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This issue brief, the second in a series prepared by Breakaway Policy Strategies for FasterCures, discusses four of the most common alternative health care payment models (APMs) and how these models are gradually shifting our nation’s health care delivery and payment systems away from the traditional feeforservice (FFS) model of reimbursement to one that seeks to reward higher quality and lower cost care. The APMs examined in this brief include accountable care organizations, bundled payment arrangements, pay forperformance initiatives, and primary care medical homes. This brief also discusses public and private sector initiatives, recent studies on program outcomes, and key challenges with implementation. Introduction National health care spending continues to grow, pushing public and private health care payers, providers, and other stakeholders to find innovative and lower cost ways of providing quality care. In 2012, U.S. health care spending increased by 3.7 percent to $2.8 trillion or $8,915 per person, composing 17.2 percent of the nation’s Gross Domestic Product (GDP). 1 The Centers for Medicare and Medicaid Services (CMS) projects that by 2022, U.S. health care spending will reach approximately $5 trillion, amounting to 19.9 percent of GDP. 2 One primary driver of rising health care costs is our system’s reliance on a model of reimbursement, which often compensates providers for each service they provide. As the most common payment model among public and private sector payers, Fee for Service (FFS; See Index of Acronyms) can create incentives for providers to increase the volume (and cost) of care they deliver—through additional tests, procedures, inpatient stays and outpatient visits—rather than focusing on the value of care provided to patients. 3 In addition, by paying each provider separately for their services regardless of the quality of care or patient outcome, FFS can encourage fragmented and uncoordinated care that further increases health care costs and care inefficiencies. 4 Increasingly, these concerns associated with FFS reimbursements have motivated private payers and providers to experiment with Alternative Payment Models (APMs). 5 In addition, in 2010, the Patient Protection and Affordable Care Act (ACA) mandated several changes in existing compensation programs and established the CMS Innovation Center to develop and test payment and service delivery models, helping to steer the focus of provider payment systems from volume based to valuebased care. 6 Over the past few years, the number of APMs and individuals receiving care through APMs has grown rapidly. The expansion of APMs has been fueled in large part by a desire among providers, payers, policymakers, and consumers to develop integrated payment and delivery systems that provide higher quality and more costeffective care. One sign that APMs will likely play a prominent role in the future delivery of health care is the bipartisan embrace of these models in recent, highprofile Congressional proposals to repeal the Sustainable Growth Rate (SGR)—a formula enacted by Congress in 1997 in order to limit growth in spending for physician services—and reform the Medicare’s physician payment system. These proposals (including the February 2014 bipartisan, bicameral SGR replacement bill), in part, would provide financial and other incentives to encourage health professionals to participate in APMs in place of the traditional volumebased Medicare FFS structure. 7 Types of Alternative Payment Models There are several different types of APMs, some of which evolved in the private sector, others which were established by

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This  issue  brief,  the  second  in  a  series  prepared  by  Breakaway  Policy  Strategies  for  FasterCures,  discusses  four  of  the  most  common  alternative  health  care  payment  models  (APMs)  and  how  these  models  are  gradually  shifting  our  nation’s  health  care  delivery  and  payment  systems  away  from  the  traditional  fee-­‐for-­‐service  (FFS)  model  of  reimbursement  to  one  that  seeks  to  reward  higher  quality  and  lower  cost  care.  The  APMs  examined  in  this  brief  include  accountable  care  organizations,  bundled  payment  arrangements,  pay-­‐for-­‐performance  initiatives,  and  primary  care  medical  homes.  This  brief  also  discusses  public  and  private  sector  initiatives,  recent  

studies  on  program  outcomes,  and  key  challenges  with  implementation.

Introduction  

National  health  care  spending  continues  to  grow,  pushing  public  and  private  health  care  payers,  providers,  and  other  stakeholders  to  find  innovative  and  lower  cost  ways  of  providing  quality  care.  In  2012,  U.S.  health  care  spending  increased  by  3.7  percent  to  $2.8  trillion  or  $8,915  per  person,  composing  17.2  percent  of  the  nation’s  Gross  Domestic  Product  (GDP).1  The  Centers  for  Medicare  and  Medicaid  Services  (CMS)  projects  that  by  2022,  U.S.  health  care  spending  will  reach  approximately  $5  trillion,  amounting  to  19.9  percent  of  GDP.2      

One  primary  driver  of  rising  health  care  costs  is  our  system’s  reliance  on  a  model  of  reimbursement,  which  often  compensates  providers  for  each  service  they  provide.  As  the  most  common  payment  model  among  public  and  private  sector  payers,  Fee  for  Service  (FFS;  See  Index  of  Acronyms)  can  create  incentives  for  providers  to  increase  the  volume  (and  cost)  of  care  they  deliver—through  additional  tests,  procedures,  inpatient  stays  and  outpatient  visits—rather  than  focusing  on  the  value  of  care  provided  to  patients.3  In  addition,  by  paying  each  provider  separately  for  their  services  regardless  of  the  quality  of  care  or  patient  outcome,  FFS  can  encourage  fragmented  and  uncoordinated  care  that  further  increases  health  care  costs  and  care  inefficiencies.4  

Increasingly,  these  concerns  associated  with  FFS  reimbursements  have  motivated  private  payers  and  providers  

to  experiment  with  Alternative  Payment  Models  (APMs).5  In  addition,  in  2010,  the  Patient  Protection  and  Affordable  Care  Act  (ACA)  mandated  several  changes  in  existing  compensation  programs  and  established  the  CMS  Innovation  Center  to  develop  and  test  payment  and  service  delivery  models,  helping  to  steer  the  focus  of  provider  payment  systems  from  volume-­‐based  to  value-­‐based  care.6    

