Alternative Payment Models 2.0 – A Renewed Focus on Driving Equitable Health Outcomes

The concept of value-based payment in health care is, in simple terms, payment for care delivery should be tied to the quality of care rather than the volume of services provided. Numerous value-based – a.k.a. alternative payment models (APMs) – have been introduced over the last decade+ in attempt to reign in sky-rocketing health care costs, promote better population health management, and improve patient outcomes.

Originally published in 2016 and refreshed in 2017, the Health Care Payment Learning and Action Network (HCPLAN) Framework organizes APMs in four categories: 1) Fee-for-service – no link to quality and value, 2) Fee-for-service – link to quality and value, 3) APMs build on fee-for-service architecture (e.g., shared savings models), and 4) Population-based payment. According to the HCPLAN, in 2020, 40.9 percent of U. S. health care payments, representing approximately 238.8 million Americans and 80.2 percent of the covered population, flowed through categories 3 and 4.

The Centers for Medicare & Medicaid Services (CMS) has offered approximately 50 different models, such as the Medicare Shared Savings Program, Next Generation ACO Model, and Bundled Payments for Care Improvement initiative. Yet, the models have yielded mixed results in terms of cost and quality and only six of those 50-plus models generated substantial savings for Medicare.

This led the Biden administration to rethink the strategic direction of value-based payment.

In October 2021, the CMS Innovation Center (or CMMI), a division of CMS responsible for developing and testing new health care payment and service delivery models, released its “Innovation Center Strategy Refresh,” which shapes how it will craft and evaluate models over the next decade. Key pillars of the refresh are to reduce the sheer number of models, concentrating on fewer models but garnering greater participation; and reducing health disparities.

The refresh defines five strategic objectives.

1. Drive Accountable Care: Increase the number of people in a care relationship with accountability for quality and total cost of care.
2. Advance Health Equity: Embed health equity in every aspect of CMMI models. Increase the focus on underserved populations and expand safety net provider participation.
3. Support Care Innovations: Leverage a range of supports that enable integrated, person-centered care such as actionable, practice-specific data, technology, dissemination of best practices, peer-to-peer learning collaboratives, and payment flexibilities.
4. Improve Access by Addressing Affordability: Pursue strategies to address health care prices, affordability, and reduce unnecessary or duplicative care.
5. Partner to Achieve System Transformation: Align priorities and policies across CMS and aggressively engage payers, purchasers, providers, states, and beneficiaries to improve quality, to achieve equitable outcomes, and to reduce health care costs.

This framework may present new opportunities for some of the clients we work with at Third Horizon Strategies such as health and hospital systems serving diverse and vulnerable populations, safety net providers, and behavioral health providers. These groups have had fewer opportunities in the past to participate in APMs, due to a myriad of reasons not the least of which is that the most vulnerable populations have complex health and social needs that make improving outcomes more difficult.

However, the success of any of CMMI’s new models may hinge on agency’s ability to appropriately support providers in transitioning to APMs and building appropriate population health management capabilities.  In my experience there can be significant upfront costs to enhance health information technology, and data systems and quality improvement processes. Providers also need to be given enough time to fully implement the model, engage patients, and demonstrate improved outcomes.

Multi-payer alignment will also be key to pushing forward sustainable value-based models. Aligning requirements, quality metrics, and financial incentives across different payers can accelerate the transition to value-based care by reducing administrative burden and ensuring all patients regardless of payer source can receive the same level of excellence of care.

The participation of state Medicaid agencies will be particularly critical in achieving the administration’s goals around health equity. Medicaid plays a disproportionately large role in covering people of color, and low income people with serious mental illness and other behavioral health conditions.

Finally, CMS should also collaborate with coalitions of employer-sponsored health plans to ensure employers and other commercial payers are more involved in value-based payment going forward.

The CMMI Strategy Refresh makes me cautiously optimistic about the potential future acceleration and impact of value-based payment. Let’s hold the administration accountable to achieving its lofty goals by participating in CMMI’s public forums, submitting written comments to the administration, and maintaining regular communication with members of Congress. Please reach out to me if you have additional thoughts or need assistance implementing value-based care!