AMA Guide to Alternative Payment Models.pdf

8/20/2019 AMA Guide to Alternative Payment Models.pdf

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A GUIDE TOPHYSICIAN-FOCUSED

ALTERNATIVE PAYMENT

MODELS

Better Care

for Patients

Financially

ViablePhysicianPractices

Lower

Spendingfor Payers


2/26

2© American Medical Association and Center for Healthcare Quality and Payment Reform

CONTENTS

EXECUTIVE SUMMARY ............................................................................................. i

I. THE NEED FOR PHYSICIAN-FOCUSED ALTERNATIVE PAYMENT MODELS ..... 1

A. Barriers to Better Care and Lower Costs in Current Payment Systems................................... ..... 1

B. Characteristics of Successful Alternative Payment Models ............................................. ................ 1

C. Creating Physician-Focused APMs in Medicare ............................................. .................................... .. 2

II. A MENU OF PHYSICIAN-FOCUSED ALTERNATIVE PAYMENT MODELS ........... 3

APM #1: Payment for a High-Value Service .................................... .......................................... .................. 5

APM #2: Condition-Based Payment for a Physician’s Services .................................. .......................... 7

APM #3: Multi-Physician Bundled Payment .......................................................................... ..................... 9

APM #4: Physician-Facility Procedure Bundle ...................................... ............................................. ...... 11

APM #5: Warrantied Payment for Physician Services ............................................ ............................... 13

APM #6: Episode Payment for a Procedure ..................................... ......................................... ............... 15

APM #7: Condition-Based Payment ...................................... ............................................ .......................... 17

III. CHOOSING AN APPROPRIATE ALTERNATIVE PAYMENT MODEL .................. 19

A. Matching the APM to Opportunities, Barriers, and Capabilities ......................................... ....... 19

B. Combining Multiple APMs .................................... ......................................... ........................................... 19

C. Using APMs for Provider Compensation Inside of Other APMs .................................... .............. 19

Better Carefor Patients

FinanciallyViablePhysicianPractices

LowerSpendingfor Payers


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A Guide to Physician-Focused Alternative Payment Models

The Barriers in Current Payment Systemsto Higher-Value HealthcareAll too often, when physicians try to redesign the ways theydeliver services in order to provide higher quality patientcare at a lower cost , they nd that barriers in current pay-ment systems prevent them from doing so. The two mostcommon barriers are:

Lack of payment or inadequate payment for high-value services. Medicare and most health plans do notpay physicians for many services that would benetpatients and help reduce avoidable spending.

Financial penalties for delivering a diff erent mix of

services. Under fee for service (FFS), practices loserevenue if physicians perform fewer or lower-costservices, but their practice costs do not decrease propor-tionately (if at all), which can cause operating losses.

Alternative Payment Models Can EnableHigher Quality and Lower CostsAlternative Payment Models (APMs) can provide a way ofovercoming the barriers in current payment systems so thatphysicians can deliver higher-quality care for patients atlower costs for purchasers in ways that are nanciallyfeasible for physician practices. To be successful, an APM

must have three characteristics:1. Flexibility in Care Delivery. An APM must be designed

to give physicians sufficient exibility to deliver theservices patients need in the most efficient and eff ectiveway possible.

2. Adequacy and Predictability of Payment. An APMmust provide adequate and predictable resources toenable physician practices to cover the costs of deliveringhigh-quality care to patients. Payments must be appro-priately risk-adjusted based on characteristics of patientsthat increase their need for services, and limits must beplaced on the total amount of nancial risk thatphysicians face.

3. Accountability for Costs and Quality That PhysiciansCan Control. An APM must also be explicitly designedto assure patients and payers that spending will becontrolled or reduced and that quality will be maintainedor improved. However, individual physicians should onlybe held accountable for aspects of spending and qualitythey can control or inuence.

The Medicare Access and CHIP Reauthorization Act (MACRA)encourages the creation of APMs and provides incentives forphysicians to participate in them. MACRA explicitly encour-ages the development of “Physician-Focused PaymentModels,” and the law provides considerable exibility in

dening APMs so that they can support the wide range ofhealth problems physicians treat.

A Menu of Physician-FocusedAlternative Payment Models

There is no single approach to APMs that will work for allphysicians or their patients. Diff erent medical specialtiestreat diff erent kinds of health problems, and the opportuni-ties to improve quality and reduce costs diff er by the diff er-ent types of health problems addressed by physicians with-in each specialty and subspecialty. Moreover, the care

delivery changes that are needed to address theseopportunities also diff er by specialty, as do the barriers inthe current payment system that need to be overcome forphysicians to redesign care delivery for their patients.

This report describes seven ways of structuring APMs thatcan be used to address the most common types ofopportunities and barriers that physicians face:

APM #1. Payment for a High-Value Service. A physicianpractice would be paid for delivering one or moredesirable services that are not currently billable, and thephysician would take accountability for controlling theuse of other, avoidable services for their patients.

APM #2. Condition-Based Payment for PhysicianServices. A physician practice would have theexibility to use the diagnostic or treatment options thataddress a patient’s condition most efficiently andeff ectively without concern that using lower-costoptions would harm the operating margins of thephysician’s practice.

APM #3. Multi-Physician Bundled Payment. Two ormore physician practices that are providing complemen-tary diagnostic or treatment services to a patient wouldhave the exibility to redesign those services in waysthat would enable high-quality care to be delivered asefficiently as possible.

APM #4. Physician-Facility Procedure Bundle. A physician who delivers a procedure at a hospital or

other facility would have the

exibility to choose themost appropriate facility for the treatment and to workwith the facility to deliver the procedure in the mostefficient and high-quality way.

APM #5. Warrantied Payment for Physician Services. A physician would have the exibility and accountabilityto deliver care with as few complications as possible.

APM #6. Episode Payment for a Procedure. A physicianwho is delivering a particular procedure could workcollaboratively with the other providers deliveringservices related to the procedure (e.g., the facility where

A Guide to Physician-FocusedAlternative Payment Models

EXECUTIVE SUMMARY

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ii© American Medical Association and Center for Healthcare Quality and Payment Reform

the procedure is performed, other physicians who areinvolved in the procedure, physicians and facilities whoare involved in the patient’s recovery or in treatingcomplications of the procedure, etc.) to improveoutcomes and control the total spending associated withthe procedure.

APM#7. Condition-Based Payment. A physician practicewould have the exibility to use the diagnosis or treat-ment options that address a particular health condition

(or combination of conditions) most efficiently andeff ectively and to work collaboratively with otherproviders that deliver services for the patient’s conditionin order to improve outcomes and control the totalspending associated with care for the condition.

The “right” APM for a particular specialty or a particular phy-sician practice in that specialty will depend on the types ofpatients and conditions that specialty cares for, the opportu-nities that exist for improving their care, the barriers the

physicians face under the current payment system, andany barriers that exist that are unrelated to payment (e.g.,restrictions in laws or regulations). In some cases, two ormore APMs could potentially be used to address aparticular combination of opportunities and barriers, butone of the models may be more feasible for a particularphysician practice given its size or relationships with otherproviders.

The fastest progress in improving the quality and control-

ling the cost of healthcare will be achieved if each of thephysicians and other providers who deliver care to patientscan receive the resources and exibility they need to im-prove the aspects of care quality and costs that they cancontrol or inuence. Consequently, it is important thatMedicare and other payers make all of these APMsavailable so that every physician practice in every specialtycan contribute eff ectively to the nation’s eff orts to achievehigher quality, more aff ordable healthcare.