Over  the  past  few  years,  the  number  of  APMs  and  individuals  receiving  care  through  APMs  has  grown  rapidly.  The  expansion  of  APMs  has  been  fueled  in  large  part  by  a  desire  among  providers,  payers,  policymakers,  and  consumers  to  develop  integrated  payment  and  delivery  systems  that  provide  higher  quality  and  more  cost-­‐effective  care.    One  sign  that  APMs  will  likely  play  a  prominent  role  in  the  future  delivery  of  health  care  is  the  bipartisan  embrace  of  these  models  in  recent,  high-­‐profile  Congressional  proposals  to  repeal  the  Sustainable  Growth  Rate  (SGR)—a  formula  enacted  by  Congress  in  1997  in  order  to  limit  growth  in  spending  for  physician  services—and  reform  the  Medicare’s  physician  payment  system.  These  proposals  (including  the  February  2014  bipartisan,  bicameral  SGR  replacement  bill),  in  part,  would  provide  financial  and  other  incentives  to  encourage  health  professionals  to  participate  in  APMs  in  place  of  the  traditional  volume-­‐based  Medicare  FFS  structure.7    

Types  of  Alternative  Payment  Models  

There  are  several  different  types  of  APMs,  some  of  which  evolved  in  the  private  sector,  others  which  were  established  by  

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the  ACA.    The  following  section  provides  a  brief  description  of  the  features  of  some  of  the  most  prevalent  APMs.  

Accountable  Care  Organizations  

Accountable  care  organizations  (ACOs)  are  networks  of  doctors,  hospitals,  and  other  health  care  providers  that  share  responsibility  for  coordinating  care  and  meeting  health  care  quality  and  cost  metrics  for  a  defined  patient  population.      

ACOs  are  a  product  of  the  growing  movement  to  realign  financial  incentives  in  health  care  with  the  primary  objectives  of:    

1)  promoting  more  coordinated  care,    

2)  improving  quality,  and    

3)  reigning  in  health  care  spending.    

Although  ACO-­‐like  delivery  and  payment  arrangements  gradually  evolved  among  private  health  care  providers  and  insurers  over  the  last  decade,  the  ACO  movement  is  strongly  associated  with  the  Medicare  program.  The  ACA  codified  the  ACO  model  into  law,  creating  the  Medicare  Shared  Savings  Program  (MSSP),  to  assess  whether  this  new  framework  could  offer  higher  quality  care  at  a  lower  cost.8    The  private  sector  has  also  implemented  several  ACO  variations.  As  of  January  2014,  there  were  606  public  and  private  ACOs—with  more  than  360  of  them  offered  through  Medicare.9      

Participation  in  Medicare  ACO  programs  is  voluntary.  ACOs  must  accept  responsibility  for  at  least  5,000  Medicare  FFS  patients  and  participate  for  at  least  three  years.10    Medicare  ACOs  use  some  variation  of  a  shared  savings  model  with  CMS,  which  financially  rewards  providers  that  improve  quality  on  certain  metrics  while  decreasing  spending.  To  earn  shared  savings,  participating  ACOs  must  meet  33  quality  measures  related  to  patient  and  caregiver  experience,  care  coordination,  patient  safety,  preventive  health,  and  at-­‐risk  populations.11    ACOs  also  must  have  annual  per-­‐beneficiary  Medicare  expenditures  below  the  CMS-­‐established  benchmark  for  their  defined  beneficiaries.12    In  some  cases,  Medicare  ACOs  financially  penalize  providers  who  fail  to  meet  quality  and  cost  metrics.  

In  January  of  this  year,  CMS  released  findings  on  the  cost  savings  achieved  by  the  114  ACOs  in  the  MSSP  that  launched  in  2012.13  According  to  the  study,  during  their  first  12  months  of  operations,  nearly  half  of  the  ACOs  spent  less  than  the  benchmark  projections  and  roughly  a  quarter  achieved  shared  

savings—a  total  of  $254  million,  with  $126  million  in  provider  savings  and  $128  million  for  the  Medicare  Trust  Fund.  Some,  however,  have  interpreted  these  findings  as  less  than  favorable.  In  the  first  year,  ACOs  were  required  to  report  data  but  were  not  evaluated  based  on  performance.  So,  the  results  of  the  study  do  not  show  whether  the  ACOs  actually  improved  care  quality  while  achieving  shared  savings.  In  addition,  only  about  a  quarter  of  ACOs  actually  achieved  shared  savings.  Accordingly,  it  is  difficult  to  accurately  assess  the  overall  success  of  the  MSSP.    Table  1:  Breakdown  of  ACO  Measures  for  Each  Domain  Domain   Number  of  Individual  

Measures  Patient/Caregiver  Experience   7  Care  Coordination/Patient  Safety   6  Preventive  Health   8  At-­‐Risk  Population   12  Total  in  all  Domains   33  

