A recent report indicates a 6% increase in healthcare payments tied to APMs over a year, but a deeper dive into the data suggests a smaller impact. Conclusion? Fee-for-service still dominates.
An uptick in healthcare payments tied to alternative payment models (APM) shows providers are continuing to move away from fee-for-service to alternatives they see as providing more incentives for higher-quality care and improved outcomes. The increase is fairly modest, however, and should be viewed with some skepticism.
A new report from the Health Care Payment Learning and Action Network (LAN) indicates that in 2016 about 29% of healthcare payments were tied to APMs compared to 23% in 2015. LAN is a public-private partnership launched in 2015 to push the adoption of new value-based payment models. The results are in line with LAN’s goal to tie 30% of total U.S. healthcare payments to APMs by 2016 and 50% by 2018.
LAN used data from America's Health Insurance Plans, the Blue Cross Blue Shield Association, and the Centers for Medicare & Medicaid Services across commercial, Medicaid, Medicare Advantage, and fee-for-service Medicare markets. The data were derived from more than 80 participants, accounting for nearly 245.4 million people, or 84% of the covered U.S. population.
The report indicates that 43% of healthcare dollars were in Category 1 (traditional fee-for-service or other legacy payments not linked to quality), 28% of healthcare dollars were in Category 2 (pay-for-performance or care coordination fees), and 29% of healthcare dollars were in a composite of Categories 3 and 4 (shared savings, shared risk, bundled payments, or population-based payments).
Read the data carefully
The results could be misleading if the data is not studied carefully, says Sean McSweeney, founder and president of Apache Health, a company providing billing support to healthcare providers. The report shows a significant percentage of revenue coming from APM methods, but McSweeney points out that the 29% of payments were not necessarily all from APMs, but rather they were “tied to” APMs.
“While it is likely true that payments tied to APM were in the range of 29%, this still only represents a low single-digit percent of reimbursement,” he explains. “For example, 29% of payments may have had a bonus or reduction associated with the payment of 4% to 9%. Therefore, 29% of 4% is approximately 1.1%. This illustrates how this report might be misleading to some without understanding that the financial impact so far is likely measured in the low single digits, while the report appears to make it much larger.”
Similar words of caution come from Dan Unger, senior vice president of product development and financial decision support at Health Catalyst, whose data analytics technology is used by Kaiser Permanente Healthcare, the University of Pittsburgh Medical Center, and others.
“Although the Category 3 and 4 bucket increased from 23% to 29%, it’s interesting how they don’t break out that category more deeply. There is a very big difference between Category 3— APMs built on fee-for-service architecture and Category 4—population-based or capitated payments.”
Based on Health Catalyst survey data and the work of others, Unger says only 5% to 10% of healthcare dollars are truly at risk.
“So the numbers are misleading because of how they grouped those two buckets,” he says. “ In reality, the majority of healthcare dollars are still fee-for service. The needle isn’t moving as fast as they are claiming.”
Given that reality, Unger says healthcare leaders need to think carefully about how they react and invest in this impending shift. Even looking at the LAN results warily, he says, it still may be prudent to invest in cost reduction, readmission reduction, coding and documentation improvements, patient safety, and even to dabble in care management for specific at-risk populations.
“Healthcare organizations can invest in technology, capabilities, and cultural changes that address specific focus areas that build some key competencies to survive in a population health world, while not damaging, or even improving, their financial situation in what is still very much a fee-for-service world,” he says.
Gregory A. Freeman is a contributing writer for HealthLeaders.