Practices Still Averse to Risk-Based Alternative Payment Models

October 29, 2018 - Physician practices are less willing to participate in alternative payment models with downside financial risk compared to four years ago, revealed a new study from the RAND Corporation and the American Medical Association (AMA).

Several physician practice leaders, frontline physicians, and other healthcare stakeholders participating in a 2014 AMA and RAND study expressed enthusiasm and interest in joining alternative payment models that included downside financial risk.

Participants thought that risk-based models would incentivize providers to change how they deliver care to add value to the healthcare system.

By 2018, however, enthusiasm and interest in risk-based models were relatively rare, the follow-up analysis involving the same physician practice leaders, frontline physicians, and other observers showed.

Physician practices spanning multiple specialties and markets reported a low tolerance for financial risk, especially if the practice had no prior experience with risk-based alternative payment models and limited infrastructure to manage downside financial risk.

READ MORE: Exploring Two-Sided Financial Risk in Alternative Payment Models

But even practices that already invested in the care management infrastructure necessary for risk-based models expressed disinterest in taking on additional risk. Some participants reported less interest in risk-based models even after entering contracts with downside financial risk over the past several years.

“A low tolerance for risk appears to have persisted—despite the substantial trend toward mergers, formation of ACOs, clinical networks, and other forms of consolidation among providers—because organizations were apprehensive about the possibility of absorbing an income reduction,” the report stated.

The risk trade-off associated with taking on additional risk-based alternative payment models is steering physician practices away from entering new value-based contracts. But so is the pace of change and complexity of the models, the study uncovered.

Physician practice leaders and other stakeholders reported an accelerating pace of change in payment models since 2014.

The healthcare industry already went through a decade of fast-paced healthcare payment and regulatory changes, such as the introduction of the Physician Quality Reporting System (PQRS), Medicare bundled payment programs, and the boom of ACOs.

READ MORE: A Holistic View of the Patient Enables Risk-Based ACO Success

But MACRA implementation recently drove another round of acceleration in alternative payment model changes, participants said. One local medical society leader summarizing the recent pace of change said:

“[N]ow with MIPS this year we have clinical practice improvement activities and then next year we have the resource use piece of MIPS coming in. [A]nd the rules for leaving MIPS to join the APM—or now they’re calling them AAPMs— the rules are changing multiple times during the year and all of the different measures that they’re following and they care about and the requirements for submitting them...What we’re seeing right now is just a lot of these what I would call like big pills to swallow all in a very short time period of the seven to eight years, where it seems like almost every year there’s a major shift that you have to make.”

Physician practices and their support systems are finding it difficult to keep up with the constant changes to alternative payment models.

“This pace of change was challenging for most practices and especially so for small and independent practices,” the report stated. “Market observers noted that even practice management consultants were sometimes unable to keep up with the pace of change, making it harder for small primary care practices in certain markets to find trustworthy advice.”

Large practices could handle the rapid changes easier than their smaller counterparts. But even the large practices reported shielding their physicians from the payment changes by prioritizing long-standing internal goals and altering their internal incentives more slowly than external payment incentives from payers.

READ MORE: How to Prepare for Alternative Payment Model Implementation

Physician practice leaders and other stakeholders also commented on the increasing complexity of alternative payment models.

The growing range of performance measures, uncertainty about performance thresholds, and interactions between different payment models made it difficult for physician practice leaders and other stakeholders to understand, and ultimately participate in, alternative payment models.

“Practices of all sizes and specialties said that understanding complex new payment models often entailed a significant investment, either to hire consultants or to build internal capabilities to analyze APMs,” the report stated.

The investments needed to understand complex models were a challenge for small practices. Whereas, larger practices and those affiliated with a health system reported making the investments to understand alternative payment models.

Practices making the investments reported positive financial and clinical results.

“For practices that did invest in understanding APMs, the increased complexity of payment models presented new opportunities for financial success,” the report stated.  “Some of these practices found ways to get more credit for their preexisting quality—without materially changing patient care—by enhancing their documentation and data abstraction practices, thoroughly coding risk adjustment diagnoses, actively managing patient attribution, or purposefully selecting their performance measures to maximize the likelihood of rewards.”

In light of the challenges identified by physician practice leaders, the AMA and RAND advised payers to create simpler alternative payment models.

“When practices do not understand APMs, they are unsure of whether to invest in care improvement, or how to do so in ways that will be financially rewarded or reimbursed. However, when practices have invested in understanding these APMs, they can find ways to earn bonuses and avoid penalties without necessarily changing patient care (e.g., through strategies that affect patient attribution), especially when practice leaders believe their quality is already high,” the organizations wrote.

“Our findings suggest that the greater the complexity of APMs, the greater the potential financial return on practices’ investments in understanding them. Simplifying APMs might help tip the balance back toward improving patient care as the preferred strategy for earning financial rewards,” they continued.

Payers could also encourage practices to participate in more alternative payment models by implementing a “stable, predictable, moderately paced pathway for APMs.” Slowing the pace of APM changes might help practice leaders negotiate longer-term contracts, the organizations stated.

AMA and RAND also advised payers to reconsider mandatory risk-based alternative payment models in light of the increase in risk aversion among physician practices.

“Given this risk aversion, and given the likelihood that practices will find ways to minimize downside risk in any event, payers should carefully weigh the anticipated advantages and disadvantages of mandating APMs with downside risk,” the report stated. “In some cases, continuing to offer upside-only APMs or finding other ways to help practices manage downside risk (e.g., subsidizing up-front investments in new practice capabilities) might improve APM uptake—especially among practices with limited experience in risk contracts.”