Savings for Payer

Unpaid Services

Payments toFacilities,Other Practices,

and Other EntitiesDeliveringHealthcare

Servicesto the Patients

FFS Payments toPhysicians &Other HealthProfessionals

Payments toFacilities,

Other Practices,and Other Entities

DeliveringHealthcare


Avoidable Spending Avoidable Spending

Accountabilityfor

ControllingAvoidableSpending

$

TotalSpending

PhysicianPractice

Revenue

Fee-for-ServicePayment (FFS)

Physician-FocusedAlternative

Payment Model

Flexible, AdequatePayment forServices of

Physicians &Other HealthProfessionals

OPPORTUNITIES TO REDUCE SPENDING Reduce Avoidable Hospital Admissions Reduce Unnecessary Tests and Treatments Use Lower-Cost Tests and Treatments Deliver Services More Efficiently Use Lower-Cost Sites of Service Reduce Preventable Complications Prevent Serious Conditions from Occurring

Unpaid Services






Avoidable Spending

$

TotalSpending

Physician

PracticeRevenue


BARRIERS IN FEE-FOR-SERVICE No Payment for Many High-Value Services Insufficient Revenue to Cover Costs When

Using Fewer or Lower-Cost Services


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A Guide to Physician-Focused Alternative Payment Models

A. Barriers to Better Care and LowerCosts in Current Payment Systems

There are many signicant opportunities to improve thequality and reduce the costs of healthcare. Many patientsdevelop health problems that could have been prevented,receive tests and procedures that are not needed, arehospitalized because their health problems were noteff ectively managed, or experience complications andinfections that could have been avoided. Other patientscould receive diff erent types of treatment than they dotoday that would be equally eff ective but cost less. If theseunnecessary and avoidable health problems, services, andcosts could be eliminated, tens of billions of dollars could besaved and the quality of life for the patients would beimproved.1

Helping people stay healthy, improving quality, and reduc-ing health care spending will require changes in care deliv-ery. New types of services, innovative ways of deliveringexisting services, less costly settings for service delivery, anddiff erent combinations of services and providers will likelybe needed. Only physicians can ensure that these new ap-proaches to delivering services will safely and appropriatelyaddress patient needs.

Many physicians are actively working to redesign the waysthey deliver and order services in order to provide higherquality care for patients while lowering spending by payers.

However, all too often, these desirable changes in care deliv-ery cannot be successfully implemented because of barriersin current payment systems. The two most common barriersare:

1. Lack of payment or inadequate payment for high-value services. Medicare and most health plans do notpay physicians for many services that would benetpatients and help reduce avoidable spending. Forexample, there is generally no payment or inadequatepayment for:

responding to a patient’s phone call about a symptomor problem, which could help the patient avoid theneed for far more expensive services, such as an emer-gency department visit;

communications between primary care physicians andspecialists to coordinate care, or the time spent by aphysician serving as the leader of a multi-physician careteam, which can avoid ordering of duplicate tests andprescribing conicting medications;

communications between community physicians andemergency physicians, and short-term treatment anddischarge planning in emergency departments, whichcould enable patients to be safely discharged withoutadmission;

providing proactive telephone outreach to high-riskpatients to ensure they get preventive care, whichcould prevent serious health problems or identifythem at earlier stages when they can betreated more successfully;

spending time in a shared decision-making processwith patients and family members when there aremultiple treatment options, which has been shown toreduce the frequency of invasive procedures and theuse of low-value treatments;

hiring nurses and other staff to provide education andself-management support to patients and familymembers, which could help them manage their

health problems more eff ectively and avoidhospitalizations for exacerbations;

providing palliative care for patients in conjunctionwith treatment, which can improve quality of life forpatients and reduce the use of expensive treatments;and

providing non-health care services (such as transpor-tation to help patients visit the physician’s office)which could avoid the need for more expensivemedical services (such as the patient being taken byambulance to an emergency department).

2. Financial penalties for delivering a diff erent mix ofservices. Under fee for service (FFS) payment,

physician practices lose revenue if physicians performfewer procedures or lower-cost procedures, but thecosts of running the practices generally do not decreaseproportionately (if at all), which can cause operatinglosses. For many types of procedures, most of thesavings payers experience does not come from thepayments that are made to the physician practice, sosavings can still be achieved without nanciallypenalizing the physician practice. The most severeimpact under FFS is that physician practices do not getpaid at all when their patients stay healthy and do notneed health care services.

Some physician practices have received special funding

from the federal government, private foundations, healthplans, and/or provider organizations for demonstrationprojects to overcome these payment barriers. Theseprojects have enabled physicians to show that with theright nancial support, they can deliver better care for pa-tients at lower costs and with greater professional satisfac-tion than is possible in the typical delivery system today.Unfortunately, despite positive results, many of thesedemonstration projects have had to be terminatedbecause they cannot be sustained on a long-term basisunder the current FFS payment system.

THE NEED FORPHYSICIAN-FOCUSEDALTERNATIVE PAYMENT MODELS

I.Better Carefor Patients




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2© American Medical Association and Center for Healthcare Quality and Payment Reform

B. Characteristics of SuccessfulAlternative Payment Models

It is unrealistic to expect physicians to improve quality orreduce spending without adequate nancial support fortheir eff orts. On the other hand, it is also unrealistic toexpect that patients or payers will be willing to pay more ordiff erently without assurances that the quality of care will beimproved, spending will be lower, or both. Alte rnativePayment Models (APMs) are needed that support the delivery ofhigher-quality care for patients at lower costs for purchasersin ways that are nancially feasible for physician practices.

The fact that a payment system is di ff erent from traditionalfee-for-service payment does not automatically mean that itis better . In order to be successful in achieving all three ofthese goals – better care for patients, lower spending forpayers, and nancial viability for physician practices – anAPM must have three characteristics: 2

1. Flexibility in Care Delivery. To be successful, an APMmust be designed to give physicians sufficient exibilityto deliver the services patients need in the most efficientand eff ective way possible. If the current payment systemdoes not pay for specic services that physicians need todeliver in order to improve outcomes or reduce spendingon other types of services, the APM must authorize

payment for additional services, broaden the denition ofthe services that can be provided using existingpayments, or both.

2. Adequacy and Predictability of Payment. To be bothsuccessful and sustainable, an APM must provideadequate and predictable resources to enable physicianpractices to cover the costs of delivering high-quality careto patients. Achieving savings is only a desirable goal if itdoes not jeopardize access or quality. Moreover, it is im-possible for physicians to make investments in facilitiesand equipment and to recruit, train, and retain high-quality personnel if they cannot predict how much they

will be paid for their services or if there are frequent,signicant changes in payments. Payments must alsobe appropriately risk-adjusted based on characteristicsof patients that increase their need for services, and lim-its must be placed on the total amount of nancial riskthat physicians face.

3. Accountability for Costs and Quality That PhysiciansCan Control. In order to be successful and sustaina-ble, an APM must also be explicitly designed to assurepatients and payers that spending will be controlled orreduced and that quality will be maintained or

improved. However, individual physicians should onlybe held accountable for aspects of spending and qualitythey can control or inuence.

The goal of APMs should not be to simply shift nancialrisk from payers to physician practices, but rather to givephysician practices the resources and exibility they needto take accountability for the aspects of costs and qualitythey can control or inuence. In some cases, a smallchange in the current payment system, such as paymentfor a specic type of service in addition to existing FFSpayments, may be all that is needed to support betteroutcomes and lower overall costs. In other cases, a moresignicant change may be needed, such as restructuringpayments for many diff erent services delivered by multiple

providers.In most cases, traditional pay-for-performance and “value-based purchasing” systems that simply modify current FFSpayment rates based on measures of quality or totalspending will not be sufficient to serve as a successfulAPM, since they do not remove the barriers in the currentpayment system. The problem to be solved is not a lack of“incentives” for physicians to deliver care in a diff erent way,but the failure of the current payment system to adequate-ly support the better and more efficient approaches to caredelivery that physicians want to use.3

Unpaid Services






Avoidable Spending

$

TotalSpending

PhysicianPractice

Revenue

Fee-for-ServicePayment (FFS) OPPORTUNITIES TO REDUCE SPENDING

Reduce Avoidable Hospital Admissions

Reduce Unnecessary Tests and Treatments

Use Lower-Cost Tests and Treatments

Deliver Services More Efficiently

Use Lower-Cost Sites of Service Reduce Preventable Complications

Prevent Serious Conditions from Occurring

BARRIERS IN FEE-FOR-SERVICE

No Payment for Many High-Value Services

Insufficient Revenue to Cover Costs WhenUsing Fewer or Lower-Cost Services


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A Guide to Physician-Focused Alternative Payment Models3

C. Creating Physician-Focused APMs inMedicare

The Medicare Access and CHIP Reauthorization Act (MACRA)that was enacted by Congress in April 2015 encourages thecreation of APMs and provides incentives for physicians toparticipate in them. Physicians who have a minimum per-centage of their revenues or patients in APMs will receivesupplemental payments beginning in 2019 and they willreceive higher updates to their payments under thePhysician Fee Schedule (PFS) beginning in 2026, in additionto the benets of participating in the APMs.

