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INSIGHT: Rethink Medicare’s APM Incentives to Drive Value-Based Care

July 20, 2020, 8:00 AM

The Covid-19 pandemic has underscored the importance of moving away from provider payment systems that rely on the volume of services provided.

As volumes fell, many fee-for-service based physician practices and hospital systems experienced corresponding revenue shortfalls. At the same time, value-based models that pay based on improving population health weathered the storm in a more secure position.

Pre-pandemic, policymakers recognized the promise of these models—to provide a better care experience for patients, a favorable model for physicians facing burnout, and a more sustainable future for the Medicare Trust Fund.

During the pandemic, providers participating in these two-sided risk models sprang to action, offering coordinated care for seniors with multiple chronic conditions now confined to their homes, deploying telehealth capabilities, and responding to the virus. The advanced alternative payment model (APM) infrastructure provided an incredibly important public health resource for communities. The case for the move to value-based care is as clear as ever, and it is time to re-examine how policy can better support that transition.

MACRA Hasn’t Achieved Full Potential

In 2015, a sweeping bipartisan majority in Congress enacted the Medicare Access and CHIP Reauthorization Act (MACRA). The law sought to propel the industry away from traditional fee-for-service payment models and toward value-based care. To incentivize this transition, MACRA included a 5% bonus for participants in advanced APMs who meet certain criteria. Qualifying participants (QPs) would also be exempt from the more burdensome reporting requirements and payment adjustments of MACRA’s “Merit-based Incentive Payment System.”

These are potentially strong incentives, and we have seen encouraging progress in recent years. The unfortunate reality on the ground, however, is that the mechanics of the advanced APM incentive are preventing MACRA from achieving its full potential.

How the Advanced APM Bonus Works

Pursuant to law and regulation, advanced APM (two-sided risk-bearing) entities must have a minimum threshold percentage of their patients or payments flow through the advanced APM to qualify for the 5% bonus.

Those thresholds incrementally increase over time with the intent of encouraging greater participation in performance-based risk models. The goal was to accelerate the movement away from a broken payment system that rewards clinicians for volume and toward models that pay for population health.

Unintended Consequences

Unfortunately, in practice, the thresholds serve as a barrier for participants in advanced APMs to achieve payment bonuses. Because of the way the thresholds are structured, including specialists in the advanced APM network usually counts against an advanced APM trying to hit those patient or payment targets. In the case of accountable care organizations (ACOs), it is harder for beneficiaries to be aligned through specialists because alignment is based where the patient receives most of their primary care services.

Unfortunately, this flaw in the methodology may cause ACOs to carve out specialists or avoid multi-specialty practices. This is the opposite result of MACRA’s intent when the thresholds were created, because it reduces the number of physicians and patients participating in APMs. Failing to meaningfully engage specialists in ACOs also misses key opportunities to change care patterns and control costs.

Frustrations with the thresholds are compounded by a lack of transparency around threshold calculations. ACOs don’t have enough information to track, assess and adjust their performance against the thresholds in a meaningful way. The MACRA authors intended for the 5% bonus to serve as an incentive. Without meaningful information about how to achieve the bonus, the ability to incentivize movement is limited.

Pandemic Adds to Frustration Around Complicated Calculations

The coronavirus outbreak presents additional challenges for ACOs striving to meet the MACRA thresholds. For some participants, resources have been re-deployed from advanced APM work to Covid-19 work. Others have experienced major decreases in patient volume and shifts in care delivery sites and modalities (e.g., increased telehealth use) which could change who is aligned to the ACO or who receives qualifying services in the QP determination periods.

The scheduled 2021 increase in the bonus payment thresholds places additional burden on APM participants to meet these levels while they work tirelessly to support Medicare beneficiaries as they stay safely at home to avoid contracting Covid-19.

How Policymakers Can Help

If the policy goal is to encourage providers to move to two-sided risk models, including models that test alternative forms of payment, the thresholds should be restructured to achieve that result.

Restructuring these thresholds can further ignite the movement from volume to value—creating a better end result for patients, physicians, and the Medicare Trust Fund. Consistent with the flexibilities offered under the national public health emergency, we recommend the following:

  1. Waive application of the payment and patient count thresholds for 2020 to allow all participants in two-sided risk models to qualify for bonus payments.
  2. Freeze the patient count threshold at current levels for the 2021 performance year. If CMS will not exercise its statutory authority to make this change via rulemaking, Congress should make the change in must-pass legislation in the coming months.
  3. Grant CMS the clear statutory authority to adjust payment amount threshold in addition to the patient count threshold and direct the HHS secretary to explore changes to the QP methodology that encourage greater specialist physician engagement and network design flexibility for total cost-of-care models like ACOs.
  4. Extend the 5% bonus payment for advanced APMs for five more years to drive even more uptake of these models relative to inefficient fee-for-service payment systems.
  5. Improve APM participants experience by providing:
    • clear and timely information to APM entities about incentive payment amounts paid at the QP level;
    • a specific date range for payment distributions;
    • a process for APM entities and QPs to request corrections to their incentive payment amounts; and
    • a process for APM entities and QPs to determine their near real-time performance relative to the patient and payment thresholds.

These policy changes would help achieve MACRA’s full potential: improving the patient and physician experience and reducing costs. Importantly, these changes would send a powerful message to providers that now is the time to move to value-based care models.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Mara McDermott is vice president of McDermott+ Consulting and executive director of Next Gen ACO Coalition. She is an accomplished health-care executive with a deep understanding of federal health-care law and policy, including delivery system reform, physician payment and Medicare payment models.

Ashley Ridlon is vice president of health policy for Evolent Health. She leads the development and implementation of the firm’s health policy and advocacy strategy to drive value-based health-care transformation across the country.

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