Leaders from a wide range of practices said that APMs have become increasingly complex since 2014, making participation less viable for small practices.


Oct. 30—Physicians across the country are concerned about rapid changes in alternative payment models (APMs) and want the process to slow down, according to a recent study. Meanwhile, Trump administration officials say physicians should prepare for accelerated changes.

“Some practice leaders called for a ‘time out’ from further payment changes, so that they could better understand how to respond to their current financial incentives,” according to a recently issued compilation of interviews of leaders at 31 physician practices of differing sizes, specialties, and ownership models. The interviews in six markets across the country were conducted by RAND Corporation researchers and funded by the American Medical Association (AMA).

The interviews were follow-ups to similar queries in 2014 and found ongoing APM challenges. Providers reported many of the same challenges, including obtaining data with which to understand and improve their performance.

Negative experiences—including financial hits—reduced practices’ willingness to participate in future APMs, even when offered by different payers, according to the report.

Practices reported undertaking many costly initiatives to improve their performance under a variety of APMs, such as investments in data and analytics, internal financial and nonfinancial incentives for individual physicians, and expanded use of care management and care coordination staff.

One source of difficulty was sudden or unexpected discontinuations of APMs, the report found. For instance, one practice described the challenges it faced when a Medicaid bundled payment program was discontinued after a change in the state’s political leadership.

Similarly, the Trump administration’s cancellation of a mandatory Medicare cardiac bundled payment pilot interrupted the formation of physician-hospital business relationships and had some lingering effects, according to one practice. Cardiac and orthopedic surgeons were upset when planned hospital acquisitions of their practices were canceled as a result.

Despite the desire of the surveyed practices for slower movement toward APMs, the Trump administration appears poised for a big APM expansion. For instance, Alex Azar, secretary of the U.S. Department of Health and Human Services (HHS), said at the Sept. 6 meeting of the Physician-Focused Payment Model Technical Advisory Committee (PTAC) that “a number of the models advanced by PTAC have significantly influenced models we have in the works, but working with all of you, we want to go much further.”

At the September meeting, PTAC recommended at least partial implementation of three physician-focused models after previously urging HHS to act on 10 models.

In October, Seema Verma, administrator of the Centers for Medicare & Medicaid Services (CMS), said her agency is developing models that identify high-value providers and is looking to create financial incentives for beneficiaries to seek care from them.

“We aim to provide a range of alternative payment models, creating a variety of options and choices that create incentives for clinicians to provide better value to their patients,” Verma said at America’s Health Insurance Plans’ 2018 National Conference on Medicare.

Issues with Model Complexity

Interviewees from a wide range of practices, markets, and roles said that APMs have become increasingly complex since 2014. Specific sources of complexity include an expanding number of performance measures, uncertainty concerning performance thresholds for penalties and rewards, and interactions between different payment models.

Another “key source” of complexity, according to the report, was the choice between the two tracks of Medicare’s physician payment system, which was implemented over the last two years. Participants in advanced APMs—one of the two payment arms—are two years into a five-year window in which they can garner bonuses through Medicare.

“Practices of all sizes and specialties reported that understanding complex new payment models often entailed a significant resource investment, either to hire consultants or to build internal capabilities to analyze APMs,” the report stated.

Larger practices and those affiliated with large health systems could afford such investments, while smaller, independent practices were more likely to be left confused and disengaged.

Several Trump administration officials have promised greatly simplified models for smaller practices.

Practices that did invest in understanding existing APMs found new opportunities for financial gain.

“Some of these practices found ways to receive more credit for their preexisting quality—without materially changing patient care—by enhancing their documentation and data abstraction practices, thoroughly coding risk adjustment diagnoses, actively managing patient attribution, or purposefully selecting their performance measures to maximize the likelihood of rewards,” according to the report.

AMA wrote CMS a letter in September to urge a range of simplifications to the non-APM payment arm of Medicare compensation, the Merit-based Incentive Payment System (MIPS), in which the vast majority of physicians fall. Such changes were needed to reduce the aggregate national implementation cost of following those requirements, which CMS estimated at $368 million.

Changes also were urged to ease participation in advanced APMs, which have lower reporting burdens than MIPS and shield practices from potentially significant payment cuts.

A related finding of the RAND interviews was of a “high degree of financial risk aversion,” which influenced practices’ decisions about whether to participate in new payment models.

“Risk aversion was especially prominent among practices that had experienced losses in APMs or that were inexperienced in managing risk,” the report stated.

Physician Pay in APMs

Despite increasing participation in APMs, most practices reported little change in how their individual clinicians were paid. “Modest bonuses for quality performance” remain common—except at small, independent practices (where physician-owner incentives were inseparable from practice-level incentives).

Individual-physician financial incentives based on care costs were “almost nonexistent.”

Fee-for-service (FFS) was still the dominant internal financial incentive for both primary care and subspecialist physicians, even in practices that took on substantial external risk in shared savings contracts and other APMs.

“When individual physicians did receive non-FFS incentives, they were of modest size, framed as upside-only, and typically linked to performance on quality measures,” according to the RAND report.

The report found that some practices simply divided bonuses equally among physicians, which effectively created group-level performance incentives.

For reference, 43 percent of respondents in a national physician survey said their compensation plan included at least some value-based pay components, up from 41 percent in the same survey in 2017.

The July survey of more than 2,200 physicians, released by the Medicus Firm, a national physician search company, found that among half of the physicians whose pay included a value-based component, that component comprised less than 10 percent of their total income. That threshold is considered by some compensation advisers as a key cutoff, below which physicians are unlikely to alter practice patterns.


Rich Daly is a senior writer/editor in HFMA’s Washington, D.C., office. Follow Rich on Twitter: @rdalyhealthcare

Publication Date: Wednesday, October 31, 2018