90% of health plans think the use of alternative payment models will increase in the coming years

A recent report from the Health Care Payment Learning and Action Network (HCP LAN) examines how providers are getting paid in the U.S. today.  Traditionally, health care providers (e.g., physicians, hospitals) were paid via fee-for-service (FFS).  Fee-for-service means that every time a provider does a service, they get paid.  This is truly largely regardless of quality and whether or not the service was actually needed.

Alternative payment models (APM) aim to change this.  APMs increase reimbursement for high quality care and also for providers that save money for the system.  The problem with APMs are: (i) quality is difficult to measure and providers may shift effort from unmeasured to measured dimensions of quality, and (ii) providers may start to under-provide care to patients who need it.

Defining an APM

The HCP LAN defines four categories of APMs in a previous report.

• Category 1: Pure FFS payment (not really an APM).
• Category 2: FFS linked to quality or value such as payment for foundational initiative or infrastructure (e.g., HITECH payments for EMR implementation, pay-for-reporting, or pay-for-performance.
• Category 3: APMs built on FFS structure.  Examples include APMs with shared savings, and APMs with shared savings and downside risk (e.g., Medicare Shared Savings Program)
• Category 4: Population-based payments such as condition-specific population-based payments, comprehensive population based payments (e.g., global budgets), or integrated finance and delivery systems where the insurer owns the providers (e.g., Kaiser Permanente model).

Share of spending captured by APMs

Regardless of your thoughts on FFS payment and APMs, there has been significant growth in the later.  HCP LAN surveyed health plans and states to asked them to provide data on the share of dollars paid to providers during the previous calendar year that were for APMs.  actual dollars paid to providers during the previous calendar year (CY) or the most recent 12- month period for which the data was available.  Responses were received from 61 health plans, three Medicaid states, and Medicare’s fee-for-service arm.  The results of the survey found the following:

• Category 1: 41% in pure FFS in 2017, down from 43% in 2016
• Category 2: 25% of health care dollars in FFS with quality metrics, down from 28% in 2016Category 2
• Category 3/4: 34% in some type of APM in 2017, up from 29% of health care dollars in 2016

APMs were most common in Medicare Advantage (49.5%) and Medicare FFS (38.3%) but less common in commercial (28.3%) or Medicaid programs (25.0%). Further, 90% of respondents thought the use of APMs will increase in the future.