MACRA specically designates Accountable Care Organiza-tions (ACOs) within the Medicare Shared Savings Program asa qualifying APM. However, many physicians do not viewthe current design of this program as providing the exibil-ity in care delivery or the adequacy and predictability inpayment that they need to successfully improve patient carewhile reducing costs. In addition, the program tries to hold

the providers in the ACO accountable for the costs ofhealthcare services that the providers cannot control orinuence. These weaknesses have discouraged many phy-sicians from participating and have made it difficult for theACOs that have been created to be successful.

Fortunately, MACRA explicitly encourages the develop-ment of “Physician-Focused Payment Models,” and the lawprovides considerable exibility in dening APMs so thatthey can support the wide range of health problems

physicians treat. This provides an unprecedented oppor-tunity for physician organizations to work with the Depart-ment of Health and Human Services and the Centers forMedicare and Medicaid Services to develop APMs that cansupport better care for patients, at lower costs for Medicareand other payers, in ways that are nancially sustainablefor physician practices and other providers.

Savings for Payer

Unpaid Services











Accountabilityfor


$

TotalSpending

PhysicianPractice

Revenue


Physician-FocusedAlternative

Payment Model

Flexible, AdequatePayment forServices of

Physicians &Other HealthProfessionals


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4A Guide to Physician-Focused Alternative Payment Models

There is no single Alternative Payment Model that will workfor all physicians or their patients. Diff erent medical special-ties treat diff erent kinds of health problems, and the oppor-tunities to improve quality and reduce costs will diff er forthe diff erent types of health problems addressed by physi-cians within each specialty and subspecialty. Moreover, thecare delivery changes that are needed to address theseopportunities will also diff er by specialty, as will the barriersin the current payment system that need to be overcome ifphysicians are to redesign care delivery for their patients.

This means there will need to be multiple types of APMs inorder for physicians in all specialties to participate and inorder for all patients to benet. A good APM will overcomethe speci c payment system barriers a physician practicefaces in pursuing the speci c kinds of improvementopportunities available for the types of patient conditionsthe physicians in that practice treat.

There is no need for complex and expensive changes in pay-ment structures if simple changes will address the barriers. Ifpaying for a new service code could enable a physicianpractice to deliver signicantly better care at lower overallcost, there is no need to force the practice to nd ways tomanage a complex bundled payment. On the other hand, ifmuch more extensive changes in care delivery are neededthat involve multiple providers, an entirely new type of bun-dled payment may be needed to provide sufficient exibilityand accountability to support those changes in care, and a

physician practice may need to work collaboratively withother physician practices and other types of providers tomanage that payment in order to deliver the improved care.

This report describes seven diff erent types of APMs that canbe used to address the most common types of opportunitiesand barriers:

APM #1. Payment for a High-Value Service. A physicianpractice would be paid for delivering one or moredesirable services that are not currently billable, and thepractice would take accountability for controlling the useof other, avoidable services for their patients.

APM #2. Condition-Based Payment for PhysicianServices. A physician practice would have the exibil-

ity to use the diagnostic or treatment options that ad-dress a patient’s condition most efficiently and eff ectivelywithout concern that using lower-cost options wouldharm the operating margins of the physician practice.

APM #3. Multi-Physician Bundled Payment. Two ormore physician practices that are providing complemen-tary diagnostic or treatment services to a patient wouldhave the exibility to redesign those services in ways thatwould enable high-quality care to be delivered as effi-ciently as possible.

APM #4. Physician-Facility Procedure Bundle. Aphysician who delivers a procedure at a hospital or otherfacility would have the exibility to choose the mostappropriate facility for the treatment and to work withthe facility to deliver the procedure in the most efficientand high-quality way.

APM #5. Warrantied Payment for Physician Services. A physician would have the exibility and accountabilityto deliver care with as few complications as possible.

APM #6. Episode Payment for a Procedure. A physicianwho is delivering a particular procedure would be ableto work collaboratively with the other providers deliver-ing services related to the procedure (e.g., the facility

where the procedure is performed, other physicians whoare involved in the procedure, physicians and facilitieswho are involved in the patient’s recovery or in treatingcomplications of the procedure, etc.) in order to improveoutcomes and control the total spending associatedwith the procedure.

APM #7. Condition-Based Payment. A physician prac-tice would have the exibility to use the diagnosis ortreatment options that address a particular health condi-tion (or combination of conditions) most efficiently andeff ectively and to work collaboratively with other provid-ers that deliver services for the patient’s condition inorder to improve outcomes and control the total spend-ing associated with care for the condition.

Each of these APMs addresses a diff erent type of oppor-tunity for savings and/or a diff erent barrier in the currentpayment system. Although each APM design would needto be adapted to the unique services and outcomes associ-ated with a specic health problem or treatment, the basicstructure of the APM would be similar across the diff erentspecialties and patient conditions to which it is applied.

This means that the billing and claims payment systemchanges made to support one of the APM designs in onespecialty could be used for physician practices in otherspecialties that are using the same basic APM structure.

Some of the APMs could be implemented easily by singlespecialty physician practices of any size, while other APMswould likely only be feasible for larger physician practices,for multi-specialty practices, or for practices working col-laboratively with other physician practices or other provid-ers, such as hospitals. For those APMs that are involve ser-vices delivered by multiple specialties or multiple types ofproviders, an “Alternative Payment Entity” may be neededto accept and distribute payments among the participatingproviders.4

A MENU OFPHYSICIAN-FOCUSEDALTERNATIVE PAYMENT MODELS

II.Better Carefor Patients




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© American Medical Association and Center for Healthcare Quality and Payment Reform5

CHANGE FROM CURRENTFEE FOR SERVICE SYSTEM

Payment Made

forServices NotCovered by

Current Fee-for-Service

Payment

Payment isBased on the

Patient’sCondition, Notthe Treatment

Delivered

One Payment

is Made forRelatedServices

Delivered byMultiple

Physicians

One Payment

is Made forRelatedServices

Delivered byPhysicians and

Facilities

One Payment

is Made forBoth Planned& Unplanned

ServicesRelated toTreatment

APM #1Payment for a

High-ValueService

YES NO NO NO NO

APM #2Condition-

BasedPayment for a

Physician’sServices

YES YES NO NO NO

APM #3Multi-

PhysicianBundledPayment

YES YES YES NO NO

APM #4Physician-

FacilityProcedure

Bundle

YES NO NO YES NO

APM #5WarrantiedPayment for

PhysicianServices

YES NO NO NO YES

APM #6Episode

Payment for aProcedure

YES NO YES YES YES

APM #7Condition-

BasedPayment

YES YES YES YES YES

TABLE 1


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Goal of the APM:

Pay physicians for delivering desirable services that are notcurrently billable in order to avoid the need for patients toreceive other, more expensive services.

Components of the APM:

1. Continuation of Existing FFS Payments. The physicianpractice can continue to bill and be paid the standardamounts for all CPT® codes that are currently eligible forpayment under the Physician Fee Schedule.

2. Payment for Additional Services. The practice can alsobe paid for one or more specic services or combinationsof services that are not currently eligible for FFS payment.

To receive payment, the practice bills the payer using acode indicating that the service or combination of ser-vices was delivered. This may be an existing CPT® codethat is not currently billable or a newly-developed code todescribe the service or a combination of services. A pay-ment amount is dened for the code based on the cost ofdelivering the service or combination of services.

3. Measurement of Avoidable Utilization. One or moreother services are identied that the practice agrees canbe avoided or controlled by delivering the newly-payableservices. Utilization of these services by the practice’spatients is measured to determine the rate of avoidableutilization. A target level of avoidable utilization is de-ned based on what is known to be achievable by practic-es that have the resources to deliver appropriate services.

The practice’s rate of avoidable utilization is compared tothe target level to determine whether the physician prac-tice is above or below the target level. The rate is risk-

adjusted to re

ect patient characteristics that aff

ect utili-zation but are outside the physician’s control.

