CMS can do better – much better.  The Problems with Medicare’s Alternative Payment Models and How to Fix Them describes two different APMs designed to improve care for patients with chronic conditions.  Unlike the existing CMS APMs, each of these APMs would meet all eight of the criteria for a successful APM.

Moreover, these APMs would address a major opportunity for saving money and improving care for Medicare beneficiaries that CMS has completely ignored – providing the resources that teams of specialists and primary care physicians need to provide high-quality care to patients with chronic conditions.  Patients with asthma, chronic kidney disease, COPD, diabetes, heart failure, inflammatory bowel disease, and other chronic conditions are often hospitalized for exacerbations of their condition that could have been avoided through better care management services, in-home services, and other services, but these services aren’t paid for adequately or at all under current Medicare payment systems.  Yet despite the fact that a large percentage of Medicare beneficiaries have one or more of these chronic conditions and there are opportunities for significant savings by improving their care, CMS has not implemented any APMs specifically focused on helping patients with these conditions avoid hospitalizations.  None of the existing CMS APMs change payments for the specialists who typically manage or co-manage care for the subset of patients who are most at risk of complications, even though these physicians are often in the best position to help such patients avoid hospitalizations. 

Alternative Payment Models hold the potential for accelerating progress toward more affordable and higher-quality care, but only if they are designed in the right way and only if they are focused on opportunities to reduce spending without harming patients.  Faster progress in developing and implementing these types of APMs needs to be a national priority.

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Friday, January 04, 2019

Does Medicare Need Mandatory Payment Models?

The Failure of Current Alternative Payment Models

Despite high hopes that Alternative Payment Models (APMs) would achieve significant savings for payers and better quality care for patients, most of the APMs implemented to date have had disappointing results. 

The largest APM in the nation is the Medicare Shared Savings Program (MSSP).  Debates among statisticians about how much savings have been achieved by Accountable Care Organizations in the MSSP have obscured the fact that even the most optimistic analyses show net savings of only $29 per beneficiary per year (one-quarter of one percent) during the first four years of the program (2013-16), and savings in 2017 were only slightly higher. 

The poor performance of current APMs is not surprising because they do not actually change the fee-for-service payment system; they merely pay bonuses if providers can reduce spending and/or impose penalties if spending increases.  However, because there are no changes in the way physicians, hospitals, and other providers are paid, they cannot deliver many kinds of high-value services that could reduce spending without harming patients.  Moreover, most APMs require that individual providers reduce total spending on their patients, even though no individual provider can control all of the services a patient receives or all of the factors affecting the costs of those services.

The Move to Higher-Risk APMs

Unfortunately, rather than creating better APMs, the Centers for Medicare and Medicaid Services (CMS) and other payers claim that the solutions are to continue using the same approaches, but with higher levels of financial risk for providers, or to create “population-based payments” in which healthcare providers would be expected to deliver all of the services a patient needs for a fixed monthly or annual payment.  CMS has already announced plans to phase out the “upside only” Medicare Shared Savings Program, and the Center for Medicare and Medicaid Innovation (CMMI) has indicated that most new APMs it tests will require high levels of financial risk.

Because of the problematic way that most APMs have been structured, many providers have been unwilling to participate.  Increasing the level of risk in APMs could result in even fewer providers participating, which in turn would reduce the total savings that can be achieved.  In addition, because participation in APMs has been voluntary, evaluations of the APMs will be biased if the initial participants are not representative of all providers who would ultimately participate.  

Concerns about these issues have led to calls for CMS to create “mandatory” payment models. 

What is a “Mandatory” Payment Model?

The term “mandatory payment model” is misleading because the intention is typically not to require every provider in the country to participate in a particular alternative payment model.  Instead, the goal is to make participation in an APM mandatory for some providers in order to “test” the APM, i.e. to evaluate its effectiveness in reducing spending and/or improving quality.  

In an effort to mimic a randomized controlled trial, a randomly-chosen subset of providers would be paid under the APM (whether they want to participate or not), while other providers (or a random subset of other providers) would be prohibited from participating in the APM (even if they would like to be paid under the APM).  CMS is using one version of this approach in the Comprehensive Care for Joint Replacement (CJR) APM.  CMS selected 196 of the 380 metropolitan statistical areas (MSAs) in the country, randomly chose 75 of those MSAs, and required all hospitals in 67 of the MSAs to participate in the CJR APM for two years.  Hospitals in the rest of the country were not permitted to participate in the CJR APM.  After the first two years of the program, the mandate was removed entirely in 34 of the MSAs and for small and rural hospitals in all 67, but about one-fourth of those hospitals elected to continue participating voluntarily.  

