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What are alternative payment models?


The Centers for Medicare & Medicaid Services (CMS) alternative payment models can be very confusing, particularly for a new independent physician. In essence, the models stem from the Quality Payment Program (QPP), designed to financially reward quality over quantity.

Alternative payment models (APMs) reward physicians for the quality of care they provide, as opposed to the traditional fee-for-service model that emphasizes the volume of services provided to patients. These alternative payment models are part of the movement toward a value-based payment system, a growing priority for private sector payers as well as for CMS.

Before the QPP was established, the payment increases for Medicare services were set by the Sustainable Growth Rate (SGR) law. The SGR capped spending increases according to the Medicare population growth with a modest allowance for inflation. CMS did away with the SGR with the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) and initiated QPP.

The idea behind the QPP is to reward high-value, high-quality Medicare providers with payment increases while reducing payments to physicians who are not meeting performance standards. There are two tracks in the QPP that healthcare providers can choose depending on their practice size, location, specialty, or patient population:

  • Merit-based Incentive Payment System (MIPS)
  • Advanced Alternative Payment Models

Advanced alternative payment models under the QPP enable healthcare providers to earn more rewards in exchange for taking on risks related to delivering high-quality, cost-efficient care. Providers participating in the QPP can also choose to participate in MIPS.

The objectives of the QPP include:

  • Improving population health
  • Improving the care received by Medicare patients
  • Lowering the costs to the Medicare program by improving care and health outcomes
  • Advancing the use of healthcare information between allied physicians and patients
  • Educating, engaging, and empowering patients as members of their care team
  • Providing accurate, timely, and actionable performance data to healthcare providers and their patients, as well as to other stakeholders.

The alternative payment models are part of a new approach that focuses on paying for care that holds healthcare providers accountable to achieving specific quality performance goals efficiently. Group practices participating in an APM received added incentive payments to be able to achieve their goals.

Although the APM payment method is different from traditional fee-for-service reimbursements, an APM may also retain elements of the fee-for-service payments as part of the reimbursement structure.

High-quality and cost-efficient care are the primary goals of the alternative payment models. The Advanced APM track of the QPP offers a 5% incentive for achieving threshold levels of patients or payments. Providers achieving these thresholds are excluded from the MIPS reporting requirements and payment adjustment.

Advanced APMs are alternative payment models that:

  • Require healthcare providers to use certified electronic health record (EHR) technology
  • Provide payment for covered services based on quality measures that are comparable to those used in the MIPS quality performance category
  • Require participants to bear a significant financial risk -or- participate as a Medical Home Model expanded under CMS Innovation center authority.

Beginning with Performance Year 2019, eligible providers will be able to become Qualifying Alternative Payment Model Participants (QPs) through the All-Payer Option. To attain this Option, eligible providers must participate in a combination of Advanced APMs with Medicare and Other-Payer Advanced APMs. Other-Payer Advanced APMs are non-Medicare payment arrangements that meet criteria that are similar to Advanced APMs under Medicare.