Update: Call To Health Plans—Nationwide Alternative Payment Model (APM) Data Collection Effort

Health plans have an important opportunity to lead the way in gauging where we stand as a nation on the pathway to payment reform. In mid-May, the Health Care Payment Learning & Action Network (LAN) will launch an eight-week nationwide data collection program with public and private plans, concluding in mid-July. This initiative follows the development of the APM Framework by the LAN’s APM Framework and Progress Tracking Work Group in January of this year. The results of this effort will help the LAN assess progress toward its goal of 30 percent adoption of APMs by 2016 and 50 percent by 2018 for the U.S. health system.

To gain a more complete picture of APM adoption nationwide, the LAN is recruiting 200–300 public and private health plans nationwide to participate alongside several of the larger health plans that have already joined the APM data collection effort. Those who participate will help to advance understanding of the current state of payment innovation, and provide insights to advance effective payment reform for the future. This LAN initiative to measure APM adoption is a key activity in our collective efforts to transform heath care to better care, healthier people, and smarter spending.

To participate in this crucial effort, send an email to paymentnetwork@mitre.org.

Original Post. The release of the Alternative Payment Model (APM) Framework White Paper earlier this week is an important milestone in the progress of the Health Care Payment Learning & Action Network (LAN) toward its goal: driving new and innovative health care payment models that promise to improve the quality and value of health care.

The White Paper was developed over the course of several months by the LAN’s Alternative Payment Model Framework and Progress Tracking (APM FPT) Work Group and its Guiding Committee (GC), representing a wide range of private payers, large employers, providers, patients, consumer groups, and state and federal partners. It establishes a common framework and a set of conventions to facilitate discussions among stakeholders and expedite the generation of evidence-based knowledge about the capabilities and outcomes of APMs. In addition, the Work Group has developed a roadmap for measuring progress in the adoption of APMs.

From the outset, one of the guiding principles of the Work Group and the LAN has been that the APM Framework White Paper should reflect the needs of those who receive, provide, and pay for health care. With that in mind, diverse stakeholders were invited early in the process to review an initial draft and submit their ideas, observations, questions, and concerns. Over a month-long public comment period the Work Group received 113 comments, equally divided between individuals and organizations. The Work Group and the LAN thank everyone who took the time to share their knowledge and expertise with us.

Why Do We Need Alternative Payment Models?

Among stakeholders in the U.S. health system, there is an emerging consensus that the traditional methods used to pay health care providers tend to hinder their ability to deliver person-centered care by favoring volume over value. That is why, in May 2014, the U.S. Department of Health and Human Services (HHS) unveiled a framework of APMs that reward providers for the quality and coordination of the care they provide.

However, there was wide recognition that without partnership across the public and private sectors, the goal of transforming the health care payment system would not be efficiently and effectively achieved. Thus, the LAN was created in March 2015. By making a commitment to changing payment models, by establishing a common framework and aligning approaches to payment innovation, and by sharing information about successful models and encouraging use of best practices, the LAN can help to reduce barriers and accelerate the adoption of APMs.

When developing the LAN’s APM Framework, the APM FPT Work Group expanded and refined the four-category HHS framework by:

1. Articulating key principles to explain what the APM Framework means to convey, including:

  • Changing the financial reward to providers is only one way to stimulate and sustain innovative approaches to the delivery of person-centered care. In the future, it will be important to monitor progress in initiatives that empower patients to have a voice in model design, to seek care from high-value providers (via performance metrics, financial incentives, and other means), and to become active participants in shared decision-making.
  • As delivery systems evolve, the goal is to drive a shift towards shared-risk and population-based payment models that incentivize improvements in the quality and efficiency of person-centered care.
  • To reach our goals for health care reform, value-based incentives should be intense enough for providers to invest in and implement delivery reforms, and they should increase over time.
  • Centers of excellence, accountable care organizations, and patient-centered medical homes are delivery systems that can be supported by a variety of payment models.