Source:  Centers  for  Medicaid  and  Medicare  Services.14    

While  many  private  sector  ACOs  incorporate  aspects  of  a  shared  savings  model,  they  are  more  likely  to  experiment  with  ACO  variations  and  include  other  APMs.  Most  private  ACOs  offer  financial  incentives  tied  to  established  quality  measures,  consist  of  three-­‐to-­‐five  year  programs,  and  institute  shared  responsibility  for  5,000  or  more  individuals.15  Types  of  private  ACO  contracts  include:  1)  the  Shared  Savings  Contracts  (One-­‐Sided  Model),  which  rewards  providers  with  bonuses  for  meeting  quality  measures  and  reducing  health  spending,  but  does  not  penalize  them  if  they  fail  to  achieve  savings;  2)  the  Shared  Risk  Payment  Model  (Two-­‐Sided  Model),  which  holds  providers  accountable  for  both  bonuses  and  penalties;  and  3)  Partial  Capitation,  which  allows  providers  experienced  in  coordinated  care  to  transition  towards  population-­‐based  alternative  payment  systems.  Most  private  sector  ACOs  operate  within  the  one-­‐sided  risk  framework.    Private  sector  ACOs  tend  to  differ  from  Medicare  ACOs.  For  example,  they:  1)  are  more  likely  to  experiment  with  other  APMs,  such  as  bundled  payments,  retainer  agreements,  in-­‐kind  services,  and  payer  subsidies;16  2)  have  contracts  that  tend  to  offer  greater  flexibility  and  customization  for  the  providers’  and  payers’  respective  patient  population;  17  3)  are  more  willing  to  experiment  with  greater  risk  in  their  payment  models;18  and  4)  sometimes  enter  into  contracts  that  provide  incentives  for  patients  to  seek  care  exclusively  within  the  ACO  network.19  

Some  private  sector  ACOs  report  that  they  have  successfully  reduced  hospital  admissions  and  medical  costs,20  facilitated  

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closer  provider-­‐patient  relationships,21  and  encouraged  investments  in  health  information  technology  (HIT).22    Several  important  issues  may  need  to  be  addressed  as  the  ACO  model  evolves.  For  example,  Medicare  ACOs  do  not  provide  patients  with  incentives  to  reward  healthy  behavior  or  stay  

within  the  ACO  network  for  their  care.  Given  the  critical  role  that  patients  play  in  determining  their  own  health  outcomes,  some  stakeholders  argue  that  the  failure  to  engage  patients  directly  could  be  ACOs’  biggest  weakness.23  In  addition,  within  the  MSSP,  ACOs  do  not  include  Medicare  Part  D  prescription  drug  costs  within  the  shared  savings  calculations.  This  exclusion  may  affect  how  providers  in  Medicare  ACOs  utilize  Part  B  services  and  Part  D  therapies  in  striving  to  improve  their  shared  savings.  CMS  raised  this  issue  in  its  recent  Request  for  Information  on  the  Evolution  of  ACO  Initiatives,  seeking  stakeholder  comments  on  the  potential  benefits  and  barriers  of  integrating  Part  D  expenditures  within  the  Medicare  ACO  structure.24  If  the  MSSP  expands  to  include  Medicare  Part  D  prescription  drug  costs  in  the  future,  providers  may  have  increased  incentive  to  reduce  the  utilization  of  expensive  drugs  in  favor  of  cheaper  generic  drugs.  As  a  result,  biopharmaceutical  companies  may  face  greater  pressures  to  demonstrate  the  cost-­‐savings  and/or  quality  gains  of  new  therapies  for  patients  in  ACOs.25    

 

 

Bundled  Payments  

Under  a  bundled  payment  arrangement,  payers  compensate  providers  with  a  single  payment  for  an  episode  of  care,  which  is  defined  as  a  set  of  services  delivered  to  a  patient  over  a  specific  time  period.  This  model  aims  to  incentivize  providers  to  improve  care  coordination,  limit  costly  and  unnecessary  services,  and  reduce  variations  in  care  not  tied  to  patient  care  quality  and  outcomes.  By  providing  one  single  payment  for  various  providers,  bundled  payments  seek  to  promote  a  team-­‐

based  approach  to  care.  Though  bundled  payments  differ  based  on  the  patients’  illnesses  and  conditions,  and  tend  to  reflect  the  average  costs  of  the  treatments  involved  in  an  episode  of  care,  they  do  not  typically  vary  with  the  explicit  number  or  mix  of  services  provided  to  any  individual  patient.26  In  most  models,  participating  providers  share  in  savings  if  their  actual  expenditures  are  below  the  bundled  payment  amount.27    Both  Medicare  and  private  payers  have  utilized  bundled  payment  arrangements  with  providers  for  narrow  sets  of  services,  including,  for  example:      

• The  PROMETHEUS  Payment  model—launched  in  2006  with  four  initial  pilots—has  grown  to  cover  21  episodes  of  care  bundles,  including  heart  attacks,  hip  and  knee  replacements,  diabetes,  asthma,  congestive  heart  failure,  and  hypertension.28  

• The  Medicare  Acute  Care  Episode  Demonstration,  where  CMS  provided  bundled  payments  to  providers  at  five  health  systems  for  all  Part  A  and  B  services  relating  to  three  joint  replacement  and  five  cardiovascular  procedure  episodes  of  care.29  

 The  most  prominent  Medicare  initiative  is  the  Medicare  Bundled  Payments  for  Care  Improvement  (BPCI)  initiative,  established  by  the  CMS  Innovation  Center.  The  three-­‐year  project  involves  four  different  models  of  care  and  payment  for  participating  providers.30  On  January  30,  2013,  CMS  announced  that  464  health  care  organizations  would  participate.  Depending  on  the  results  of  the  initiative,  which  are  not  yet  available,  CMS  and  Congress  may  consider  implementing  bundled  payments  on  a  broader  basis  in  Medicare.31    

 As  with  all  APMs,  there  are  some  issues  with  bundled  payment  arrangements.  The  financial  incentives  associated  with  an  episode-­‐based  bundled  payment  model  may  have  broader  impacts  on  provider  utilization  and  patient  outcomes  than  anticipated.  As  with  FFS  payments,  bundled  payments  only  

