29% of Healthcare Payments Under Alternative Payment Models

October 31, 2017 - About 29 percent of healthcare payments in 2016 were paid through an alternative payment model, such as shared savings/risk arrangements, bundled payments, or population-based reimbursements, the Health Care Payment Learning and Action Network (LAN) recently reported.

The share of payments being reimbursed through an alternative payment model is up 6 percentage points from 2015, revealed the analysis of data from the LAN, America’s Health Insurance Plans, Blue Cross Blue Shield Association, and CMS.

As a result, $354.5 billion in healthcare payments stemmed from an alternative payment model in 2016.

With the increase, LAN reported that the industry nearly achieved the organization’s goal of linking 30 percent of healthcare payments to alternative payment models with population-based accountability by the end of 2016.

“As healthcare expenditures and capabilities have continued to rise, it’s vital that we find ways to significantly reduce the cost burden for both consumers and the healthcare system,” stated Mark McClellan, Co-Chair of the LAN Guiding Committee and Robert J. Margolis Center for Health Policy Director. “This measurement effort represents the kind of collaboration between the public and private sectors to make real progress on improving care.”

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The analysis of commercial, Medicare Advantage, Medicaid, and fee-for-service reimbursements, which covered about 84 percent of covered lives, also uncovered that fee-for-service payments decreased in 2016.  

Only 43 percent of healthcare payments stemmed from a fee-for-service arrangement, compared to 62 percent in 2015.

Consequently, healthcare payments shifted to value-based reimbursement structures. In addition to increased alternative payment model participation, more payments in 2016 were paid under a value-based reimbursement model that linked payments to care quality, but did not have population-based accountability.

Approximately 28 percent of healthcare payments in 2016 came from value-based reimbursement models that used pay-for-performance or care coordination incentive payments on top of traditional fee-for-service reimbursement.

The share of payments in the value-based reimbursement category rose from just 15 percent in 2015.

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LAN attributed the shift away from fee-for-service to the growing number of accountable care organizations (ACOs).

Ninety-two new organizations started operating as ACOs in 2016, bringing the total number of ACOs to 923 nationwide by the start of 2017, a recent Leavitt Partners and Accountable Care Learning Collaborative analysis stated.

ACOs used a shared savings and/or risk arrangement to reimburse providers, LAN stated. Therefore, the healthcare payments made under ACO arrangements qualified as population-based alternative payment models.

In addition to ACO growth, researchers pointed to MACRA implementation as an alternative payment model driver.

Qualifying Medicare providers can earn an automatic 5 percent incentive payment under MACRA’s Advanced Alternative Payment Model pathway. The financial incentives for the MACRA track likely spurred providers to join alternative payment models with population-based accountability, like Medicare ACO programs and approved bundled payment models.

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MACRA implementation may have also prompted a decrease in fee-for-service payments and increase in value-based reimbursement without population-based accountability. If Medicare providers do not qualify for incentive payments under the Advanced Alternative Payment Model track, they may still have to participate in MACRA’s Merit-Based Incentive Payment System (MIPS), which pays eligible clinicians based on care quality.

Providers may have moved away from fee-for-service models to prepare for MIPS.

MIPS and Advanced Alternative Payment Model incentives should continue to motivate providers to accelerate their value-based reimbursement participation, LAN predicted.

The organization also explained that value-based reimbursement growth in the recent report partly stemmed from the inclusion of Medicare fee-for-service data.

If LAN eliminated Medicare fee-for-service data to make comparable data sets, fee-for-service payments made in 2016 would decrease from 62 percent in 2015 to 58 percent in 2016, rather than 43 percent.

Value-based reimbursement without population-based accountability would also decrease from 15 percent in 2015 to 14 percent, rather than increase to 28 percent.

The inclusion of Medicare fee-for-service did not impact the portion of healthcare payments made through an alternative payment model in 2016.

As healthcare payments gradually shift to alternative payment models, LAN remains confident that providers and payers will continue the transition to population-based accountability. The organization maintained its 2018 goal of tying one-half of payments to alternative payment models.

The organization’s partners also expressed confidence with the alternative payment model transition.

 “We are encouraged by these results and the great progress being made towards APM adoption,” stated Trent Haywood, Blue Cross and Blue Shield Association CMO. “These findings underscore the importance of the public and private sectors working in concert supporting providers towards APM adoption. We know that providers need information and support from health plans to take on risk. This Measurement Effort helps develop the rationale for continued payment reform, and we as health plans must continue to share information, clinical support and data on spending and quality to determine to encourage further progress.”