Alternative Payment Models – The Undefined Future of Healthcare Payment



When you hear healthcare wonks talk about healthcare reform, buzzwords such as “quality” and “value” are often used with little hesitance.  This is because a consensus has been built around shifting the payment model from fee for service to alternative payment models (APMs) that factor in outcomes.  It is argued that our healthcare system should pay for quality not quantity and that results and value should affect physician pay.  While it is clear that these new payment models are the way of the future, it is very much unclear how exactly these models will work and be developed.  How does one factor in “quality” and “value” into reimbursement rates?  What metrics are appropriate?  These questions have yet to be answered and will have to be solved before the transition to these new models can be completed. 

Until recently, the government had no real plan to implement APMs.  However, due to the passage of the Medicare Access and CHIP Reauthorization Act of 2015 (H.R. 2), and recent actions by the Department of Health and Human Services (HHS), a tangible plan is beginning to develop.  In January, HHS announced explicit goals for Medicare payments to be tied to quality or value through APMs such as Accountable Care Organizations or bundled payment arrangements.  HHS wants 30% of payments to be tied to APMs or bundled payments by the end of 2016 and 50% by the end of 2018.  Furthermore, the recent passage of H.R. 2, provides financial incentives (starting in 2019) to providers who receive a majority of their revenue through APMs.  While creating explicit goals and incentives for providers to adopt APMs is a major step forward in their implementation, the specifics of how APMs and bundled payments would actually work remain largely unknown. 

To address this need, H.R. 2 contains a number of measures to help develop APMs over the next few years.  The bill authorizes $15,000,000 a year through 2019 for HHS to develop a comprehensive plan for adopting APMs and to provide annual reports to Congress on the progress of APM development.  Furthermore, H.R. 2 boosts and extends funding for a HHS contract with the National Quality Forum (NQF), an organization tasked with developing and building consensus around APMs and bundled payments.  These provisions, among others should provide a boost to HHS and their contractors as they can now accelerate their efforts to hash out the specifics of the Alternative Payment Model system. 

As a result, we now have explicit goals to attain, provider incentives to adopt, and the funding to develop Alternative Payment Models.  However, the work is only beginning because quantifying “quality” and “value” in healthcare can be a difficult task and building consensus towards new payment methods is tough with so many stakeholders involved.  Nevertheless, it should be acknowledged that these recent developments from HHS and Congress are significant and should ignite a conversation that has lingered far too long.