Medicare's Alternative Payment Models

Under MACRA, the Medicare and CHIP Reauthorization Act, there are two ways a healthcare organization can structure their payment systems. The first path is MIPS (Merit-Based Incentive Payment System), and the second is participating in an Alternative Payment Model (APM). We covered MIPS in a recent blog post.

Important: MIPS and APM payments start in 2019, but the reporting period begins January 2017.

Why is this happening?

Healthcare is transitioning from fee-for-service to value-based payments. To do this, reimbursement needs to be restructured to pay for quality and overall value instead of the volume of services delivered. Incentives and payment need to change in order to improve efficiency, more appropriately reimburse providers, and encourage desired patient behaviors.

What is an APM?

“APMs are new approaches to paying for medical care through Medicare that incentivize quality and value.”     - Centers for Medicare and Medicaid (CMS)

These new payment methods involve the payer and provider sharing in some of the risk and rewards associated with managing and caring for patient populations. The goal of  APMs are to help reimburse and incentivize providing quality care with good patient outcomes.

There will be APMs and Advanced APMs. Advanced APMs are “CMS Innovation Center models, Shared Savings Program tracks, or statutorily-required demonstrations where clinicians accept both risk and reward for providing coordinated, high quality, and efficient care.” - CMS

Why is this important?

Again, APMs are a transitional payment model. Organizations participating in an APM  will be graded based on quality, advancing care information, clinical practice improvement activities, and cost. The intent of APMs is to help bridge the gap and reimburse differently to aid in the transition from fee-for-service to value based payments.

APMs are new, and there are definitely questions about how they’re going to work. From what we know now, it seems that  APMs may involve more risk than MIPS, but also have higher rewards. We do know that participating in an APM is going to be more challenging for some than others, but the benefits from a successful APM can be very rewarding. The key to survival and success is to be prepared.

Potential Benefits

For the glass-half-full crowd, this section’s for you:

  • Better designed incentives to reward providers for value and quality, not volume

  • Lighter reporting burden to CMS

  • Advanced APM-specific awards and a 5% annual participation bonus for providers participating in an APM from 2019-2024

  • Ability to share in the savings for high quality, coordinated, efficient care. When you perform well, you get paid for it.

  • Recognized Medical Homes will receive automatic points towards MIPS in the Clinical Practice Improvement Activities category in the first year (15% of the total score). Practices must be Recognized before January 1, 2017 to be eligible. 

  • For providers who qualify for an APM, but do not yet meet the criteria to be an Advanced APM, they can still receive MIPS adjustments and APM specific awards.  (This is a great safety net for organizations still trying to figure out how to make an Advanced APM work well for their system.)

Potential Issues and Risks

There are benefits for participating in an APM, but there are also risks:

  • You must meet eligibility requirements to select the APM path

  • Provider is financially responsible for managing the health of the patient population and utilization of resources

  • Provider assumes some risk that is tied to reimbursement (we think this is a good thing, but others may disagree)

  • There is potential for negatively adjusted payments (penalties) for low performance and quality


Important Dates

It’s exciting for providers to begin sharing in the risk and reward for providing high quality patient care and managing patient populations. This could be a financially rewarding opportunity. But it takes time to put these processes in place, refine them, and train your team to be data-driven.

Are you ready? This is not something you want to be figuring out in 2019 when the financial incentives begin - that will be too late. Set yourself up for success by starting now, so you can handle the risk and reap the higher rewards.

*Contact Clarify for advice or questions regarding APMs or MIPS, and ways we can work together.