4. Measurement of Quality/Outcomes. If the services tobe avoided are undesirable (e.g., treatment of infectionsor complications following a procedure), the measure ofavoidable utilization also represents a measure of quality.However, if the services are sometimes necessary or desir-able and sometimes undesirable or unnecessary, thenthere may also need to be one or more additionalmeasures of quality, outcomes, or appropriateness, inorder to ensure that only the undesirable/unnecessaryservices are being reduced. A target level for the quality/outcome measures or consistency with appropriatenesscriteria would be dened based on what is known to be

achievable by physician practices with similar patientsand similar resources.

5. Adjustment of Payment Amounts Based onPerformance. If the pra ctice’s rate of avoidable utiliza-tion and quality is within normal statistical variationaround the target levels, it receives the standard paymentamount for the new code. If the practice’s rate of avoida-ble utilization is signicantly higher than the target levelor if quality is signicantly lower, the payment amount forthe new service would be reduced. If utilization is signi-cantly lower or quality is signicantly higher, the paymentamount would be increased. If the rate of avoidable utili-

zation is much higher than the target level, the physi-cian practice could be ineligible to bill for the new code.

6. Updating Payments Over Time. The paymentamount for the new service code would be increasedeach year based on ination, and the payment amountwould be periodically adjusted based on an assessmentof the costs of delivering the service in order to ensurethat the payment is adequate but no higher than neces-sary.

Benets of the APM:

The patient would benet by receiving services that can-not currently be provided due to lack of payment.

The payer would benet because the expected savingsfrom low levels of avoidable utilization would be greaterthan the payments made for additional services.

The physician practice would benet by receiving the

resources needed to deliver desirable services to pa-tients that will avoid complications or the need for thepatients to receive less eff ective services.

E x amples:

Payment for Services to Reduce AvoidableEmergency Room Visits and Hospitalizations ofCancer Patients. Under this APM, in addition tocurrent E&M services payments, an oncology practicewould be able to bill and be paid for delivering caremanagement services to patient undergoingchemotherapy treatment. A bill would be submitted tothe payer for each month of services using a newly-dened service code to indicate that care managementservices were delivered in that month. The practicewould have the exibility to use the payment for what-ever combination of specic care management servicesit deemed appropriate. The rate at which the oncologypractice’s patients visited an emergency department orwere admitted to the hospital for conditions related tocancer treatment (such as dehydration or fever) wouldbe measured and compared to a target level, and thepractice’s monthly payment for care managementwould be adjusted up or down based on that perfor-mance measure. The practice’s visit/admission ratewould be risk-adjusted based on the types of cancerstreated and the toxicity levels of the treatments used.(This is one of the elements of the American Society ofClinical Oncology’s proposal for Patient-CenteredOncology Payment.5)

Payment for Services to Support Safely DischargingEmergency Room Patients without HospitalAdmission. Under this APM, in addition to currentE&M services payments, emergency physicians could billand be paid for discharge planning and coordinationservices for patients seen in the emergency department.

The emergency physician would have the exibility touse this additional payment to support additional physi-cian time or additional staff to help appropriate patients

APM #1: PAYMENT FOR A HIGH-VALUE SERVICEBetterCareforPatients


LowerSpendingforPayers


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return home (or return to the facility where they resided)rather than being admitted to the hospital. The rate atwhich the patients of the emergency medicine practice oremergency department are admitted to the hospital wouldbe measured and compared to a target level, and a qualityindicator, such as the rate of returns to the ED, would alsobe measured, with both rates risk-adjusted based on clinicaland other characteristics of the patients. The amounts paidto the emergency physicians for discharge planning andcoordination would be adjusted up or down based on per-formance on these measures.

Payment to Support Implementation of AppropriateUse Criteria for Diagnostic Testing. Under this APM, inaddition to current CPT codes for E&M visits, a physicianpractice would bill and be paid for the time and resourcesneeded to apply appropriate use criteria and engage in aneducation/shared decision-making process with patients inorder to determine the most appropriate diagnostic tests touse when the patient has symptoms (e.g., chest pain) or isat high risk of developing a disease or a recurrence (e.g.,cancer). The proportion of tests ordered that were con-sistent with the appropriate use criteria would be measuredand compared to expected rates based on registry data,

and the amounts paid to the physician practice for the ap-plication of the criteria would be adjusted up or downbased on performance. Since performance would be basedon appropriate use, not absolute rates of utilization, no sep-arate measures of quality would be needed. (This is also anelement of the American Society of Clinical Oncology’s pro-posal for Patient-Centered Oncology Payment.)

Di ff erence from Other Payment Models:

In contrast to typical pay-for-performance programs, thephysician practice would be paid for the additional ser-vices it needs to deliver in order to improve quality orreduce total costs.

In contrast to a typical shared savings program, an indi-vidual physician practice’s payments would not be ex-plicitly tied to how much money that practice saved thepayer. Instead, the physician practice would be paidadequately to deliver appropriate services, and the pay-er would save money by spending less on avoidableservices (for the patients in all participating practices)than the additional payments made to all practices par-ticipating in the APM. A physician practice that alreadyhad achieved low rates of avoidable utilization by deliv-ering services without adequate payment would be ableto receive additional payment in order to sustain thatperformance without having to further reduce avoidableutilization, and a physician practice that had an unusual-ly high rate of avoidable utilization would need to makesignicant reductions in order to receive the additionalpayment.

Net Savings for Payer

Unpaid Service





Fee-for-ServicePayments to

Physician Practice






Accountabilityfor


$

TotalSpending

PhysicianPractice

Revenue

FFS Spending

on a Physician’sPatients

APM #1

Payment for aHigh-Value Service

New Service Payment

Fee-for-ServicePayments to

Physician Practice


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Goal of the APM:

Give a physician the exibility to use the most appropriatediagnostic or treatment option for a patient’s conditionwithout reducing the operating margins of the physician’s

practice, including diagnosis or treatment options not sup-ported through the current payment system.6


1. Payment Based on the Patient’s Health ConditionRather Than Services Delivered. The physician prac-tice can bill and be paid for treating or managing the careof patients with a specic health condition (or combina-tion of conditions), rather than having payment tied tothe delivery of specic services or treatments. The physi-cian practice has the exibility to use the payment to sup-port both services that are currently billable as well asnew services that are not currently billable. The bundlecould be dened to include services delivered on a single

day or over a longer period of time, such as a month.2. Condition-Based Payment Replaces Some Current

Fee-for-Service Payments to the Physician Practice. For patients who have the relevant health condition(s)and are eligible for services through the Condition-BasedPayment, the physician practice no longer bills for individ-ual CPT® codes for services that are included in the Condi-tion-Based Payment.7 The practice continues to bill andbe paid for individual services to the patients that are not related to the condition (such as treatment for an unrelat-ed acute episode or accident) using the appropriate CPT® codes. If the practice unintentionally submitted a sepa-rate bill for one of the services included in the Condition-Based Payment, the payer would simply not pay the billfor that individual service.8 Payments to other providersthat deliver services for the condition (e.g., payment to ahospital for services the physician performs at the hospi-tal, or payments to a laboratory for tests the physicianorders) would still be made separately by the payer tothose providers. (See APM #3 - Multi-Physician BundledPayment and APM #4 - Physician-Facility Procedure Bun-dle for discussions of bundled payments that involve ser-vices delivered by multiple providers, rather than just byone physician practice.)

3. Payment Amounts Stratied Based on Patient Needs. The physician practice would bill for an eligible patient bychoosing a code from a new family of bundled servicecodes (these would be “condition-based” codes ratherthan procedure codes). Each of these condition-basedcodes would be dened based on patient characteristicsthat are expected to result in a mix of services from thephysician practice with similar costs, similar to the wayhospital Diagnosis Related Groups dene a range of pa-tients who are expected to require similar amounts ofhospital resources during an inpatient stay. Diff erentcodes would be assigned diff erent amounts of paymentbased on diff erences in the expected costs of services forthe patients.

4. Measurement of Appropriateness/Outcomes. In or-der to ensure that patients continue to receive the mostappropriate services through the Condition-Based Pay-ment, the physician practice would either agree to doc-ument the application of appropriate use criteria (if such

criteria exist) or to measure quality or outcomes fortreatment of the patient’s condition and compare thequality/outcome measures to benchmarks.