The Problems with Mandatory APMs

There are a number of serious problems with the “mandatory model” approach to APM testing:

  • There is no guarantee that the APM will achieve the desired results or that it will have no undesirable impacts, otherwise there would be no need to test it.  APMs designed to reduce spending, particularly those involving significant financial risk, have the potential to harm patients as well as providers. It is inappropriate to require providers and their patients to participate in an APM that could be harmful before any testing or evaluation has been completed. 
  • Conversely, if the potential benefits of the APM are sufficiently great to justify requiring some providers to participate, it is inappropriate to prevent other providers from voluntarily participating, particularly if their patients could benefit from the type of care that could be delivered with support from the APM.
  • It is well-known that there are significant differences in the health status of patients across the country and significant differences in practice patterns of providers both across and within geographic regions.  Randomization only by region without randomization of providers or patients within regions would only have a limited ability to separate the effects of the APM from the influence of inter-regional and intra-regional differences in spending and quality.
  • Requiring every provider in a geographic region to participate in a payment model does not preclude patients from traveling to a different region for services, either to avoid the effects of the APM in their home region or to obtain whatever benefits are expected under the APM from a provider in a participating region.  For example, there is anecdotal evidence that in regions where CJR is mandatory, higher-risk patients are being forced to travel to non-participating regions in order to receive hip or knee surgery.  This “cherry-picking” and “lemon-dropping” could reduce the reliability of any evaluation results.
  • Because the mandate may only last until the evaluation is completed, providers who would be unwilling to participate voluntarily may also be unwilling to make the changes in care delivery necessary to achieve success while the test is underway.  Consequently, the evaluation of a temporary mandatory test would not necessarily show what the impacts of a permanent mandatory program would be.  Indeed, if a subset of providers did not want the APM to be universally mandated, they would have an incentive not to produce successful results during the demonstration.

A Better Approach:
Well-Designed APMs That Attract Patients and Providers

Support for mandatory models rests heavily on three false premises.  False Premise #1 is that a voluntary approach will not provide an accurate indication of the true impact of an APM.  However, there is no evidence for this; in fact, the evaluations of the mandatory CJR APM and the voluntary Bundled Payments for Care Improvement (BPCI) APM found similar impacts on savings and quality for hip and knee replacement surgeries. 

False Premise #2 is that when providers are unwilling to participate in an APM, the only way to overcome that is to require them to participate.  However, there is a better alternative — redesigning the APM so that providers and patients will want to participate.  

Randomized controlled trials (RCTs) for drugs, medical devices, and procedures do not mandate that either patients or providers participate. RCTs recruit volunteers based on the potential benefits of a new therapy or the opportunity to achieve similar outcomes at lower cost. 

The reason providers have refused to participate in CMS APMs is the poor design of those APMs, not unwillingness to move away from fee-for-service payment.  The best evidence of this is the dozens of APM proposals that physicians have submitted to the Physician-Focused Payment Model Technical Advisory Committee (PTAC).  Over the past two years, PTAC has recommended 14 APMs that physicians want to participate in.  But CMS has refused to implement any of them. 

Instead, CMS continues to design APMs that place providers at financial risk for aspects of spending and quality they cannot control, while failing to give providers the resources they need to improve patient outcomes and reduce Medicare spending.  There is no evidence that simply increasing the financial risk in CMS APMs would result in greater savings.  Moreover, transferring significant financial risk to providers can have undesirable results, including loss of access to services for higher-need patients, higher prices due to consolidation of providers, and lower quality of care.   

A Better Approach:
Limited Scale Testing Followed by Phased Expansion

False Premise #3 is that a new APM must be immediately tested with a large number of providers in order to determine whether it works.  Yet this is the exact opposite of the approach used for clinical trials.  Large, randomized trials are Phase III, not Phase I.  The drug, device, or procedure is first tested with a small number of volunteers to ensure it is safe, then it is tested with a larger group of volunteers to make a preliminary assessment of its efficacy, and only then is a large scale trial contemplated.  Positive results from the initial phases encourage patients and healthcare providers to voluntarily participate in the larger-scale tests.

The mandatory APM approach is also the exact opposite of how every other industry develops new products and services.  New products do not immediately jump from the design table to large-scale production.  Businesses create one or more prototypes and then test them on a limited scale to identify problems and opportunities for improvement.  The design is then revised before broader production begins.  In addition, product designs continue to be refined and new versions of products are created whenever the benefits for consumers are expected to outweigh the costs of making the changes.

A similar “beta testing” process is needed for APMs.  The more innovative the APM – i.e., the more that it differs from the current payment system – the more likely there will be a need for initial beta testing and potentially for additional rounds of refinement after the APM is implemented more widely.  Positive results from the beta testing phase will encourage more patients and providers to participate in larger tests, and if results continue to be positive, they will pave the way for broad implementation.  This is why PTAC has recommended beginning with limited-scale testing for most of the APMs it has favorably reviewed.

Should Successful APMs Be Mandated?

If testing of an APM is successful, it will likely be appropriate to make it permanent.  However, participation can still be voluntary.  Successful APMs will not achieve savings simply because they pay in a different way or because they create an “incentive” to spend less; they will achieve savings by removing specific payment-related barriers to changing care delivery that will impact specific opportunities for improvement.  Both the opportunities to achieve savings and the barriers to pursuing those opportunities will differ from community to community.  This means that “one size fits all” APMs will be less likely to achieve the full amount of savings that are possible nationally or to provide better care to patients in all parts of the country than a more customized approach.  Mandating a single approach may lower administrative costs for Medicare and other payers, but it will also likely reduce the amount of savings even more.  Multiple, voluntary APMs will allow the fastest progress toward higher quality, more affordable healthcare.

(Download Does Medicare Need Mandatory Payment Models here.)

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