As the entire healthcare industry steers away from a fee-for-service model to value-based reimbursement, the U.S. Department of Health and Human Services has also introduced several changes to its reimbursement policies and procedures. The agency intends to convert more than 50 percent of Medicare fee-for-service plans to advanced alternative payment models by the end of 2018. This is a payment approach wherein added incentives are given to providers who provide cost-efficient care.

Earlier, the eligibility criteria for providers to be a part of an advanced APM was to cater to a certain number of Medicare beneficiaries. As per the recent changes introduced in late 2017, the basic requirement to qualify in any of these models is to make use of certified electronic health record technology, to base payment on quality metrics with measurable outcomes, and to involve provider risk.

CMS has proposed a demonstration program to increase participation in Medicare Advantage plans that participate in APMs called the Medicare Advantage Qualifying Payment Arrangement Incentive Demonstration. Moreover, CMS has started a module for MA plans to request that their payment arrangements be a part of “other payer advanced APM.” The benefit of becoming a part of the “other payer advanced APM” option is that MA plans will be able to receive an APM bonus a year before the All-Payer Combination Option begins, which will be in favor of providers engaged in MA plans in regions with maximum MA enrollment.

As per 2018 Decision Resources Group data, about 36 percent of Medicare beneficiaries are enrolled in Medicare Advantage plans nationally, and the proportion of MA plans has been steadily growing. MA plans in some states (California, Oregon, Minnesota, Wisconsin, Pennsylvania, Florida, and Rhode Island) grew more than 40 percent, and per DRG forecasts, MA plans in many states (North Dakota, Texas, South Carolina, North Carolina, Illinois, Maryland, and Maine) are expected to grow by 14 percent or more in 2018. This indicates that it is a conducive environment to implement risk-bearing arrangements such as the APMs.

Providers will benefit from APMs, as qualifying participants will receive a 5 percent bonus to their Part B payments if 25 percent of Medicare Part B payments and 20 percent of Medicare patients are through an advanced APM, and they can also be exempted from Merit-Based Incentive Payment System payments, which would increase the urgency among provider groups to replace fee-for-service contracts. Treatments that reduce overall medical cost would be preferred, and payers will look to have better tier placement of their drugs by these plans, possibly leading to more outcome-based contracts.

While it is premature to predict the uptake of these models at the provider level given the constantly changing conditions in the U.S. healthcare market, it is imperative for providers to explore these innovative strategies to sustain in a market that is shifting its focus from volume to value. There could be a few challenges, such as the complexity of services and higher utilization of resources for the aged and disabled Medicare population, which makes achieving cost savings difficult. However, backed by the support of CMS and other governing bodies, alternative payment models and other initiatives that focus on value-based healthcare are here to stay.

 

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