5. Adjustment of Payment Amounts Based onPerformance. The payment amounts for the condi-tion-based codes would be reduced if the physicians inthe practice failed to apply appropriate use criteria or ifthe quality/outcome measures were signicantly belowbenchmark levels.

6. Updating Payments Over Time. The Condition-BasedPayment amounts would be increased each year basedon ination, and the payment amounts would be peri-odically adjusted based on an assessment of the costs ofdelivering care to the patients who have the condition

in order to ensure that the payments are adequate butno higher than necessary.

Benets of the APM:

The patient would benet because the exibility underthe Condition-Based Payment would allow the physicianpractice to deliver diff erent types or combinations ofservices to patients that cannot currently be provideddue to lack of payment, and to deliver care for the pa-tient’s condition more eff ectively at a lower total cost.

The payer would benet because either (1) the newcombination of services enables the physician to orderfewer or lower-cost services from other providers or re-

sults in fewer health problems or complications for thepatient, so the payer would spend less overall, or (2) thepractice can accept a lower payment for the Condition-Based Payment than the payer would have expected topay for the individual services that would have beenprovided under the current payment system.

The physician practice would benet by having theexibility to deliver the most appropriate services topatients without concern about which service willgenerate more revenue for the practice.

Examples:

Monthly Payments for Chronic Disease Manage-

ment. Under this APM, a primary care practice orspecialty practice that is helping a patient manage achronic disease such as asthma, COPD, diabetes, heartfailure, or inammatory bowel disease (or a combinationof such conditions) would bill for a single paymentamount each month. The practice would no longer billfor Evaluation & Management payments for these pa-tients. (The practice could continue to bill for E&M ser-vices for patients without chronic diseases and it couldcontinue to bill for any individual procedures performedon all patients, including chronic disease patients.9) The

APM #2: CONDITION-BASED PAYMENT FORA PHYSICIAN’S SERVICES

BetterCareforPatients




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practice would have the exibility to use the payments forwhatever combination of services were most eff ective –office visits, phone calls, emails, support from non-physician staff , etc. Monthly payments would be higherfor patients with multiple chronic diseases or more severechronic diseases, since the patients would be expected toneed more contacts with physicians or practice staff .Quality measures and rates of hospitalization would becalculated and compared to benchmarks to ensure pa-tients were receiving necessary care. 10

Case Rates for Radiation Therapy for Cancer. Underthis APM, a radiation oncology practice would bill for asingle payment amount for an entire course of radiationtherapy for a patient. The amount of payment would notbe based on the specic type of treatment used, but itwould be based on the type of cancer and on patient-specic factors aff ecting the appropriate radiation thera-py. The amount of payment for a particular category ofpatients would be based on the average spending on thediff erent treatment modalities used for similar patients inthe past. The radiation oncologist would have the exibil-ity to use whichever type of treatment was most appropri-ate for the patient. (The American Society of Radiation

Oncology is developing this type of payment model forbreast cancer treatment and palliative care of bone me-tastases; some radiation oncology practices have imple-mented this approach with commercial health plans.11)

Monthly Payments for Chemotherapy Treatment. Under this APM, a medical oncology practice would billfor a single payment amount for each month that a pa-tient is undergoing chemotherapy. The monthly pay-ment would replace E&M services payments and pay-ments for about 50 diff erent CPT codes describing diff er-ent types of infusions and injections (drugs and diagnos-tic tests would still be billed for and paid separately).

The oncology practice would have theexibility to use

the monthly payment to provide the combination ofservices that best met the patient’s needs without con-cern for which services generated more revenue. Theamount of payment would diff er depending on patientcharacteristics such as comorbidities and the toxicityand complexity of the treatment regimen, instead ofbeing based on the number of office visits or on whetherinfused or oral therapy was used. (This is similar to theproposal for Consolidated Payments for Oncology Caredeveloped by the American Society of ClinicalOncology.12)

Di ff erence from Other Payment Models:

In contrast to typical pay-for-performance programs and

shared savings programs, the physician practice wouldhave the exibility to deliver new types of services anddiff erent combinations of services rather than being lim-ited to what can be billed under the current fee-for-servicepayment system.

Savings for Payer

Unpaid Option 3for Treatment



Involved in Treatment Options

1 and 2

FFS Payments toPhysician Practice

for Treatment Option 1



Involved in Treatment Options

1 and 2

Avoidable Spendingfor the Condition


Accountabilityfor


$

TotalSpending

PhysicianPractice

Revenue

FFS Spending toTreat Patients with

a Speci

c Condition

APM #2:Condition-Based Paymentfor a Physician’s Services

Condition-Based

Paymentto the

PhysicianPractice

Treatment 1

Treatment 2

Treatment 3


for Treatment Option 2


14/26


Goal of the APM:

Give multiple physicians who are providing services to thesame patient the exibility and resources needed to rede-sign their services in coordinated ways that will improvequality and reduce the costs of diagnosis or treatment.


1. Single Bundled Payment for Services Delivered byTwo or More Physicians. A single payment is madethat covers the services delivered by two or more physi-cians in order to diagnose a patient’s condition or to de-liver a specic treatment for a diagnosed health problem.

The physicians would have the exibility to use the bun-dled payment for services that are not currently eligiblefor payment as well as for services for which they can cur-rently bill the payer, and they would also have the exibil-ity to divide the payment diff erently than what theywould receive under the current payment system.

2. Bundled Payment May Supplement and/or ReplaceCurrent Fee-for Service Payments to the Physicians.

The bundled payment could be designed to increase rev-enue to the physician practices in order to support deliv-ery of one or more specic services or combinations ofservices that are not currently eligible for payment underthe Physician Fee Schedule or that do not currently re-ceive adequate payment. The bundled payment couldalso be designed to replace payment for some existingservices, i.e., the physicians delivering those serviceswould no longer bill for individual CPT® codes for the ser-vices but would instead use the bundled payment to cov-er the costs of those services. The exact structure of thebundle will depend on the nature of the barriers in the

current payment system.3. Patient Agreement to Use the Multi-Physician Team

for the Services. In order to receive the benets of themore coordinated and exible care, the patient wouldneed to agree to use only the physicians on the team forall services covered by the Bundled Payment.

4. Bundled Payment Paid to an Alternative PaymentEntity Designated by the Participating Physicians. Theparticipating physician practices would designate an or-ganizational entity to receive the bundled payment. This“Alternative Payment Entity” could either be one of thephysician practices (which would agree to pay the otherphysician practices their shares of the bundled paymentfor the components of services they provide) or it could

be a new organization (e.g., a limited liability corporationthat is jointly owned by the participating practices) thatwould receive the payment and allocate it among theparticipating practices based on rules the practices adopt.

5. Payment Amounts Stratied Based on Patient Needs. The designated Alternative Payment Entity bills the payerfor services to an eligible patient using a new servicecode. If some patients need signicantly more servicesthan others, a family of new bundled service codes wouldbe used, with each code dened based on patient charac-teristics that are expected to need combinations of ser-

vices from the participating practices with similar totalcosts.

6. Measurement of Avoidable Utilization of OtherServices. If the bundled payment is designed to in-crease total payments to the physician practices, one or

more other services are identied that the physicianpractices agree can be reduced or controlled by deliver-ing the newly-payable services using the bundled pay-ment. The utilization of these services for the physicianpractices’ patients is measured to determine the rate ofavoidable utilization, and a target level of avoidable uti-lization is dened based on what is known to be achiev-able by physician practices that have the resources todeliver appropriate services. The rate of avoidable utili-zation for the practices’ patients is compared to the tar-get level to determine whether the practices are aboveor below the target level. The rate is risk-adjusted toreect patient characteristics that aff ect utilization butare outside the physician practices’ control.

7. Measurement of Appropriateness/Quality/Outcomes. If the bundled payment replaces pay-ments for two or more existing services, then in order toensure that patients continue to receive appropriateand high quality services under the bundled paymentarrangement, the participating physicians would eitheragree to document the application of appropriate usecriteria (if such criteria exist) or to measure quality and/or outcomes for the patients and compare the measuresto benchmarks.

