1/3 of US payments used alternative models last year, but progress stagnant

Linda Wilson Oct. 24, 2019

Dive Brief:

·         Nearly 36% of U.S. healthcare payments in 2018 involved alternative payment models, compared with 34% in 2017, but only 14.5% of 2018 payments included some form of downside financial risk for providers, a report released Thursday from the Health Care Payment Learning & Action Network found. The public-private partnership looked at data on 226.5 million Americans, or 77% of the covered population.

·         Fee-for-service still accounted for 39% of healthcare payments in 2018 while another quarter of payments were for fee-for-service with some link to value, such as bonuses for reporting data on quality or performance.

·         Medicare Advantage plans had the highest percentage of total payments tied to alternative payment models (53.6%), followed by traditional Medicare (40.9%), commercial payers (30.1%) and Medicaid (23.3%).

Dive Insight:

Striving to reduce costs and improve quality, CMS and commercials payers have been pushing providers for years to participate in alternative payment models, but hospitals and doctors have resisted, particularly arrangements in which they assume downside financial risk.

Part of the problem is that providers are still figuring out how to cope with APMs involving downside risk.

A report released this week from Navigant showed that operating margins for U.S. health systems are an average of 30% below 2015 levels, attributed in part to value-based contracts with commercial payers. Navigant said larger numbers of Medicare and Medicaid patients and rising rates of claim denials also contributed to declining operation margins.

"Our analysis reinforces our belief that rigorous control over staffing, improved clinical effectiveness, and better resource use are vitally important to the short- and long-term financial health of hospitals and health systems," report co-author and Navigant Managing Director Alex Hunter said in a statement.

A 2018 study from Rand and the American Medical Association found that physician practices, particularly those with multiple specialties, reported high levels of aversion to APMs involving risk. Practices that have suffered losses in APMs or have no experience managing risk are particularly wary.

In the current study from the Health Care Payment Learning & Action Network, APMs include those built on top of the fee-for-service architecture (such as shared savings arrangements with or without downside risk), bundled payments and population-based payments (such as global payments and per-member, per-month payments).

But only 5% of total healthcare payments involved population-based payments, or the most advanced forms of APMs. Overall, MA plans have made the most progress adopting these arrangements (17.2% of payments), compared with Medicaid (5.9% of payments) traditional Medicare (4.4% of payments) and commercial payers (2.5%).

State Medicaid programs had the highest percentage of payments tied to fee-for-service without links to quality (66.1%), followed by commercial plans (55.7%) MA (39.5%) and traditional Medicare (10.2%).

A total of 62 health plans, seven fee-for-service state Medicaid programs and traditional Medicare submitted data for the study.

Nearly all of the payers submitting data for the study support APMs, with a total of 91% saying that APM activity will increase in the future and 97% believing this will lead to better quality of care.

https://www.healthcaredive.com/news/13-us-payments-alternative-models-progress-stagnant/565738/