Understanding Alternative Payment Models' (APMs) Impact on a Practice

Posted by Continuum on Jun 21, 2016 4:28:25 PM

As healthcare shifts from a fee-for-service to a value-based system, Medicare is making sweeping changes to how it reimburses physicians. The Centers for Medicare and Medicaid Services (CMS) has introduced new regulations and reporting requirements – as well as unprecedented potential for financial rewards and penalties.Commercial payers are adopting similar models, further expanding the potential impact of these changes.iStock_92583603_LARGE.jpg

Choose Your Path

The Medicare Access & CHIP Reauthorization Act (MACRA) of 2015 created the Quality Payment Program (QPP), which offers physicians a choice between two different reporting paths. Both start in the 2017 reporting year; the Merit-Based Incentive Payment System (MIPS)  and Advanced Alternative Payment Models (APMS). For more information on MIPS, see our previous blog post and read our whitepaper.

In this blog, we focus on APMs, payment arrangements in which clinicians accept financial risk for providing coordinated, high-quality care. As an incentive to take on this risk, CMS offers increased monetary rewards. CMS has designated specific payment models as Advanced APMs – including certain medical homes, accountable care organizations (ACOs) and bundled payment models -- and it will continue to approve new models. Advanced APMs are similar to one another, with variations based primarily on the different quality measures they use – such as those for primary care, oncology, and end-stage renal disease. 

The APM track offers higher financial rewards than the MIPS track, but requires more advanced levels of value-based activities. APMs also require physicians to be part of a larger group (such as an ACO or medical home), and to bear greater financial risk (more on that below). Most physicians who see Medicare patients will be required to report under either the MIPS or Advanced APM track starting in January 2017. Those in Advanced APMs must still complete MIPS reporting for the first year (2017) so CMS can determine whether they meet the Advanced APM requirements. Additionally, 2017 MIPS reporting will provide spending benchmarks for a prospective Advanced APM.


Weighing the options

Although these systems are complex, one thing is clear: Doctors must determine where they stand – and where they want to go – in order to plan effectively for their future success. Whether they report under MIPS or pursue the Advanced APM track will depend upon their goals, interests and preferences for their practice. Consider:

  • Do you want your income to be more certain but with lower potential rewards (MIPS) or less certain but with higher rewards (Advanced APM)?
  • Would you rather be measured on your own (MIPS) or as part of a team (MIPS or APM)?
  • What would your future revenue look like under each model?

The status quo is not an option. At minimum, most physicians must meet MIPS requirements or face increasing penalties.

Criteria for Advanced APMs

It’s important to distinguish between APMs and Advanced APMs. APMs include key features that enhance value and help physicians earn payment incentives. However, only certain APMs – those considered Advanced – are eligible for greater incentives over MIPS payments, and are not subject to MIPS penalties. An Advanced APM must meet the following three criteria: 

  • Use certified electronic health record technology(CEHRT) to document and communicate clinical care. In its first year, 50% of the APM’s eligible clinicians (ECs) must use CEHRT. After the first year, 75% of ECs must use CEHRT. (Under the CMS Shared Savings Program only, ECs may receive a penalty or reward based on their degree of CEHRT use.)

  • Report quality measures comparable to those of MIPS: The APM can use actual MIPS measures or other measures that are evidence-based, reliable and valid. At least one outcome measure must be used, unless none is available under MIPS. The APM’s Medicare Part B payments are based on these quality measures.

  • Bear sufficient financial risk. The APM entity must assume risk for monetary losses of a certain magnitude. These losses are CMS penalties that kick in if the APM exceeds its expenditure benchmark by a specific amount. Or, the APM can avoid the risk requirement by being an “expanded” medical home model per the CMS Innovation Center. Moreover, CMS applies lower financial risk standards to medical homes that are not expanded, to accommodate entities with 50 or fewer clinicians. 

Advanced APMs: potential rewards

Qualifying Advanced APM entities will receive a 5% Medicare Part B incentive payment from 2019 through 2024. Starting in 2026, they will receive a higher fee schedule update: 0.75% for Advanced APMs versus 0.25% for physicians reporting under MIPS. Advanced APM participants will also be excluded from MIPS adjustments.In order to receive incentive payments for Advanced APM participation, clinicians must meet either certain payment percentages or patient volumes through the APM. For instance, in the 2017 reporting year, clinicians must receive at least 25% of their payments or see at least 20% of their patients through an Advanced APM.

Participation in “Other Payer” Advanced APMs (such as those arranged through commercial payers) can count toward these requirements. Moreover, an “All-Payer Combination Option” – based on a clinician’s level of Medicare plus “Other Payer” Advanced APM participation – offers another approach, starting in the 2019 reporting year. These models will enable clinicians to more easily meet the minimum payment/patient thresholds for Advanced APM participation.

To learn more about the requirements, how ACOs are affected, and steps physician enterprises should be taking now, please download our whitepaper "The New Gold Standard in Quality Reimbursement: Alternative Payment Models:Should Your Practice Reach for the Gold?"

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Topics: value-based reimbursement, CMS, Alternative Payment Models

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