8. Adjustment of Payment Amounts Based onPerformance. The amounts paid for the bundledservice codes would be reduced if the avoidable utiliza-tion was not reduced, if physicians failed to apply appro-

priate use criteria, or if quality or outcome measureswere signicantly below benchmark levels.

9. Updating Payments Over Time. The bundled pay-ment amounts would be increased each year based onination, and the payment amounts would be periodi-cally adjusted based on an assessment of the costs ofdelivering the services to patients to ensure that thepayments are adequate but no higher than necessary.

Benets of the APM:

Patients would benet because the physicians deliver-ing their care could work together in a more coordinat-ed way and use the additional resources and/or exibil-

ity under the bundled payment to deliver diff erent typesor combinations of services that cannot currently beprovided.

The payer would benet because the new paymentwould enable the physicians to deliver care more effi-ciently, order fewer or lower-cost services from otherproviders, and/or reduce the number of complicationsfor their patients.

The physician practices would benet by having theresources and exibility to deliver the most appropriateservices to patients in a coordinated way without con-

APM #3: MULTI-PHYSICIAN BUNDLED PAYMENTBetterCareforPatients




15/26


cern about which services will generate more revenuefor the individual practices.

Examples:

Bundled Payment for Diagnosis of Non-Urgent ChestPain. Under this APM, primary care practices andcardiologists would work together to accurately diag-nose individuals with newly reported mild chest painthat does not warrant emergency treatment. A group ofprimary care practices and a cardiology practice wouldreceive a monthly payment to support use of the Ameri-can College of Cardiology appropriate use criteria fordetermining the most appropriate tests to order whenpatients report new chest pain. The cardiologists wouldhelp the primary care physicians implement the criteriaand the primary care physicians would contact the cardi-ologists by telephone or email for assistance in deter-mining what to do for “gray area” cases. The monthlypayment would cover the cost of any electronic decisionsupport system incorporating the appropriate use crite-ria, the primary care physicians’ time in applying the cri-teria, and the cardiologists’ time in consulting with thePCPs. Primary care practices and cardiology practices

would continue to receive standard E&M payments foroffice visits with patients in addition to the new bundledpayment. The monthly payments would be increased ordecreased based on the rate of adherence to the criteriain ordering tests and/or the rate of utilization of high-cost diagnostic tests. (This is a type of payment modelbeing considered to support the SMARTCare projectdeveloped by the American College of Cardiology.13)

Bundled Payment for Collaborative Treatment ofAllergic Asthma. Under this APM, primary care prac-tices and allergy specialists would work together to de-velop and implement a treatment plan for patients withallergic asthma. The primary care and allergy practiceswould bill payers for a payment for each patient withdiagnosed allergic asthma. The payment would supportthe development of appropriate immunotherapy treat-ment by the allergy practice and administration of the

treatments by the primary care practice with telephonesupport from the allergy practice. The rate at whichasthma control medications are used and the frequencyof exacerbations would be measured to assess whetherpatient outcomes had improved and total costs hadbeen reduced.

Bundled Payment for Integrated Behavioral andPhysical Health Care. Under this APM, primary carepractices and psychiatry practices would jointly receivea payment to support (1) screening of patients for be-havioral health problems in the primary care practiceoffice and (2) either brief interventions in the primarycare practice office or referral for treatment by the psy-chiatrist when appropriate. The bundled payments

would support the additional time spent by primary careproviders to screen patients for behavioral health needs,the hiring of behavioral health specialists to work in theprimary practice (or to be available through a tele-healthlink) to provide immediate brief interventions for pa-tients with a positive screening, and training, phoneconsultations, and supervision by psychiatrists.

Savings for Payer

Unpaid Servicesby Physician Practices


Other Practices,and Other Entitiesfor Services to the

Shared Patients

FFS Payments toPhysician Practice 2

for Services toShared Patients


Other Practices,and Other Entitiesfor Services to the

Shared Patients



Accountabilityfor


$

TotalSpending

PhysicianPractice 2

Revenue

FFS Spending for

Patients Cared for byMultiple Physicians

APM #3:Multi-Physician

Bundled Payment

BundledPayment

Shared byPhysicianPractices

1 & 2

Current &NewServices by

PhysicianPractice 2

Current &New

Services byPhysicianPractice 1

FFS Payments toPhysician Practice 1

for Services toShared Patients

PhysicianPractice 1

Revenue


16/26


Goal of the APM:

Give a physician greater ability to choose the most appropri-ate hospital or other facility to deliver a particular procedureand to work with the facility to improve efficiency and quali-

ty in delivering that procedure.


1. Single Bundled Payment for the Physician and FacilityServices. A single payment is made for the physicianservices and the services of the hospital or other facilitywhere the physician performs services as part of a particu-lar treatment for a patient’s health problem. The physi-cian practice and the facility have the exibility to use thebundled payment for services that are not currently eligi-ble for payment as well as for services for which they cancurrently bill. The physician practice and the facility candivide the bundled payment in ways that are diff erentfrom what they would have received for the same services

under current payment systems.2. Bundled Payment Replaces Current Fee-for-Service

Payments to the Physician and Facility. The physicianpractice no longer bills for individual CPT® codes for theservices covered by the bundled payment, and the facilityno longer bills for the relevant services under the applica-ble payment system (e.g., a hospital would not bill underthe Inpatient Prospective Payment System if the bundleapplied to inpatient care, and it would not bill under theOutpatient Prospective Payment System if the bundleapplied to outpatient care.)

3. Payment Made to an Alternative Payment EntityDesignated by the Participating Providers. An

“Alternative Payment Entity” is designated to receive thebundled payment and allocate it between the physicianpractice and facility. This entity could be the physicianpractice, the hospital or other facility where the proce-dure is performed, a Physician-Hospital Organization thatis jointly owned by physicians and the hospital, or a newlyformed entity.

4. Facility-Independent Payment or Facility-SpecicPayment. Since many treatments can be delivered inmultiple types of facilities (e.g., in a hospital inpatient unit,a hospital outpatient department, an ambulatory surgerycenter, a physician office, etc.), the bundle could be“facility-independent,” i.e., the payment would be thesame regardless of which type of facility is used for the

treatment. Alternatively the bundled payment could be“facility-specic,” with the payment amount diff ering de-pending on the specic facility where the treatment isdelivered.

5. Payment Amounts Stratied Based on Patient Needs. The Alternative Payment Entity submits a bill to a payerfor payment for services delivered to an eligible patientusing a code from a family of new bundled codes thatdesignate the service provided. Payment amounts areassigned to codes based on diff erences in the expectedcosts of the services delivered by both the physician andthe facility. If the codes are facility-specic, each code is

dened based on patient characteristics that are ex-pected to aff ect the types of services performed by thephysician and the facility, but the code is not based ex-plicitly on the actual services delivered. If the codes arefacility-independent, then the codes are also dened

based on patient characteristics that are expected toaff ect the type of facility used for a patient, but thepayment is not based explicitly on which facility wasactually used.

6. Outlier Payments for Patients with Unusually HighNeeds. A supplemental payment would be made forpatients who need an unusually large number of ser-vices or unusually expensive services as part of the treat-ment.

7. Measurement of Appropriateness/Quality/Outcomes. In order to ensure that patients continueto receive appropriate, high quality services under thebundled payment, the physician and facility agree todocument the application of appropriate use criteria (ifsuch criteria exist) or to measure quality and/or out-comes for the patients and compare those measures tobenchmarks.

8. Adjustment of Payment Amounts Based onPerformance. The amounts paid for the bundledcodes are reduced if the providers fail to apply appropri-ate use criteria or if quality or outcome measures aresignicantly below benchmark levels.

9. Updating Payments Over Time. The bundled pay-ment amounts would be increased each year based onination, and the payment amounts would be periodi-cally adjusted based on an assessment of the costs ofdelivering the procedure to ensure that the bundled

payments are adequate but no higher than necessary.

Benets of the APM:

The patient would benet by being able to receive highquality care at the lowest-cost facility and to receive co-ordinated and efficient care from the physician andfacility staff .

The payer would benet because the Alternative Pay-ment Entity could accept a lower payment for the bun-dle than the total amounts that would have been paidseparately to the physician and facility under currentpayment systems.

