So you’re considering joining an APM?

An Alternative Payment Model (APM) is a payment approach that combines cost efficiencies and quality metrics into its reimbursement method to providers. APMs have surfaced within the last four years since the passage of MACRA in 2015. This was done in an effort for CMS to get practices to reconsider how they are paid for providing care. More recently, in the last couple of years, the term Advanced APM has been introduced. Advanced APMs are also one of two alternative payment paths under the Quality Payment Program that will be used to determine Medicare Part B payment adjustments. We will revisit AAPMs a little later.

The most common type of APM is an ACO (Accountable Care Organization). The concept of an ACO was born out of the 2010 Affordable Care Act (Obamacare), and started as shared savings initiatives. ACOs are groups of doctors, hospitals, and other healthcare providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients. The goal of coordinated care is to ensure that patients get the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors. When an ACO succeeds both in delivering high-quality care and spending health care dollars more wisely, the ACO will share in the savings it achieves for the Medicare program. The most popular type of ACO is a MSSP (Medicare Shared Savings Program). The MSSP provides participants with the following four ACO options, each of which requires an ACO to assume a different level of risk:

  • Track 1—These ACOs assume no downside financial risk, meaning there’s no financial penalty to the ACO if it doesn’t lower costs. It can only benefit from the shared savings that are generated. Track 1 is often viewed as a stepping stone to help the ACO “test the waters” and initiate best practices and integration necessary to achieve and sustain lower costs. Savings are limited to a maximum of 50 percent each year.
  • Track 1+—These ACOs assume limited downside risk while preparing for the more intensive Tracks 2 and 3. ACOs can join the Track 1+ Model as part of 2018, 2019, and 2020 MSSP application cycles. Savings are limited to a maximum of 50 percent annually. Downside risk will vary depending on the ACO’s composition. In 2018-2020, losses under the Track 1+ model are capped at either eight percent of ACO participant Medicare Part A or Part B fee-for-service revenue or at four percent of the ACO’s updated historical benchmark.
  • Track 2—These ACOs must repay Medicare for exceeding anticipated costs. However, when shared savings are generating, they receive a larger portion of those savings as compared to their Track 1 and Track 1+ counterparts. Savings are capped at 60 percent annually, and the shared loss rate may not be less than 40 percent or exceed percent.
  • Track 3—These ACOs take on the greatest amount of risk, but may also share in the greatest portion of savings if successful. Savings are capped at 75 percent, and the shared loss rate may not be less than 40 percent or exceed 75 percent.

Currently, the one-sided risk option (i.e., Track 1) is the most popular with 82 percent of ACOs falling into this category, according to CMS. Ten percent of ACOs are in the Track 1+ model, one percent is in the Track 2 model, and seven percent are in the Track 3 model. As the industry continues to shift toward value-based payment models, the MSSP will likely continue to remain in the spotlight.

The newest Advanced APM concept out of CMS is called Direct Contracting. This concept was introduced in April 2019 and centers around CMS contracting directly with a health care provider under a capitated payment system that also has a 2-sided risk model component.   These types of models are indicative of the goal CMS ultimately wants to achieve – leaving volume-based fee-for-service payment models altogether.