APM Adoption Slows as Price Transparency Capabilities Heat Up

November 18, 2021 - Revenue cycle management and healthcare finance priorities shifted during the COVID-19 pandemic, with alternative payment model (APM) adoption taking a backseat to price transparency and other priorities last year.

More healthcare organizations received reimbursement from fee-for-service contracts in 2021 compared to previous years, the College of Healthcare Information Management Executives’ (CHIME’s) latest Digital Health Most Wired survey revealed earlier this week. The survey represented over 36,600 facilities, with 738 surveys completed by healthcare organizations offering acute, ambulatory, and long-term post-acute care in seven countries.

About three-quarters (76 percent) of revenue from healthcare organizations came from fee-for-service models last year, up from 71 percent in 2020 and 74 percent in 2019, the survey found.

Meanwhile, average total revenue from APMs, including pay-for-performance, upside and downside shared savings, bundled payment, and capitation models, was down to 24 percent in 2021 from 29 percent in 2020 and 26 percent in 2019.

“With immense financial pressure from the COVID-19 pandemic and limited resources to push for value-based care initiatives, alternative payment models have taken a back seat,” CHIME stated in the survey report.

APM adoption continues to center around lower-risk models, with the rate of adoption increasing the most by 9 percentage points in shared savings models with upside-only risk. The majority of organizations responding to the survey were also in pay-for-performance models (65 percent) and shared savings models with upside-only risk (61 percent).

Half of respondents participated in bundled payment models in 2021, while 41 percent participated in shared savings models with upside and downside risk and 30 precent in capitation models.

Notably, participation across all individual APMs did increase in 2021 despite average total revenue from the models decreasing compared to previous years.

APMs and value-based reimbursement actually proved useful during the COVID-19 pandemic. Models such as capitation provided stable revenue when community lockdowns hurt fee-for-service business. Research from Insights by Xtelligent Healthcare Media shows that many (41 percent) healthcare industry leaders believe the pandemic will spur more value-based payment adoption.

However, in 2021, priorities seem to be shifting despite the advantages of living in a value-based payment world during the ongoing pandemic.

CHIME’s Digital Health Most Wired survey found that healthcare organizations focused investments on other priorities, such as price transparency compliance. The survey showed that 83 percent respondents reported adoption of revenue cycle and contract capabilities that estimate patient out-of-pocket expenses, up from 64 percent.

Additionally, 95 percent of respondents said their organizations provided a list of procedures or services with associated price, up from 87 percent in 2020. This capability is actually part of a federal regulation that went into effect earlier this year. The regulation requires hospitals to publish a complete pricing list for all their services on their websites, as well as a shorter, more consumer-friendly list of shoppable services.

Healthcare organizations have beefed up their price transparency capabilities in 2021. This year, 67 percent provided cost-burden estimation based on insurance type, 62 percent provided price comparisons or filtering based on procedure type, and 60 precent provided definition of key terms.

At least half of organizations also provided education on price transparency tools (59 percent), price comparison based on insurance plan or type (53 percent), and price comparison based on insurance network (50 percent).

Despite increased adoption of price transparency capabilities, research still shows that compliance with the federal regulation mandating hospital price transparency remains low and inconsistent. CHIME also warned in the survey report that “not all price transparency mechanisms and tools are equal in their accuracy and ability to handle the complexity of healthcare costs.”