Value-Based Care News

91% of Payers Foresee Alternative Payment Model Activity Increase

Payers are confident that alternative payment models activity will increase, but also that the APMs will still be grounded in fee-for-service structures.

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Source: Thinkstock

By Kelsey Waddill

- An overwhelming 91 percent of payers think that alternative payment model (APM) activity will increase in the future, according to a recent survey conducted by Health Care Payment Learning and Action Network (LAN).

LAN survey looked at responses from 62 health plans in addition to 7 fee-for-service (FFS) state Medicaid programs and the traditional Medicare program to evaluate APM utilization.

LAN used four categories to stratify responses.

Category one focused FFS systems. Category two looked at FFS systems that are linked to quality and value, including infrastructure and operations payments and rewards for reporting on performance. Category three consists of APMs grounded in FFS structure, like APMs linked to shared savings with either upside or downside risk.

The final category is population-based payment. This encompasses condition-specific population-based payments, such as per-member per-month (PMPM) payments. It could be comprehensive population-based payment, for example, a global budget. Or it could incorporate an integrated finance with a delivery system, which would include global budgets within an integrated system.

The survey found strong optimism about the future of APM adoption and development in the coming years.

Nearly all health plans—95 percent—strongly agreed that APM adoption would improve care coordination and 97 percent thought that it would bring about higher quality care.

Payers indicated that APMs would positively affect healthcare spending. Eighty-eight percent stated that APMs would make care more affordable, though 8 percent were unsure. And 63 percent disagreed that APM adoption would raise unit prices for discreet services. Nine percent thought that it would raise discreet services’ unit prices and 28 percent were unsure.

The topic of industry consolidation and healthcare provider mergers divided most payers. Fifty-six percent said that APMs would increase provider consolidation, whereas 19 percent disagreed. Twenty-five percent were unsure.

Payers appeared to recognize that the transition would be an incremental process, as most were not ready to commit to category four APMs, population-based payment. Instead, the majority of payers thought that category three APMs, in which payers use APMs but still use an FFS structure, would see the greatest increase in adopters.

Payers’ responses sync with the data. In three of the four sectors of the industry that the survey covered—commercial payers, Medicare Advantage, and Medicaid—category three models proved to be just as popular as standard category one FFS models. Specifically, most payers were using upside risk to reward quality care.

Traditional Medicare was the only sector in which this was not the case, with nearly half of its payment models being FFS with a link to quality and value.

Overall, less than half of the payer industry relies solely on FFS and payers look for more plans to get on board the transition to APMs in the future. Forty-five percent of payers expect to see more payment models that exercise both upside and downside risk for appropriate care and 31 percent anticipate a rise in the number of plans that implement upside risk rewards.

The top three challenges that stand in the way of payers implementing APMs are related to providers’ response to this transition. Payers are concerned about whether providers are willing to embrace higher financial risk, if they can operationalize, and whether they are even interested in or ready to move to APMs due to the increased financial stress.

Though these obstacles may loom large for many payers, they are confident in health plan preparedness and interest. Payers also see a role for the government, seeing government programs such as the CMS Advanced Alternative Payment Model as a positive influence toward adopting APMs. And although they have concerns about provider preparedness, they find hope there as well, naming providers’ interest and readiness as one of the top three facilitators toward the industry’s movement toward APM adoption.