2. Introducing four new categories, ranging from payment models that are not considered progress towards payment reform, to population-based payment models.

3. Introducing eight subcategories to account for nuanced but important distinctions between APMs within a single category.

4. Delineating explicit decision rules that can be used to place a specific APM within a specific subcategory.

5. Compiling, with the help of the LAN, examples of APMs that illustrate key characteristics of each of the subcategories.

Figure 1. APM Framework (At-A-Glance)

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The APM Framework: Fee-for-Service (FFS) With No Link To Quality And Value (Category 1)

Payment models classified as Category 1 utilize traditional FFS payments (i.e., payments that are made for units of service) that are not adjusted to account for infrastructure investments, provider reporting of quality data, or provider performance on cost and quality metrics. Additionally, it is important to note that diagnosis-related groups (DRGs) that are not linked to quality and value are classified in Category 1.

Fee-For-Service (FFS) Linked To Quality And Value (Category 2)

Payment models classified as Category 2 utilize traditional FFS payments, but these payments are subsequently adjusted based on infrastructure investments to improve clinical services, provider reporting of quality data, and/or provider performance on cost and quality metrics. Category 2 includes four subcategories:

  • Payments placed in Category 2A involve payments for infrastructure investments that can improve the quality of patient care.
  • Payments placed in Category 2B provide positive or negative incentives to report quality data to the health plan and (preferably) to the public.
  • Payments placed in Category 2C provide rewards for high performance on clinical quality measures.
  • Payments placed in Category 2D reward providers who perform well on quality metrics and penalize providers who do not perform well, thus providing a significant linkage between payment and quality.

APMs Built On Fee-for-Service Architecture (Category 3)

Payment models classified as Category 3 are based on a FFS architecture, while providing mechanisms for the effective management of a set of procedures, an episode of care, or all health services provided for individuals. Payments in Category 3 are structured to encourage providers to deliver effective and efficient care. Episode-based and other types of bundled payments encourage care coordination because they cover a complete set of related services for a procedure that may be delivered by multiple providers. Clinical episode payments fall into Category 3 if they are tied to specific procedures, such as hip replacement or back surgery. Category 3 includes two subcategories:

  • Category 3A gives providers an “upside” opportunity to share in the savings they generate.
  • Payments in Category 3B involve both upside gainsharing and downside risk based on performance on cost measures.

Population-Based Payment (Category 4)

Payment models classified as Category 4 involve population-based payments, structured in a manner that encourages providers to deliver well-coordinated, high-quality, person-level care within a defined (4A) or overall (4B) budget. This holds providers accountable for meeting quality and, increasingly, person-centered care goals for a population of patients or members.

Payments within Category 4 are intended to cover a wide range of preventive health, health maintenance, and health improvement services, as well as high-quality care for patients with specialized needs. These payment models will likely require care-delivery systems to establish teams of health professionals to provide enhanced access and coordinated care. Category 4 includes two subcategories:

  • Category 4A payments are population-based, but they are limited to certain sets of condition-specific services (e.g., asthma, diabetes, or cancer). They remain person-focused in the sense that they hold providers accountable for the total cost and quality of care related to that condition.
  • Payments in Category 4B are capitated or population-based for all of the individual’s health care needs.

The LAN believes that driving the health system toward the more transformational models of Categories 3 and 4 will improve care coordination and the patient experience. With these models, providers will have more flexibility to coordinate care for individuals and populations and will seek innovative ways to deliver care, particularly to individuals with chronic, complex, and costly illnesses.

Looking Forward

The APM Framework is a critical step toward achieving the goal of smarter spending, better quality, and better patient-centered care for people across the nation. The core purpose of the LAN is to enable the many existing efforts of payers, providers, and patients to make more rapid and clear progress toward shared goals. In the coming months, the LAN’s other work groups—the Population-Based Payment (PBP) Work Group and the Clinical Episode Payment (CEP) Work Group—will announce steps to help accelerate progress toward these goals as well.