Box  1:  Outpatient  Prescription  Drug  Coverage—Medicare  Part  B  vs.  Part  D  Outpatient  prescription  drugs  generally  are  covered  under  either  Medicare  Part  B  or  Part  D.  Medicare  Part  B,  which  pays  for  outpatient  medical  care,  such  as  doctor  visits,  home  health  services,  and  some  laboratory  tests  and  medical  equipment,  generally  pays  for  prescription  drugs  and  biologics  that  are  not  usually  self-­‐  administered;  and  are  furnished  and  administered  as  part  of  a  physician  service.    Medicare  Part  B  also  covers  a  limited  number  of  other  drugs  including  immunosuppressive  drugs  for  patients  who  have  had  Medicare  covered  transplants,  hemophilia  clotting  factors,  and  certain  vaccines  and  oral  anti-­‐cancer  drugs.  Outpatient  prescription  drugs  not  covered  under  Part  B  are  often  covered  under  a  Part  D  Medicare  Prescription  Drug  Plan.  Some  conditions,  such  as  cancer,  may  be  treatable  by  drugs  covered  under  either  Part  B  or  Part  D.  Since  an  ACO  participant’s  Part  D  drug  costs  will  not  be  part  of  the  “shared  savings”  calculations,  ACOs  may  have  an  incentive  to  switch  patients  to  Part  D  therapies  and  away  from  appropriate  treatments  or  procedures  that  are  reimbursed  through  Medicare  Part  B.i  

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compensate  providers  for  treating  the  sick,  with  no  incentive  for  providing  preventive  care.32  Current  measures  of  care  quality  in  bundled  payment  models  are  limited,  focusing  mostly  on  processes  of  care  and  less  on  actual  health  outcomes—such  as  improvements  in  health  or  avoidance  of  new  medical  problems.33  In  addition,  bundling  requires  provider  integration  and  communication  to  ensure  optimal  resource  use  without  repeat  or  unnecessary  utilization.  Coordinating  care,  tracking  the  quality  of  care,  and  maintaining  accountability  for  costs  across  providers  can  be  difficult,  especially  if  there  is  not  a  single  health  system  or  hospital  organizing  a  patient’s  care.  Improving  connectivity  and  building  effective  communication  channels  among  providers  will  be  critical  to  the  success  of  bundled  payment  arrangements  moving  forward.34  

Pay  For  Performance  

“Pay-­‐for-­‐performance”  (P4P)  is  a  term  used  to  refer  to  those  payment  models  aimed  at  improving  the  quality,  efficiency  and  the  overall  value  of  health  care.  In  P4P  arrangements,  providers  are  reimbursed  based  on  whether  they  achieve  a  pre-­‐determined  set  of  quality  measures.  

Table  2:  Four  P4P  arrangement  categories:    Quality  Measures  

Description  

Process     Process  measures  look  at  improvement  and  assess  the  performance  of  activities  shown  to  contribute  to  positive  health  outcomes  for  patients.    

Outcome     Outcome  measures  look  at  the  effects  that  care  had  on  patients.  These  measures  can  be  controversial  since  social  or  clinical  factors  unrelated  to  the  treatment  received  may  affect  outcomes.  

Patient  Experience  

Patient  experience  measures  assess  patients’  satisfaction  with  the  quality  of  care  they  receive  and  their  overall  health  care  experience.  

Structure   Structure  measures  look  at  the  facilities,  personnel,  and  equipment  used  in  treatment.  

 

The  most  common  form  of  financial  incentive  in  a  P4P  program  is  a  bonus  payment—an  amount  paid  to  a  provider  in  addition  to  his  or  her  usual  fee  for  a  particular  service  once  that  provider  meets  certain  quality  goals.  Other  financial  incentives  may  include  withholds,  penalties,  fee  schedule  adjustments,  per-­‐member  payments,  payments  for  the  provision  of  a  particular  service,  lack  of  payment  for  poor  performance,  shared  savings,  quality  grants  or  loans,  or  payment  for  participation  in  certain  

activities  or  for  reporting  on  certain  activities,  such  as  reporting  of  outcome  measures  for  hospitals.35  

There  are  numerous  P4P  initiatives,  both  in  the  private  and  public  sectors.  One  well-­‐known  private  sector  program  is  the  BCBS  of  Massachusetts’  Alternative  Quality  Contract.36  The  program,  implemented  in  2009,  compensates  providers  based  on  a  global  budget  with  a  quality  incentive.  In  the  public  sector,  the  Medicare  Premier  Hospital  Quality  Incentive  Demonstration  project,  run  by  both  CMS  and  the  Premier  hospital  system,  tested  the  extent  to  which  financial  bonuses  would  improve  the  quality  of  care  for  Medicare  patients  with  certain  illnesses.  37  States  also  have  experimented  with  P4P  in  Medicaid.  In  Massachusetts,  a  hospital-­‐based  P4P  program  paid  hospitals  incentive  payments  based  on  scores  for  a  set  of  quality  indicators  related  to  care  for  Medicaid  patients  with  pneumonia.38    

Some  have  criticized  early  P4P  initiatives  for  focusing  too  narrowly  on  “quality”  with  very  little  consideration  of  cost.  39  Studies  have  shown  that  incentive  amounts  can  sometimes  be  

too  low  to  make  an  impact  on  quality.40  As  the  P4P  model  evolves,  programs  may  have  to  address  overall  value  by  looking  not  only  at  quality,  but  at  cost  as  well.  The  ACA  explicitly  steers  CMS  in  this  direction  by  providing  for  demonstrations  and  incentives  for  value-­‐based  purchasing,  physician  quality  reporting,  and  Medicare  Advantage  plan  bonuses.  

