Alternative Payment Models: Practices’ Best Bet to Weather Future Financial Storms

Casey McKeon – CareAllies contributor

The ongoing COVID-19 pandemic shines an intense spotlight on the importance of transitioning to value-based alternative payment models (APMs). While the “value” concept behind value-based models is nothing new, COVID-19 should be pushing practices to re-evaluate it through a fresh lens.

The pandemic forced many practices to halt non-urgent services seemingly overnight, which in turn impacted both patient access and practice revenue in unexpected ways. Primary care practices have been especially vulnerable. A Larry A. Green Center survey conducted in late July, for example, reveals that one out of every five primary care clinicians remains uncertain about their viability four weeks out. Perhaps even more troubling, 44% of providers report that their face-to-face patient volumes continue to be 30%-50% lower than pre-pandemic levels.

One of the unfortunate consequences of COVID-19 is that many patients have decided to forgo care. In this “new normal,” it’s unlikely that patient volumes will return to pre-pandemic levels any time soon—if ever. This puts traditional volume-based reimbursement models on an increasingly unstable foundation. On the other hand, many practices generating steady revenue through APMs have had an easier time navigating the changing landscape.

Now is the time

These considerations build the case for moving from fee-for-service (FFS) to transformative APMs. In an environment where patient volumes cannot be guaranteed, APMs offer practices steadier revenue streams and greater stability alongside strategies to drive higher care quality.

The latest Medicare APM program offers yet another reason to give APMs a serious look right now. To spur more rural providers toward involvement in value-based models, the Centers for Medicare and Medicaid Innovation will soon be selecting participants for CHART (Community Health Access and Rural Transformation).

No matter which program practices choose, however, APMs can help insulate them against the inevitable financial swings caused by factors such as economic downturns, insurance upheavals, and seasonal variations in care. Practices must create a stable income platform to remain afloat, and multiple models are available to do so. Furthermore, transitioning to APMs is not something that practices must do alone. Opportunities exist for providers to band together for APM purposes.

Models to pursue

So, which APM models should practices consider? 

The APM Framework is one good way to view the variety of approaches to risk payments. It illustrates not only that care coordination and pay-for-performance can help practices start achieving value, but also that true APMs are broadly categorized and represent a continuum of clinical and financial risk for provider organizations.

There are four categories within the framework. They range from FFS models with no links to quality or value (Category 1) to population-based payments (Category 4). The beauty of these categories lies in their flexibility. They each take different approaches to risk, and providers can choose to participate in multiple models to varying degrees.

At this point, independent practices and IPAs should be establishing a solid groundwork of participation in FFS models that link to quality and value—Category 2. These APMs include care coordination reimbursement, pay-for-reporting, and pay-for-performance.

However, providers increasingly are transitioning into models built on FFS architecture such as shared savings with either upside or downside risk (Category 3) or Category 4, according to the 2019 HCP-LAN APM Measurement Effort. The data shows 36% of dollars already invested in shared savings and population-based APMs (Categories 3 and 4). To remain viable, practices should have a plan for moving through Categories 2 and 3 move quickly to reach the ultimate in successful population-based payments defined by Category 4.

The movement toward APMs cannot happen overnight. It’s a gradual process of acclimation and experience. While the best path forward is unique to every practice, there are lots of options for working with partners to share in infrastructure investments and risk. CareAllies understands the many nuances involved, and is here to help even the smallest practices and IPAs develop the right APM strategies to achieve their goals. 

It’s time for practices to embrace APMs—before facing the next financial storm.