APM: Just Another TLA?

In the world of TLAs (three-letter acronyms), the APM, or alternative payment model, is a TLA we certainly need to pay attention to. APMs are a collection of new healthcare payment frameworks that are rapidly expanding across the country. Birthed in 2010 by the Affordable Care Act, APMs are being tested in a lab CMS calls the Center for Medicare and Medicaid Innovation, or CMMI for short. There are literally dozens of APMs in existence today, but most have a few things in common:

1. They are either focused on a population of patients, like an ACO or an ESCO, or they are focused on an episode of care, like the Bundled Payments for Care Improvement (BPCI) Initiative;
2. They have an established financial benchmark which is basically what CMS projects the population of patients or the episode of care would cost CMS if the APM did not exist; and
3. The majority of APMs include a measure of quality, which in many instances determines what percentage of the savings you get to keep or what percentage of the loss you must pay to CMS.

ACOs

The Innovation Center can be thought of as a lab because in many respects APMs are being tested. You can think of APMs as large-scale experiments. The first APM most of us encountered is the cleverly named “Accountable Care Organization.” One need only view the brief evolution of the ACO to witness the change underway. Starting with the aptly named “Pioneer ACO,” we next saw the emergence of the MSSP (Medicare Shared Savings Program). MSSP ACOs progressed through track 1, track 2, and track 3. Each subsequent track built on the previous model and in many respects expands the risk exposure for participants. Earlier this year, 21 “next gen” ACOs launched (with 3 rapidly bailing out). There are now over 800 ACOs in the country, including almost 500 CMS ACOs. In 2015 it was estimated that 23.5 million people were covered by an ACO.

Value instead of volume

Last year, Health and Human Services (HHS) Secretary Sylvia Burwell put a stake in the ground when she said, “HHS has set a goal of tying 30 percent of traditional, or fee-for-service, Medicare payments to quality or value through alternative payment models, such as Accountable Care Organizations (ACOs) or bundled payment arrangements by the end of 2016, and tying 50 percent of payments to these models by the end of 2018.” (emphasis mine) In March of this year, HHS reported they reached the 30-percent goal for 2016 ahead of schedule.

Few anticipated the significance of Secretary Burwell’s initial message, but less than a month later one of the most important pieces of legislation this generation has seen that impacts physician reimbursement was signed into law. MACRA creates a magnitude of change most of us will only witness once during our professional careers. Those of you who believe the looming election cycle may somehow lead to our salvation with a repeal of MACRA should remember MACRA had remarkable bipartisan support (the vote in the Senate was 92-8).

Voluntary vs mandatory APMs

The 962-page MACRA notice of proposed rulemaking has almost certainly generated mountains of feedback during the recently closed public comment period. With any luck we will see the final rule later this fall. But even without the final rule, it is clear that MACRA includes several incentives designed to attract physicians and advanced practioners to APMs. Those incentives include overt financial incentives like the 5-percent Advanced APM incentive, and various benefits designed to mitigate the tyranny of MIPS (the Merit-based Incentive Payment System).

During the 15 months since MACRA arrived on the scene, we’ve seen a proliferation of APMs. Almost universally these APMs are voluntary. An ACO or ESCO must be formed as a legal entity. Providers may elect to participate in these programs, making business decisions about taking risk. A trend is emerging, however, that warrants our attention. In April of this year, 800 hospitals in 67 geographic areas were required to participate in the Comprehensive Care for Joint Replacement Model (CJR). Basically these hospitals are now on the hook for the total Medicare Part A & B spend for Medicare beneficiaries who have an elective hip or knee replacement at their facility. This episode of care does not end with discharge from the hospital, but like BPCI, the Part A & B spend the hospital is at risk for extends to day-90 post-discharge.

The point here? Participation is not optional. If you happen to be a hospital in one of these 67 geographical areas, this is how you will be paid for hips and knees. , in another shot across the bow, HHS released a proposal to expand mandatory bundled payments to cardiac disease. On July 1, 2017, certain hospitals will be on the hook for the Part A & B spend for patients suffering from a myocardial infarction or undergoing a coronary artery bypass procedure. As with CJR, the proposed cardiac bundle includes the Part A & B spend during the hospital stay and for 90 days post-discharge. And more importantly, like CJR, the proposed cardiac bundle would not be optional.

Offense or defense?

So where does this leave us? As you think about how your practice will prepare for MIPS or APMs, consider this. Writing a few weeks ago in the New England Journal of Medicine, Robert Kocher and Anuraag Chigurupati raised an interesting point. In their Perspective piece entitled, “The Coming Battle over Shared Savings—Primary Care versus Specialists,” the authors highlight several examples where shared savings would result in a sizeable financial gain for primary care and a concomitant financial loss for specialists. They correctly point out that successful value-based programs will result in reductions in volume for hospitals and perhaps skilled nursing facilities. But they also anticipate reductions for specialists, specifically calling out ER docs, cardiologists, pulmonologists, endocrinologists, orthopedists, and radiologists. Nephrologists did not make their list, but advice later in the piece is worth our attention.

“Specialists will have to decide whether to play defense or offense in responding to these changes. Those who focus on defense will invest in the fee-for-service playbook: achieve objectively measurable clinical excellence within their specialty and consolidate into larger groups for negotiation leverage with commercial payers. For a while, they may successfully maintain incomes that way, particularly if they have strong institutional affiliations and reputations that translate into patient self-referrals and make them essential to commercial payers’ provider networks.

Other specialists will go on the offense, aiming to differentiate themselves on the basis of their ability to reduce costs of care. They could do so by limiting unnecessary consults and tests, practicing in lower-intensity facilities, prescribing lower-cost medications, and preventing avoidable hospitalizations. In some cases, specialists will be better positioned than PCPs to perform cost-reducing functions, particularly for management of complex diseases and medications. A strong offense will also involve greater financial integration with PCPs—specialists might become partners in ACOs or negotiate bundled rates for managing episodes of care. PCPs, for their part, may lock in referrals with high-value specialists and share with them the savings they help create.”¹

When I was a freshly minted nephrologist, I joined a nephrology practice in an urban Midwest city immediately after completing my nephrology fellowship. The standard of care in that community called for us to see every patient during every dialysis treatment. One of us made rounds on 3 shifts of patients, 6 days a week. If one of our patients arrived in an emergency room, the ER staff were instructed to call us, and regardless of time of day (or night), we went down to the ER to personally see them and decide on their disposition. The practice of nephrology has substantially changed in the 25 years since I left my fellowship. And while I am not suggesting we return to earlier times, I do think the way we practice is about to change again. APMs are indeed more than just another TLA, and each of you will soon face a choice in this new world. Will you play offense? Or will it be defense? Drop us a note and let us know what you think.

¹ Kocher R, Chigurupati A. The Coming Battle over Shared Savings—Primary Care versus Specialists. N Engl J Med 2016;375:104-06.

Terry Ketchersid, MD, MBA, practiced nephrology for 15 years before spending the past seven years at Acumen focused on the Health IT needs of nephrologists. He currently holds the position of Chief Medical Officer for the Integrated Care Group at Fresenius Medical Care North America where he leverages his passion for Health IT to problem solve the coordination of care for the complex patient population served by the enterprise.