A recent study of healthcare payment models has shown that, while the Fee-for-Service model is still dominant, Alternative Payment Models (APMs) have started to become more and more popular. While some patients and providers may view these models as superior, it’s important to consider why their number is only growing at a fairly slow rate and how is this slow growth is impacting providers, employers, and patients.
Returning to Value-Based Healthcare
Healthcare reform has been in the spotlight since the Affordable Care Act discussion and passage in 2010. Recently, that discussion has turned to APMs and their value. Heath care professionals have started to truly look at the move to these models, as well as whether or not they are better for patients and the industry overall.
Some players in the healthcare industry are against APMs. Large insurance companies often find that these models leave them with lower profits. Some, including Medicare Advantage, have implemented high-profit models that discourage employers from moving to APMs.
This is due, in part, to the increased transparency at the Department of Health and Human Services (HHS) under the leadership of Alex Azar. Although value-based care is starting to return, Azar and HHS have made a point of reassuring providers that moving to value-based care is an option, regardless of what insurers may say.
Where APMs Stand Today
According to a study done by the HealthCare Payment Learning and Action Network (LAN), APM usage has consistently met the goals of the industry. In 2015, APMs were used by about 23% of the industry. In 2016, APM usage had increased to 29%. LAN has anticipated that APM usage will increase to 30% in 2016 and to 50% by 2018.
This study was based on data gathered from some different sources, including Medicare and Medicaid Advantage, as well as other fees for service companies, such as Blue Cross Blue Shield, America’s Health Insurance Plans, and the Centers for Medicare and Medicaid Services (CMS). In total, over 80 different sources were used, including 245 individuals, and the overall information covered 84% of insured U.S. citizens.
One of the consequences of the slow move to APMs is that Medicare beneficiaries are not receiving the high-quality healthcare that could potentially be provided. Millions of patients on Medicare are affected by this every year. The Medicare program itself is suffering from the slowness in shifting to APMs, spending billions every year that could be saved by using a different payment model.
A Word of Caution
However, while the LAN report is helpful, providers do need to keep a few things in mind when considering the results, primarily because the data presented can be somewhat misleading. According to Dan Unger, Health Catalyst Senior Vice President of Product Development and Financial Decision Support, the study makes it appear that APMs have grown quickly in recent years. This is not exactly the case.
The LAN study grouped APMs into two different categories: those based on similar Fee-for-Service models (category 3 APMs) and those based on Population-Based, Capitated Payment models (category 4). These two categories are quite different, and looking at the two categories combined may not be as helpful as it would seem. Another issue pointed to by Sean Mcsweeney, Apache Health President and founder is that the payments made didn’t all come from APMs but were simply tied to these models in some way.
While 29% of payments made in 2016 may have been connected to APMs, this doesn’t mean that 29% of all healthcare payments were made under an APM. Instead, it means that 29% of all payments included some kind of reduction or bonus. Overall, these payments represent only between four and nine percent of all healthcare payments. This means that the actual number of APMs in use was, at a minimum, about 1.1% (29% of 4%). This means that the financial impact of APMs is much lower than the report makes it seem.
Since APMs haven’t grown as much as it appears, healthcare providers need to continue looking at ways to reduce costs and re-admissions, in addition to focusing on improving patient safety and documentation.
How Can the Shift to APMs Happen More Quickly?
Accelerating the move to APMs can be done in a few different ways. Employers who want to move to APMs over Fee-for-Service models need to make it clear that they would rather offer this option to their employees. They need to demand that value-based models be implemented.
The United States Congress did pass the Medicare and CHIP Reauthorization Act (MACRA) in 2015. As a part of this act, new incentives were introduced that were designed to accelerate the use of APMs, including providing new and better methods for paying healthcare providers.
While more dollars are being put into Alternative Payment Methods because of their incentives for higher quality of care, it is important to realize that the growth isn’t as large as the LAN study suggests. While many healthcare organizations see the revenue benefits from diverting away from fee-for-service payment models and towards risk-based payment participation, the host of variables and uncertainties associated with risk are unconventional, and are causing providers large-scale hesitancy to participate.
Ultimately, the advancement with health IT implementation, quality of care, and cost management, all associated with accepting risk-based payment contract, will be gradually acknowledged, and dependent on Medicare’s ability to drive delivery system transformation, how aggressively commercial health plans push risk contracts and whether providers will accept them.