 

Box  2:  Assessing  the  Performance  of  APMs  In  February  2014,  the  RAND  Corporation  released  a  study  commissioned  by  the  Department  of  Health  and  Human  Services  (HHS)  which  examined  value-­‐based  initiatives  over  the  past  decade  that  might  help  inform  policymaking,  including  P4P  programs,  ACOs,  and  bundled  payment  initiatives.ii  One  issue  noted  in  the  study  was  that  the  absence  of  quantifiable  goals  for  many  of  the  programs  made  it  difficult  to  determine  whether  the  programs  were  successful  in  meeting  their  goals.  Of  the  published  studies  evaluating  improvement  in  performance  from  the  impact  of  P4P  programs,  improvements,  where  observed,  were  typically  modest.  In  addition,  ACOs  and  bundled  payment  programs  using  clinical  quality  measures  have  only  recently  emerged  and  are  just  now  being  tested  and  evaluated—meaning  there  is  little  evidence  regarding  the  impact  of  these  programs  and  whether  they  can  be  successfully  implemented.  However,  because  these  programs  are  relatively  new,  experimentation  at  the  private-­‐sector  level  will  be  beneficial  in  testing  programs  through  trial  and  error  so  that  lessons  can  be  learned  for  public  and  private  initiatives  going  forward.  

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Patient  Centered  Medical  Homes  

The  patient  centered  medical  home  (PCMH)  model  facilitates  the  coordination  of  care  through  a  patient’s  primary  care  physician.  The  PCMH  model  integrates  mental  health  and  specialty  services,  and  involves  a  team-­‐based  approach  consisting  of  physicians,  nurses  and  medical  assistants,  pharmacists,  nutritionists,  social  workers  and  care  coordinators.  Stating  the  exact  definition  of  a  PCMH  is  difficult  as  the  model  is  continually  evolving.    Four  major  primary  care  societies,  however,  have  endorsed  the  description  provided  in  the  Joint  Principles  of  the  Patient-­‐Centered  Medical  Home,  which  outlines  the  general  characteristics  of  a  PCMH  as:  personal  physician  care,  physician-­‐directed  medical  practice,  whole  person  orientation,  coordinated  and/or  integrated  care,  high  quality  and  safety  in  care,  enhanced  access  to  care,  and  payment  that  supports  enhanced  services.41  

Payments  to  PCMHs  differ  from  those  under  the  traditional  FFS  system  in  several  ways.  PCMH  programs  typically  use  a  combination  of  the  following  care  coordinating  and  performance-­‐based  payments  on  top  of  existing  FFS  payments:  

1) enhanced  FFS  evaluation  and  management  payments;    2) additional  codes  for  medical  home  activities  within  FFS  

payments;  3) per  member  per  month  medical  home  activities  within  

FFS  payments;  and    4) risk-­‐adjusted,  comprehensive  per  member  per  month  

payments.42    

Reforms  to  the  payment  system  are  critical  to  the  success  of  the  PCMH  model  since  the  traditional  FFS  system  does  not  account  for  the  additional  work  physicians  and  other  providers  perform  in  order  to  coordinate  a  patient’s  care—including  additional  support  services,  patient  education,  communications  among  providers,  and  interactions  with  patients  outside  the  clinical  setting.  An  effective  transition  to  this  model  also  requires  significant  cooperation  among  and  communication  between  providers,  which  may  require  additional  investment  in  health  information  technology.  

The  success  of  APMs  like  P4P  and  PCMHs  is  due,  in  part,  to  the  effective  use  of  health  information  technology  (HIT)  to  coordinate  care  and  facilitate  communication  among  providers.    

 

There  are  several  private-­‐sector  PCMH  initiatives.  Community  Care  of  North  Carolina  focused  its  PCMH  program  on  care  coordination  and  primary  care,  and  was  able  to  decrease  preventable  hospitalizations  for  asthma  by  40  percent  and  lower  emergency  visits  by  16  percent.43  The  Group  Health  Cooperative  of  Puget  Sound  reduced  emergency  visits  by  29  percent  and  hospital  admissions  by  6  percent,44  while  the  Geisinger  Health  Plan  program  reduced  hospital  admission  rates  by  18  percent  and  readmissions  by  36  percent  per  year.45    

The  ACA  promotes  the  use  of  the  PCMH  model  by  supporting  nationwide  medical  home  demonstration  projects  administered  by  the  CMS  Innovation  Center.  Some  public-­‐sector  PCMH  initiatives  led  by  the  CMS  Innovation  Center  include  the  Multi-­‐Payer  Advanced  Primary  Care  Practice  (MAPCP)  Demonstration46,  and  the  Comprehensive  Primary  Care  (CPC)  Initiative.47  Both  initiatives  implement  payment  models  that  facilitate  the  transformation  of  primary  care  practices  into  “medical  homes.”    The  goal  of  both  initiatives  is  to  encourage  practices  to  use  a  team-­‐based  approach  to  care,  with  the  patient  at  the  center,  emphasizing  prevention,  HIT,  care  coordination  and  shared  decision  making  among  patients  and  their  providers.    

 In  January  2014,  the  Patient-­‐Centered  Primary  Care  Collaborative  (PCPCC)  and  the  Milbank  Memorial  Fund  issued  an  annual  report  highlighting  recently  published  clinical,  quality  and  financial  outcomes  of  PCMH  initiatives.48    

 

Box  3:  HIT:  Coordinates  Care  and  Facilitates  Communication  As  defined  by  the  HHS  Office  of  the  National  Coordinator  for  Health  IT  (ONC),  HIT  is,  “the  application  of  information  processing  involving  both  computer  hardware  and  software  that  deals  with  the  storage,  retrieval,  sharing,  and  use  of  health  information,  data,  and  knowledge  for  communication  and  decision  making.”    Electronic  health  records  (EHRs)—digital  or  computerized  versions  of  patients’  paper  charts—are  an  essential  part  of  the  HIT  framework,  providing  real-­‐time  patient-­‐centered  records  that  make  information  available  instantly  across  more  than  one  health  care  organization.  In  addition,  today,  more  than  40  percent  of  all  permissible  prescriptions  are  transmitted  electronically  using  certified  EHR  technology—a  process  known  as  e-­‐prescribing  (eRx)—allowing  information  to  be  automatically  stored  in  the  patient’s  record  for  easy  review  during  follow-­‐up  visits  or  for  transitions  between  providers.  