The physician practice could benet by using the bun-dled payment to cover the costs of services that are notcurrent billable or do not receive adequate compensa-tion, and by receiving compensation for changes in thephysician’s services that reduce the costs of the servicesdelivered by the facility.

APM #4: PHYSICIAN-FACILITY PROCEDURE BUNDLEBetterCareforPatients




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Examples:

Bundled Payments for Hospital Admissions. Underthis APM, a single payment would be made to a Physician-Hospital Organization (PHO) to cover both the physicianservices and the hospital services during a hospital admis-sion. The physician practice and the hospital involved inthe bundle would not bill separately for their services forany patient who was eligible for the bundled payment.(This payment model was successfully implemented by

CMS for orthopedic and cardiac procedures as part of theMedicare Acute Care Episode Demonstration.14)

Facility-Independent Bundled Payment for Surgery. Under this APM, a surgery practice would receive a single,bundled payment to cover both the surgeon’s costs forperforming the surgical procedure and the costs of thefacility used to perform the surgery. The bundled pay-ment would be the same regardless of where the surgerywas performed, so if patients could safely receive surgeryin an outpatient setting or ambulatory surgery center ra-ther than an inpatient setting (or in the physician’s officerather than an outpatient hospital setting), the payercould pay less for the bundle while the surgery practicewould earn more for performing the procedures. Thesurgery practice or the entity managing the paymentwould have the exibility to pay more for services in the

outpatient setting than the standard amount paid underthe current payment system if that would enable a pa-tient to be safely treated at a lower overall cost. Thebundled payment would be higher for patients whohave characteristics that would increase the likelihoodthat the patient would need to receive surgery in a high-er-cost setting. Complication rates and patient-reportedoutcomes (such as pain and level of function) would bemeasured and reported, and payments would be re-duced if patients were experiencing more complicationsor if outcomes worsened.

Facility-Independent Bundled Payment for NormalVaginal Delivery. Under this APM, an obstetrics prac-tice would receive a single, bundled payment to coverboth the obstetrician’s time for labor and delivery andthe payment to the facility where the delivery occurs.

The bundled payment would be the same regardless ofwhere the delivery occurred, so if a subset of motherscould safely deliver in a birth center rather than a hospi-tal, the obstetrics practice could charge less for the bun-dled payment while earning more for performing deliv-eries. The obstetrics practice would have the exibilityto pay the birth center more than the standard amount

it would have received under the current paymentsystem if that would enable more babies to be safelydelivered at the birth center at a lower overall cost.

Savings for PayerPayments toOther Facilities,

Practices, and Entitiesfor Services Related

to the Procedure

Payments toOther Facilities,

Practices, and Entitiesfor Services Related

to the Procedure

$

TotalSpending

FFS Spendingfor a Procedure

APM #4:

Physician-FacilityProcedure Bundle

BundledPayment

forPhysicianPracticeServices

& FacilityCosts

for theProcedure

Paymentfor the

Facility’sCosts

PaymentFor the

Practice’sServices

FFS Payments to thePhysician Practicefor the Procedure

PhysicianPractice

Revenue

Paymentsto the Facility

Where the

Procedureis Performed


18/26


Goal of the APM:

Give physicians adequate payment and exibility toredesign care in a way that will prevent complications andreduce the spending needed to treat them.


This APM diff ers from the previous APMs by using a singlebundled payment to cover the costs of unplanned physicianservices to treat complications in addition to the costs ofservices that are planned as part of a patient’s treatment. (Ifthe procedure resulting in a complication was delivered in afacility, APM #5 could be combined with APM #4 - Physician-Facility Treatment Bundle to include the costs of facilityservices associated with treatment of complications as wellas the physician services.)

1. A Single Payment for Both a Planned Service andTreatment of Avoidable Complications. The physician

practice can bill and be paid for a warrantied version of aservice the physician performs, and the physician practicereceives a higher payment than what is currently paidunder the current payment system for delivering thesame type of service without a warranty. The physicianpractice is responsible both for delivering the initial ser-vice and for providing or paying for the additional physi-cian services needed to treat specic types of complica-tions arising from the initial service. The physician prac-tice no longer bills separately for the services delivered totreat the complications covered by the warranty. If thetreatment for the complication is delivered by a physicianpractice other than the physician practice that deliveredthe initial service, the payer reduces the payment to thephysician practice that delivered the initial service by theamount paid to the physician who treated the complica-tion.

2. Payment Amounts Stratied Based on the Risk ofComplications. The physician practice bills for thewarrantied service by choosing a code from a family ofnew service codes. Each code is dened based on patientcharacteristics that are expected to result in a signicantlyhigher or lower rate of complications.

3. Measurement of Quality/Outcomes. The rate of com-plications covered by the warranty would be reported sothat patients could choose physician practices with lowerrates of complications. (There is no need to explicitly ad-

just the payment amount based on the rate of complica-

tions; the physician practice’s operating margins wouldautomatically be lower if complication rates are higher,because the cost of treating the complications would in-crease but the warrantied payment would remain thesame.)

4. Updating Payments Over Time. The warrantied pay-ment amounts would be increased each year based onination, and the payment amounts would be periodicallyadjusted based on an assessment of (1) the costs of deliv-ering care to the patients and (2) the achievable rate ofcomplications, in order to ensure that the payments areadequate but no higher than necessary.

Benets of the APM:

The patient would benet by being able to receive carewith fewer complications and lower overall costs.

The payer would benet by paying less for the warran-tied service that it would have paid for the combinationof the planned services and treatment of complicationsat current complication rates.

The physician practice would benet by having theexibility to deliver care diff erently if it would reducecomplication rates, and to be paid more for deliveringhigher-quality care.

Examples:

Warranty for Surgery. Under this APM, a surgerypractice would bill for a warrantied payment for surgery.

The payment would be higher than the standard surgi-

cal fee, but the surgery practice would not bill for a sep-arate fee if the patient required a second surgery to ad-dress a complication. If specic types of patient charac-teristics are known to signicantly increase the risk ofcomplications, a higher level of payment would bemade for patients with those characteristics. The typesof complications covered by the warranty would bespecied, and if a diff erent type of complication or prob-lem occurred that required a second surgery, the sur-gery practice could bill separately for that surgery. If adiff erent surgeon performed the surgery for a complica-tion covered by the warranty, the payment to that sur-geon would be deducted from the payment to the sur-gery practice of the surgeon who delivered the initial

warrantied surgery. (A warrantied payment focusedsolely on the physician practice would not be expectedto cover the payment to the hospital if a second surgerywas needed; however, a multi-provider bundled pay-ment could be dened that included both the paymentto the surgeon and the hospital, as described in APM#4.)

Warranty for Repeat Colonoscopy. Under this APM,a gastroenterology practice would bill for a warrantiedpayment for colonoscopy. The payment would be high-er than the standard colonoscopy fee, but the gastroen-terology practice would not bill for an additional fee if arepeat colonoscopy was needed due to an incompleteprocedure or to address post-polypectomy bleeding.

Di ff erence from Other Payment Models:In contrast to penalties that reduce payments when com-plications occur, the warranty approach provides greaterupfront resources so that care can be redesigned to reducecomplications. In addition, although no additional pay-ment is made when complications occur, the cost of treat-ing some complications is built into the warrantied pay-ment amount, so the physician practice is not nanciallypenalized when a small number of complications occur,but it is rewarded if it can eliminate most or all complica-tions.

APM #5: WARRANTIED PAYMENT FORPHYSICIAN SERVICES

BetterCareforPatients




19/26


Savings for Payer

Payments to Facilities,Other Practices,

and Other Entitiesfor Services Related

to the Procedure

FFS Payments to thePhysician Practice

to Treat Complicationsfrom the Procedure



to the Procedure

Other Spendingto Treat Complications

Other Spending to

Treat Complications

Accountabilityfor

ControllingComplications

$

Total

Spending

PhysicianPractice

Revenue


APM #5:Warrantied Payment

for Physician Services

WarrantiedPayment

to thePhysician

Practice

Services forComplications

PhysicianPractice

Services toDeliver

Procedurewithout

Complications


for Performingthe Procedure


20/26


Goal of the APM:

Give physicians and other providers the ability to deliver allof the care during and after delivery of a particular proce-dure or treatment in a coordinated, efficient way.

