Designing Alternative Payment Models for Health System Resiliency

October 14, 2020 - Alternative payment models that use population-based payments to incent providers to deliver coordinated, high quality, person-centered care are key to building healthcare system resiliency after a crisis like COVID-19, according to the Health Care Payment Learning & Action Network (LAN).

The COVID-19 public health emergency has highlighted the need for providers to transition from fee-for-service to alternative payment models (APMs) that enable the healthcare system to respond effectively in a pandemic while supporting population health management, LAN said in its new Resiliency Framework report.

The report released at the LAN’s 2020 Summit, which took place virtually earlier this week, stated that LAN Category 4 models promote the required resiliency. The models leverage population-based payments tied to quality of care metrics. Examples of the models include per member per month payments, global budgets, and capitation linked to quality.

Category 4 models give providers the flexibility to tailor coordinated care to patient needs, such as virtual care options during a pandemic. The models also provide a stable source of revenue not tied to the volume of services provided.

Yet, only about 5 percent of payments in the healthcare system were made via Category 4 models, the latest data from the LAN shows.

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The new framework report provides steps payers and providers can take to promote more resilient, effective APMs. The steps include transitioning to effective APMs, promoting health equity, calibrating model participation to account for varying provider needs, and advancing whole-person care through increased clinical integration.

Industry experts at the LAN Summit shared how their organizations are already engaging in the steps identified in the framework report and how their APMs are helping them continue the value-based reimbursement transition after COVID-19.

Transitioning to effective APMs

Trinity Health has $10 billion tied to Category 3 and Category 4 models, according to Emily Brower, the health system’s senior vice president of clinical integration and physician services. That puts the Michigan-based well ahead of the framework’s push for providers to commit to transitioning to population-based payment models.

But the health system knows it can do more and has set more aggressive goals for effective APM participation after the pandemic, Brower stated at the event.

“Alternative payment models that are built on the fee-for-service chassis, which is a lot of them, were subject to that same cliff that we saw in fee-for-service,” Brower said. “But that was not true of Category 4 models that retained prospective, known monthly budgets.”

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Providers in Category 4 models maintained more stable revenue levels, while their investments in population health management enabled them to also pivot more quickly to address patients at risk for COVID-19.

“Put those two together, providers who embraced alternative payment models, particularly LAN Category 4, movement was there faster with support resiliency not just of payment or financing but also care delivery,” Brower explained.

Promoting equity

One of the important lessons coming out of the COVID-19 pandemic is the longstanding racial health disparities that exist in the current healthcare system. Systemic health and social inequities have put people from racial and ethnic minority groups at increased risk of contracting and dying from the virus, the CDC says.

Moving forward, effective, resilient APMs need to promote health equity and providers can achieve that by having explicit, measurable organizational plans to address racial and ethnic equity, black, Indigenous, and people of color (BIPOC) providers, and evidence-based interventions to reduce disparities, LAN’s framework states.

To get to that point though, providers need to collect the necessary data to identify racial and ethnic health disparities.

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“We really focused on trying to figure out how do we help be sure that we're trying to take the necessary steps to provide equitable care across our population,” said Joe Kimura, chief medical officer at Atrius Health. “So, our commitment really at this point in time, because we do have the data and we do have the ability to see what's happening within these disparities, to really focus and say what are the small steps or even bigger steps we can take to be sure that it doesn't happen, particularly in this climate.”

The Massachusetts health system with 80 percent of revenue tied to risk has committed to reconfiguring quality and access reported to meet that goal.

“We picked even a simple, small one to say, at a minimum for COVID in the wintertime, we're going to really look at influenza vaccination rates by different racial groups and be sure that our system is not differentially blocking particular populations from accessing really good care.”

Down the road, APMs may also include incentive payments for providers who successfully reduce racial and ethnic health disparities, according to Mark Friedberg, senior vice president of performance measurement and improvement at Blue Cross Blue Shield of Massachusetts.

“Providers are already motivated. It's really to help them create an internal business case to commit resources to it,” Friedberg said.

Calibrating APM participation

Larger providers have had access to the resources and capital needed to invest in the capabilities needed for success in advanced APMs compared to smaller providers, and the pandemic has exacerbated this gap.

But in order for alternative payment models to be effective and resilient, there needs to be opportunities for all types of providers to participate, LAN states in the new framework.

Blue Cross Blue Shield of Massachusetts was recently able to expand its successful Alternative Quality Contracts initiative, a LAN Category 3 model, to smaller organizations.

“Historically, it's been applied only to larger organizations for actuarial purposes,” Friedberg said. “We had to have a certain sample size in place in order to not expose our own providers to too much noise. Finally, over the last two years, we've been able to extend that model down to much smaller organizations.”

For primary care providers, that has meant transitioning from fee-for-service entirely to a per member per month system, which had a number of advantages during the pandemic.

“First is the predictability of revenue for primary care practices, so they know based on the patient panel what they’re going to be receiving in terms of revenue,” Friedberg explained. “Second was the modality of primary care. For example, many of our providers are currently very interested in whether telephone-based telemedicine will continue to be paid at parity in Massachusetts after our emergency expires. That concern is completely obviated by moving to a per member per month fee.”

Advancing whole-person care

Clinical integration is key to the delivery of whole-person care, which is the ultimate goal of many advance APMs.

LAN suggests in their framework that providers engage in clinical integration by first forging new or strengthening existing partnerships with community-based organizations to respond to the pandemic, deploying care management services for a patient’s full spectrum of needs, identifying creative solutions (e.g., multidisciplinary teams, non-traditional sites of service), and embracing scope of practice flexibilities.

In the long-term though, providers should work toward behavioral health integration in primary care, robust data sharing across the care continuum, collection of patient-reported outcomes and experience measures, and patient access to healthcare data.

But ultimately, this will be a multi-stakeholder effort, industry experts at the Summit agreed.

“It is really important, and probably one of the most essential things, is this multi-payer aspect,” said Judy Zerzan-Thul, MD, MPH, chief medical officer at the Washington State Health Care Authority. “It's not an easy thing to do and there has to be some trust. We just really all need to hold hands.”