Principles of Alternative Payment Models Framework

HCPLANGreetings PolicyPub patrons. I would like to take a moment and share with you a whitepaper recently published by the Health Care Payment Learning and Action Network. The purpose of the whitepaper is to provide a roadmap to measure progress and establish a shared language and common set of conventions to help facilitate discussion and debate regarding alternative payment models (APM).

A group that I have actively participated in since its inception back in March of this year, HCPLAN was established by the Department of Health and Human Services, “to help achieve better care, smarter spending, and healthier people.” It’s primary purpose is to serve as a convener and facilitator (as well as catalyst) in pursuing HHS’s stated goals of:

  • tying 30 percent of Medicare fee-for-service payments to quality or value through alternative payment models by 2016 and 50 percent by 2018; and
  • tying 85 percent of all Medicare fee-for-service to quality or value by 2016 and 90 percent by 2018.

    The whitepaper identifies seven Key Principles for the APM Framework that all healthcare providers should be aware of and understand:
  • Principle 1: Changing the financial reward to providers is only one way to stimulate and sustain innovative approaches to the delivery of patient-centered care. In the future … it will be important to monitor progress in initiatives that empower patients (via meaningful performance metrics, financial incentives, and other means) to seek care from high-value providers and become active participants in clinical and shared decision-making.

    Principle 2: As delivery systems evolve, the goal is to drive a shift towards shared-risk and population-based payment models, in order to incentivize delivery system reforms that improve the quality and efficiency of patient-centered care.

    Principle 3: To the greatest extent possible, value-based incentives should reach providers who directly deliver care.

    Principle 4: Payment models that do not take quality and value into account will be classified in the appropriate category with a designation that distinguishes them as a payment model that is not value-based. They will not be considered APMs for the purposes of tracking progress towards payment reform.

    Principle 5: In order to reach our goals for health care reform, the intensity of value-based incentives should be high enough to influence provider behaviors and it should increase over time. However, this intensity should not be a determining factor for classifying APMs in the Framework. Intensity will be included when reporting progress toward goals.

    Principle 6: When health plans adopt hybrid payment reforms that incorporate multiple APMs, the payment reform as a whole will be classified according to the more dominant APM. This will avoid double-counting payments through APMs.

    Principle 7: Centers of excellence, patient-centered medical homes, and accountable care organizations are delivery models, not payment models. These delivery system models enable APMs and, in many instances, have achieved successes in advancing quality, but they should not be viewed as synonymous with a specific APM. Accordingly, they appear in multiple locations in the Framework, depending on the underlying payment model that supports them.

    HCPLAN is open to anyone interested in being kept informed of and joining the conversation on HHS’s efforts to  develop new payment models intended to be structured around all of the buzzwords you’ve heard over the past five years now: e.g., value, quality, transparency, patient activation, evidence-based, and so on.

    What it is not, based on my experience, is a veiled promotional vehicle to evidence broad-based support of new payment models that go largely unchallenged. To the contrary, there is a great deal of practical concern being expressed supported by real life experience having already pursued new payment models – the good, the bad and the ugly. To participate in HCPLAN, just visit the registration web page.

      ~ Sparky

Challenges of Episodic Payment Bundling

Last week the New England Journal of Medicine included this Perspective: Post-Acute Care Reform—Beyond the ACA by D. Clay Ackerly, M.D. and David C. Grabowski, Ph.D. The article describes the case of what I believe is a hypothetical patient: Mrs. T., an 88-year-old woman who was admitted to the hospital following a trip to the emergency room.

You can read the article to get the specifics of her case. The thrust of what is shared by the authors has to do with how existing Medicare payment methodologies and regulations impact clinical decision making in ways that are not necessarily in the patient’s best interest. And how payment bundling—particularly across acute and post-acute/long-term care providers—faces challenges that simply aligning financial incentives of those provider types will not adequately address.

In theory, the core precept of episodic payment bundling is that if otherwise historically disparate healthcare providers treating the same patient can be financially incentivized to better coordinate care for that patient, the costs attributable to inefficiencies, redundancies, productivity, etc. will be reduced.

Of course, underscoring this precept is the notion that human beings acting in their self interests (i.e., in pursuit of income and wealth ~ Adam Smith’s Invisible Hand) will create valuable external benefits. The counter to this belief could be found in Garret Hardin’s Tragedy of the Commons, which argues that those self interests can lead to depleting common resources to the disadvantage of wider interests – e.g., the community or society.

Economic theory aside, what the authors argue for is additional governmental intervention to remove obstacles they cite as impeding the benefits that payment bundling might otherwise achieve. These include addressing regulations impeding patient transfers between settings (e.g., the 3-day rule); research into various care delivery models that facilitate more effective care transitioning – particularly those elements outside of the clinical setting; and third, increased investment into comparative effectiveness research to help providers better determine appropriate post-acute/long-term care setting for their patients.

So here’s the irony: though many critics of the Affordable Care Act either disbelieve or refuse to accept that it was in many ways an attempt to thwart or at least delay the movement toward a national healthcare system, concepts like payment bundling, insurance exchanges and capitation are theoretically dependent upon market-based solutions. Provide the financial incentive and just watch market-driven forces create valuable solutions.

Now we are being advised in this article that’s not enough. We have to also regulate away the challenges and obstacles that market ingenuity was supposed to overcome. Sorry – but isn’t that somewhat counterintuitive?

Here’s the challenge. We recognize that individuals’ productivity – in terms of being able to create value – is closely correlated with their desire to pursue individual needs and wants (back to basic Economics). And so if we want to maximize value it follows that we need to maximize individual incentive. In a free market that is most effectively accomplished by allowing individuals to make their own choices, unfettered from governmental interference except for ensuring fairness and safety.

What we are trying to do in healthcare—with initiatives such as ACOs—is create hybrid free market models that leverage the value production ability of individuals while at the same time intentionally and unintentionally interfering with their ability to make unfettered choices. So if healthcare shared common characteristics with other industries, it would be easy to argue that government should just get the hell out of the way.

But here’s the rub. Government is already so deeply entrenched in our healthcare delivery system – at a time where demand is just beginning to grow exponentially – that I fear any serious effort to move backward toward market-based delivery would be like throwing a track switch on a runaway train. And beyond that I remain unconvinced that healthcare is not uniquely different than other industries. Thus we plod along.

What do you think?