Components of the APM: This APM involves a single bundled payment for multipleservices delivered by multiple providers over a period oftime, including services needed to address complicationsthat patients may experience as a result of treatment.

1. Payment for a Complete “Episode of Care” AssociatedWith a Procedure or Treatment. An “episode of care”would be dened based on the time needed to deliver aparticular procedure or treatment and any follow-up ser-vices needed, as well as a period of time in which mostcomplications would be expected to occur. For example,the episode of care for a procedure or treatment deliveredduring an inpatient hospital admission is typically dened

as the length of the hospitalization (and potentially a peri-od of time before the hospital admission occurs) plus axed period of time after discharge (e.g., 30 days or 90days). This means that the length of the episode can varyfrom patient to patient depending on the number of daysinvolved in delivering the treatment. (Although pay-ments for management of chronic conditions are alsosometimes labeled “episode payments,” these are moreappropriately called Condition-Based Payments and aredescribed under APM #7.)

2. Bundled Payment For All Related Services DeliveredDuring the Episode By All Providers. The episode pay-ment is a bundled payment that covers all services deliv-ered by all providers during the episode that are related

to the procedure or treatment, including services deliv-ered by all physicians to the patient as part of the treat-ment or procedure, the services delivered by the hospitalor other facility where the physician services are per-formed, and any services delivered by physicians or otherproviders after completion of the treatment that areneeded for recovery from the treatment (e.g., post-acutecare services after discharge from the hospital).

3. Warrantied Payment for Treatment of ComplicationsOccurring During the Episode. The episode paymentalso covers any services delivered to treat specic types ofcomplications related to the treatment or procedure, suchas hospital readmissions for complications related to thetreatment.

4. Patient Agreement to Use the Provider Team for theEpisode Services. In order to receive the benets ofthe more coordinated and exible care, the patient wouldneed to agree to only use the providers on the teamparticipating in the Episode Payment for all servicesrelated to the procedure or treatment.

5. Bundled Payment Paid to an Alternative PaymentEntity. An Alternative Payment Entity would bedesignated or created to serve as the recipient of theepisode payment. Depending on the type of procedureor treatment, this could be a physician practice, a hospital,

a Physician-Hospital Organization, or some other organi-zational entity governed by physicians.

Prospective Payment: If the episode payment ispaid “prospectively,” the providers would no longerbill the payer for the services they deliver that are

covered by the episode payment, but they wouldinstead be paid by the Alternative Payment Entityusing the revenues that entity receives from the payervia the episode payment.

Retrospective Reconciliation: An alternative ap-proach to implementing the episode payment is“retrospective reconciliation.” The episode paymentis treated as a budget, the providers continue to billthe payer for their individual services and they arepaid by the payer under the existing payment sys-tems, and those payments are totaled by the payerand compared to the budget. Then, if the fee-for-service billings are less than the budget, the payerpays the diff erence between the billings and the

budget to the Alternative Payment Entity; if the fee-for-service billings total more than the budget, theAlternative Payment Entity must return the diff erenceto the payer.

Hybrid Prospective/Retrospective Payment. Athird alternative is for a subset of the providers to bepaid by the payer under the current payment sys-tems; these payments would be deducted by the pay-er from the episode payment and then the balancewould be paid to the Alternative Payment Entity. Theremaining providers would no longer bill directly fortheir individual services but would be paid throughthe Alternative Payment Entity using the revenuesfrom the episode payments.

6. Payment Amounts Stratied Based on PatientNeeds. The designated Alternative Payment Entitybills the payer for services to an eligible patient bychoosing a code from a family of new bundled servicecodes. Each code would be dened based on patientcharacteristics that are expected to need combinationsof services with similar total costs.15

7. Outlier Payments and Risk Corridors for Patientswith Unusually High Needs. A supplemental pay-ment (an outlier payment) would be made by the payerto the Alternative Payment Entity for patients who needan unusually large number of services during an epi-sode. In addition, a supplemental payment (a riskcorridor payment) would be made if an unusually largenumber of patients had above average needs forservices during episodes.16

8. Measurement of Appropriateness/Quality/Outcomes. In order to ensure that patients continueto receive appropriate and high quality services underthe episode payment arrangement, the participatingproviders would agree to document the application ofappropriate use criteria (if such criteria exist) and/or tomeasure quality and/or outcomes for the patients andcompare the measures to benchmarks.

APM #6: EPISODE PAYMENT FOR A PROCEDUREBetterCareforPatients




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9. Adjustment of Payment Amounts Based on Perfor-mance. The amounts paid for the episodes would bereduced if the providers failed to apply appropriate usecriteria or if quality or outcome measures were signi-cantly below benchmark levels.

10. Updating Payments Over Time. The episode pay-ment amounts would be increased each year based onination, and the payment amounts would be periodi-cally adjusted based on an assessment of the costs of

delivering the procedure or treatment to ensure that thepayments are adequate but no higher than necessary.

Benets of the APM:

The patient would benet by receiving more coordinat-ed care and by the ability to receive diff erent types oramounts of services than are possible under the currentpayment system.

The payer would benet by paying less for the episodepayment than it would have expected to spend in totalfor all of the services delivered during the episode underthe current payment and delivery system.

The physician practice and other providers would bene-t by having the exibility to deliver care diff erently if itwould reduce costs and complication rates and theycould be paid more for delivering higher-quality, lower-cost care.

Examples:

Bundled Payment for Colonoscopy. Under this APM,a gastroenterology practice would receive a single pay-ment to cover all of the services associated with deliveryof a screening colonoscopy – the services of the gastro-enterologist performing the colonoscopy, the services ofan anesthesiologist or nurse anesthetist if one was used,and the facility fee for the facility where the colonoscopywas performed. The payment would be the same re-

gardless of which facility is used to perform the colonos-copy. The payment would also cover any repeat colon-oscopies performed due to incomplete procedures orpolypectomy bleeding. (The colonoscopy bundle devel-oped by the American Gastroenterological Associationincludes all of these costs.17)

Episode Payment for Joint Surgery. Under this APM,a surgery practice, Physician-Hospital Organization, orhealth system would receive a single payment (or a de-ned budget) for all of the costs involved in performinghip or knee surgery during an inpatient hospital admis-sion, delivering rehabilitation services after surgery, andtreating any post-operative complications. The pay-ment amount would be higher for patients with comor-bidities and functional limitations that would requiremore inpatient or post-acute care. The paymentamount would be adjusted based on measures of quali-ty and outcomes for the patients. 18

Savings for Payer



to the Procedure

Spending toTreat Complicationsfrom the Procedure

$

TotalSpending

PhysicianPractice

Revenue


APM #6:Episode Payment

for a Procedure

EpisodePayment

for theProcedure

Services forComplications

Paymentfor the

PhysicianPractice’sServices

FFS Payments to thePhysician Practice

for Performingthe Procedure

Payment forProcedure-

RelatedServices

fromFacilities,

OtherPractices,& OtherEntities


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Goal of the APM:

Give physicians and other providers who are delivering careto patients for an acute or chronic condition the exibilityand accountability to deliver the most appropriate treat-ment for the patient’s condition in a coordinated, efficient,high-quality manner.


1. Payment Based on the Patient’s Health Condition. Thephysician practice (or an Alternative Payment Entity desig-nated by the practice) can bill and be paid for managingthe care of a specic health condition (or combination ofconditions), rather than having payment tied to thedelivery of specic procedures or treatments.

2. Payment Covering Multiple Treatment OptionsDelivered by the Physician and Other Providers. TheCondition-Based Payment covers all services delivered bythe physician or by other providers that are related to the

condition during a dened period of time. For an acutecondition, the time period would end when the acutecondition is resolved; for a chronic condition, a xed timeperiod could be dened (e.g., a month or a year) or thetime period could end when the nature or severity of thepatient’s condition changes (e.g., the chronic conditionbecomes signicantly more severe). The physician prac-tice (or the Alternative Payment Entity receiving the pay-ment) has the exibility to use the payment for servicesthat are currently eligible for fee-for-service payments, forservices that are not currently eligible for payment, andfor services delivered by individuals or organizations

AMA Guide to Alternative Payment Models.pdf

Documents

Transcript of AMA Guide to Alternative Payment Models.pdf