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Key  findings  include:    

1)  that  PCMH  studies  have  demonstrated  some  improvements  in  cost,  utilization,  population  health,  prevention,  access  to  care,  and  patient  satisfaction,  while  a  gap  still  exists  in  reporting  impact  on  clinician  satisfaction;  and    

2)  that  the  PCMH  continues  to  play  a  role  in  strengthening  the  larger  health  care  system,  specifically  ACOs.    

A  February  2014  study  from  The  Journal  of  the  American  Medical  Association,  however—believed  to  be  the  first  multi-­‐payer  pilot  to  report  results  over  three  years—has  found  that  the  PCMH  model  did  not,  in  fact,  reduce  hospitalizations,  emergency  department  use,  ambulatory  services,  or  costs.49    

There  are  other  broader  concerns  worth  noting  regarding  the  PCMH  model:  

• For  the  model  to  work,  providers  must  receive  adequate  compensation  for  the  additional  time  and  effort  involved  in  coordinating  care  across  the  various  care  settings.  Some  primary  care  practices  may  not  have  the  financial  stability  to  invest  in  the  transformation  to  a  PCMH  without  assistance  to  cover  initial  costs,  such  as  those  involving  HIT.    

• Another  concern  involves  the  adequacy  of  the  health  care  workforce  to  form  an  effective  medical  home,  particularly  in  areas  with  shortages  of  primary  care  providers.    

Key  Challenges  

Payers  and  providers  will  likely  face  challenges  in  implementing  APMs.  Perhaps  the  most  significant  is  that  the  financial  incentives  for  providers  in  APMs  to  reduce  hospital  costs,  readmissions,  specialty  care,  and  excessive  utilization  make  it  more  challenging  for  providers  to  maintain  the  level  of  compensation  they  receive  under  traditional  FFS  arrangements.50    

Given  that  most  providers  continue  to  receive  at  least  some  of  their  reimbursements  through  FFS,  APM  success  may  be  limited  until  a  more  widespread  transition  away  from  FFS  becomes  viable.    

In  addition,  care  coordination  within  APMs  depends  on  robust  data  analytics  and  HIT  infrastructure  to  work  effectively.  Health  systems  with  more  advanced  integration  and  available  capital  are  in  a  better  position  to  make  these  necessary  investments  and  increase  their  success  within  the  new  APM  frameworks.  For  providers  with  limited  coordinated  care  infrastructure,  acquiring  expensive  HIT  systems  can  be  especially  difficult.51    

The  limitations  with  current  quality  measures  and  the  focus  on  reducing  overall  costs  within  some  types  of  APMs  may  discourage  providers  from  utilizing  the  most  recent  advances  in  medicine,  including  new  prescription  drugs  and  medical  devices.  In  addition,  providers  may  face  cost  pressures  to  reduce  the  uptake  of  medical  innovations  that  are:  1)  more  costly  upfront  during  the  measurement  period  of  an  APM,  despite  potentially  representing  significant  health  advances  and/or  cost-­‐savings  in  the  long-­‐term;  2)  not  yet  incorporated  into  an  APM’s  quality  measures,  potentially  causing  providers  to  receive  reduced  quality  scores  and  even  financial  penalties;  and  3)  primarily  designed  to  treat  health  conditions  that  affect  only  a  narrow  set  of  patients  within  an  APM’s  defined  population.      

Conclusion  

Physicians,  medical  societies,  payers  (public  and  private),  and  patient  groups—such  as  the  PCPCC—are  continuously  working  to  develop  payment  models  that  are  specifically  designed  to  improve  patient  care  and  save  taxpayers  money.  Both  the  public  and  private  sectors  will  continue  to  plays  a  vital  role  in  motivating  providers  to  reform  their  practices  across  the  health  care  system  through  the  use  of  APMs.  The  rapid  growth  over  the  last  few  years  in  Medicare  APM  programs  suggests  that  there  is  long-­‐term,  widespread  interest  in  the  APM  framework.  Private  sector  innovation  will  also  be  essential  in  developing  new  APMs  and  furthering  the  movement  to  reorient  our  health  care  payment  system.  As  private  sector  payers  and  providers  continue  to  experiment  with  different  types  of  APMs  and  risk  arrangements,  this  innovation  has  the  potential  to  shape  future  Medicare  initiatives  as  well.  

