Changing APM payment strategy could improve provider participation, MedPAC says

Recommendation for a population-based approach is part of annual MedPAC report to Congress

CMS could induce more providers to participate in alternative payment models (APMs) by adopting a population-based payment approach for APMs and thereby reduce the complexity and uncertainty providers face when deciding whether to participate in one.

That suggestion, included in MedPAC’s June 2022 report to Congress, is among several the commission made for implementing its earlier recommendation that CMS reduce the number of Medicare APMs and design the models to work better together.

By consolidating or eliminating some of the seven current tracks, the commission says, CMS could target them more precisely according to a provider organization’s size and ability to take on financial risk.

Other MedPAC recommendations for overhauling the APM program include:

  • Transitioning from periodically “rebasing” accountable care organizations’ (ACOs) spending benchmarks based on actual spending and relying instead on administrative updates to benchmarks using a growth factor unrelated to ACOs’ own spending performance and publicized in advance
  • Implementing a national episode-based payment model for certain types of proven clinical episodes, such as knee and hip replacements, with the goal of enhanced savings and/or improved outcomes.
  • Requiring certain providers to participate in the national episode-based payment model for all their fee-for-service (FFS) Medicare patients, including beneficiaries already attributed to an ACO.

MedPAC acknowledges that its recommendations would represent a shift from CMS’s current strategy of temporarily testing numerous model tracks on a small scale to permanently operating fewer tracks on a large scale, but believes the proposed changes offer “a promising avenue for lowering fee-for-service spending while preserving or improving care quality.”

In a statement responding to the recommendations, the National Association of Accountable Care Organizations said it is still reviewing the details, but is “pleased to see MedPAC devote such time and attention to improving Medicare’s ACO models” and “appreciates the fact MedPAC noted that allocating savings between models must be done in a way so incentives for the ACO to save and participate are considered if maximizing participation in a population-based payment model is a priority.”

Elsewhere in its report the commission:

  • Offers suggestions for improving price competition and payment of drugs covered under Medicare Part B, such as the high launch prices for some “first-in-class” drugs. To address those, it recommends that Congress give the secretary of Health and Human Services discretion cap the drug’s payment rate based on its estimated incremental clinical benefit and cost compared to the standard of care.
  • Recommends increasing support for safety-net providers by developing a new framework to identify providers who serve a disproportionate share of low-income Medicare beneficiaries and evaluate if new Medicare safety-net funding is appropriate
  •  Advocates aligning fee-for-service payment rates across ambulatory settings (hospital outpatient departments, ambulatory surgical centers and freestanding physician offices) to reduce incentives to provide care in settings with the highest payment rates without significant improvements in payment outcomes. It estimates that if payment rates had been aligned in 2019, Medicare would have spent $6.6 less and beneficiaries would have faced $1.7 billion less in cost-sharing obligations

As part of its mandate from Congress, each June MedPAC reports on issues affecting the Medicare program as well as broader changes in health care delivery and the market for health care services.