   

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                                                                                                                         1  Martin  A,  Hartman  M,  Whittle  L,  et  al.  "National  Health  Spending  In  2012:  Rate  Of  Health  Spending  Growth  Remained  Low  For  The  Fourth  Consecutive  Year."  Health  Affairs.  33.1  (2014):  67-­‐77.  2  "National  Health  Expenditures  Projections  2012-­‐2022."  Centers  for  Medicare  &  Medicaid  Services.  n.p.  11  Nov  2013.  3  "What  Is  Driving  U.S.  Health  Care  Spending?."  Bipartisan  Policy  Center.  (2012):  8-­‐9.  4  "Farewell  to  Fee-­‐For-­‐Service?."  UnitedHealth  Center  for  Health  Reform  &  Modernization.  n.p.  (2012):  6.  5  Bendix,  Jeffrey.  "Private  payers  re-­‐examining  reimbursement."  Medical  Economics.  25  Feb  2013.  6  "About  the  CMS  Innovation  Center."  Centers  for  Medicare  &  Medicaid  Services.  n.p.,  n.d.  7  "Senate,  House  Leaders  Introduce  SGR  Replacement  Bill."  United  States  Senate  Committee  on  Finance.  n.p.  06  Feb  2014.  8  "Shared  Savings  Program."  Centers  for  Medicare  &  Medicaid  Services.  n.p.  18  Feb  2014.  9  Muhlestein,  David.  "Accountable  Care  Growth  In  2014:  A  Look  Ahead."  Health  Affairs  Blog.  Health  Affairs.  29  Jan  2014.  10  "ACO  General  Questions."  Centers  for  Medicare  &  Medicaid  Services,  Frequently  Asked  Questions.  n.p.  04  Nov  2013.  11  "Medicare  Shared  Savings  Program  Quality  Measure  Benchmarks  for  the  2014  and  2015  Reporting  Years."  Centers  for  Medicare  &  Medicaid  Services.  n.p.,  n.d.  12  ""Methodology  for  Determining  Shared  Savings  and  Losses  under  the  Medicare  Shared  Savings  Program."  Centers  for  Medicare  &  Medicaid  Services.  n.p.,  n.d.  13  "Medicare’s  delivery  system  reform  initiatives  achieve  significant  savings  and  quality  improvements  -­‐  off  to  a  strong  start."  U.S.  Department  of  Health  and  Human  Services.  n.p.  30  Jan  2014.  14  “Medicare  Shared  Savings  Program  Quality  Measure  Benchmarks  for  the  2014  and  2015  Reporting  Years.”  Centers  for  Medicare  &  Medicaid  Services.  2014.  Available  at:  http://www.cms.gov/Medicare/Medicare-­‐Fee-­‐for-­‐Service-­‐Payment/sharedsavingsprogram/Downloads/MSSP-­‐QM-­‐Benchmarks.pdf.  (Accessed  March  2014)  15  Berenson,  Robert,  and  Burton,  Rachel.  "Accountable  Care  Organizations  in  Medicare  and  the  Private  Sector:  A  Status  Update."  (2011).  16  Muhlestein,  David.  "Continued  Growth  Of  Public  And  Private  Accountable  Care  Organizations."  Health  Affairs  Blog.  Health  Affairs,  19  Feb  2013.  17  Muhlestein,  David.  "Continued  Growth  Of  Public  And  Private  Accountable  Care  Organizations."  Health  Affairs  Blog.  Health  Affairs,  19  Feb  2013.  18  "Private  Sector  ACO  Models  Gaining  Prominence."  CEO's  Blog.  PayerFusion,  11  Sep  2012.  19  Berenson,  Robert,  and  Burton,  Rachel.  "Accountable  Care  Organizations  in  Medicare  and  the  Private  Sector:  A  Status  Update."  (2011).  20  Hancock,  Jay.  "New  Insurer-­‐Hospital  ACO  Touts  Early  Success."  Capsules:  The  KHN  Blog.  Kaiser  Health  News,  8  Mar  2012.  21  Gearon,  Christopher.  "ACOs:  The  New  Rx  for  Health  Care  Delivery?"  USNews.  19  August  2013,  n.  pag.  22  Brino,  Anthony.  "ACO  participants  investing  in  analytics,  survey  finds."  Government  Health  IT.  15  March  2013,  n.  pag.  23  Mathews,  Anna.  "Can  Accountable-­‐Care  Organizations  Improve  Health  Care  While  Reducing  Costs?"  Wall  Street  Journal  [New  York]  23  January  2012,  n.  pag.  24  "Request  for  Information:  Evolution  of  ACO  Initiatives  at  CMS."  Centers  for  Medicare  &  Medicaid  Services.    25  Bartolini,  Erin.  "Accountable  Care  Organizations  And  Innovation:  A  Changing  Landscape."  Health  Affairs  Blog.  Health  Affairs,  28  Jun  2013.  

Index  of  Acronyms  

ACO   Accountable  care  organization  

APM   Alternative  payment  models  

CMS   The  Centers  for  Medicare  and  Medicaid  Services  

CPC   Comprehensive  primary  care  

eRx   Electronic  prescribing  or  e-­‐prescribing  

FFS   Fee-­‐for-­‐service  

GDP   Gross  domestic  product  

HHS   The  Department  of  Health  and  Human  Services  

HIT   Health  information  technology  

MAPCP   Multi-­‐Payer  Advanced  Primary  Care  Practice  

ONC   Office  of  the  National  Coordinator  for  Health    

Information  Technology  

P4P   Pay-­‐for-­‐performance  

PCMH  Patient  centered  medical  home  

PCPCC   Patient-­‐Centered  Primary  Care  Collaborative  

SGR   Sustainable  growth  rate  

 

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                                                                                                                                                                                                                           26  "Bundle  Medicare’s  Payments  to  Health  Care  Providers."  OPTIONS  FOR  REDUCING  THE  DEFICIT:  2014  TO  2023.  Congressional  Budget  Office,  13  Nov  2013.  27  Thorpe,  Ken.  "Reforming  How  We  Pay  For  Health  Care:  The  Role  Of  Bundled  Payments."  Health  Affairs  Blog.  Health  Affairs,  13  Dec  2012.  28  "WHAT  IS  PROMETHEUS  PAYMENT®?  AN  EVIDENCE-­‐INFORMED  MODEL  FOR  PAYMENT  REFORM."  .  Robert  Wood  Johnson  Foundation.  n.p.  10  Jun  2009.  29  "ACUTE  CARE  EPISODE  DEMONSTRATION."  Centers  for  Medicare  &  Medicaid  Services.  n.p.,  n.d.  30  “Bundled  Payments  for  Care  Improvement  (BPCI)  Initiative:  General  Information."  Bundled  Payments.  Centers  for  Medicare  &  Medicaid  Services.  n.d.  31  "More  than  450  provider  organizations  join  CMS  bundled-­‐pay  effort."  The  Daily  Briefing.  The  Advisory  Board  Company,  01  Feb  2013.  32  "Bundle  Medicare’s  Payments  to  Health  Care  Providers."  OPTIONS  FOR  REDUCING  THE  DEFICIT:  2014  TO  2023.  Congressional  Budget  Office,  13  Nov  2013.  33  "Bundle  Medicare’s  Payments  to  Health  Care  Providers."  OPTIONS  FOR  REDUCING  THE  DEFICIT:  2014  TO  2023.  Congressional  Budget  Office,  13  Nov  2013.  34  Thorpe,  Ken.  "Reforming  How  We  Pay  For  Health  Care:  The  Role  Of  Bundled  Payments."  Health  Affairs  Blog.  Health  Affairs,  13  Dec  2012.  35  Cromwell  J,  Trisolini  MG,  Pope  GC,  et.  al.  “Pay  For  Performance  in  Health  Care:  Methods  and  Approaches.”  Research  Triangle  Institute.  (2011):  50-­‐52.  36  “Alternative  Quality  Contract.”  Blue  Cross  Blue  Shield  of  Massachusettes.  n.p.,  n.d.  37  “Medicare  Demonstration  Projects  &  Evaluation  Reports.”  Centers  for  Medicare  &  Medicaid  Services.  n.p.,  n.d.  38  “Medicaid  pay-­‐for-­‐performance  program  in  Massachusetts  fails  to  improve  quality  during  first  year.”  Agency  for  Healthcare  Research  and  Quality.  Research  Activities:  377.  Jan  2012.  39  Colla  C,  Wennberg  D,  Meara  E,  et  al.  “Spending  differences  associated  with  the  Medicare  Physician  Group  Practice  Demonstration.”  The  Journal  of  American  Medicine.  308.10  (2012):  1015-­‐1023.  40  Werner,  Rachel  and  Dudley,  R.  “Medicare’s  New  Hospital  Value-­‐Based  Purchasing  Program  is  Likely  to  Have  Only  a  Small  Impact  on  Hospital  Payments,”  Health  Affairs.  31.9  (2012):  1932-­‐40.  41  Joint  Principles  of  the  Patient  Centered  Medical  Home.”  Patient  Centered  Primary  Care  Collaborative.  n.p.  Feb  2007.  <http://www.aafp.org/dam/AAFP/documents/practice_management/pcmh/initiatives/PCMHJoint.pdf>.  42  Merrell  K,  Berenson  RA.  “Structuring  Payment  for  Medical  Homes.”  Health  Affairs.  29.5  (2010):  852-­‐858.  43  “Medical  Home.”  Community  Care  of  North  Carolina.  n.p.,  n.d.  Web.  25  Feb  2015.  <https://www.communitycarenc.org/population-­‐management/medical-­‐home/>.  44  McCarthy  D,  Mueller  K,  Tillmann  I.  “Group  health  cooperative:  reinventing  primary  care  by  connecting  patients  with  a  medical  home.”  The  Commonwealth  Fund.  July  2009.  45  “Medical  Home  Initiative”  Geisinger.  n.p.,  n.d.  Web.  Feb  2014.  <http://www.geisinger.org/chna/gwv/access/medical_home.html>.          46  “Fact  sheet:  Multi-­‐payer  advances  primary  care  practice  demonstration.”  Fact  sheets  items.  Centers  for  Medicare  &  Medicaid  Services,  5  April  2012.  Web.  25  Feb  2014.  <http://innovation.cms.gov/Files/fact-­‐sheet/mapcpdemo-­‐Fact-­‐Sheet.pdf>.    47  “Fact  sheet:  Comprehensive  primary  care  initiatives.”  Fact  sheets  items.  Centers  for  Medicare  &  Medicaid  Services,  22  Aug  2012.  Web.  

                                                                                                                                                                                                                           25  Feb  2014.  <http://innovation.cms.gov/Files/fact-­‐sheet/CPCI-­‐Fact-­‐Sheet.pdf>.      48  “The  medical  home’s  impact  on  cost  &  quality.”  Patient  Centered  Primary  Care  Collaborative.  n.p.  Jan  2014.  49  Friedberg  M,  et  al."Association  between  participation  in  a  multipayer  medical  home  intervention  and  changes  in  quality,  utilization,  and  costs  of  care"  JAMA  2014;  311(8):  815-­‐25.  50  Gold,  Jenny.  "ACO  is  the  hottest  three-­‐letter  word  in  health  care."  FAQ  On  ACOs:  Accountable  Care  Organizations,  Explained.  Kaiser  Health  News,  23  Aug  2013.  51  Gamble,  Molly.  "ACOs:  The  Least  Agreed-­‐Upon  Concept  in  Healthcare?"  Becker's  Hospital  Review,  06  May  2013.      Box  1:  i  Barlas  S.  Pharmacists  Want  a  More  Explicit  Role  in  ACOs:  Medicare’s  Hands  Are  Tied…  At  Least  Initially.  P  T  36  (10):  685-­‐7.  

Box  2:  ii  Damberg  CL.  et  al.  “Measuring  Success  in  Health  Care  Value-­‐Based  Purchasing  Programs.”  RAND  Corporation.  4  March  2014.