How CMS Should Accelerate Implementation of Alternative Payment Models

OPINION- Although significant changes in the proposed MACRA regulations are necessary for encouraging the development and implementation of Alternative Payment Models, regulatory changes alone are not sufficient.  The processes that CMS currently uses to implement APMs are far too slow and burdensome to achieve Congress's goal of enabling as many physicians as possible to participate in APMs.  In addition to revising the MACRA regulations, CMS must create better, faster ways to implement Alternative Payment Models that meet the requirements of the law and regulations.
 

How CMS Should Improve Its Processes for Implementing APMs
Although the Affordable Care Act created the Center for Medicare and Medicaid Innovation in 2010 in order to accelerate the development and implementation of innovative payment and delivery models, relatively little progress has been made in improving the ways most physicians and other providers are paid for their services.  As the American Medical Association has stated, "Five years after CMS was authorized to implement 'new patient care models'...Medicare still does not enable the majority of physicians to pursue ...opportunities to improve care in ways that could also reduce costs.  Today, despite all of the demonstration projects and other initiatives that Medicare has implemented, most physicians - in primary care and other specialties - still do not have access to Medicare payment models that provide the resources and flexibility they need to improve care for their Medicare patients.  Consequently, most Medicare patients still are not benefiting from regular access to a full range of care coordination services, coordinated treatment planning by primary care and specialist physicians, support for patient self-management of their chronic conditions, proactive outreach to ensure that high-risk patients get preventive care, or patient decision-support tools.  As a result, the Medicare program is paying for hospitalizations and duplicative services that could have been avoided had physicians been able to deliver these high-value services."
 

Creating a More Efficient Approach to Implementing APMs at HHS
One key reason for this slow progress is that the Center for Medicare and Medicaid Innovation (CMMI) has created a far more complex and resource-intensive process than is required or necessary to implement alternative payment models.  Under most of the payment demonstrations that it has implemented to date, 18 months or more have elapsed from the time an initiative is first announced to the time when providers actually begin to receive different payments.  Moreover, many proposals for alternative payment models have been submitted to CMMI that have not been implemented.  This is not because the staff at CMMI are slow or incompetent, but because of the complex, expensive, and time-intensive process they have created for designing the initiative, selecting participants, managing the payments, and evaluating the results as part of any payment model they test.
This process is extremely burdensome and expensive for CMMI to administer, it dramatically reduces the number of alternative payment models that can be tested, and it is also extremely burdensome for providers who are interested in participating in the initiatives that CMMI does attempt to implement.  Many providers have decided not to even apply to participate in otherwise desirable CMMI programs and others have dropped out of the programs in the early phases solely or partly because of the cost and time burden of participating.
This burdensome process is not required by either the Affordable Care Act or MACRA.  If HHS were to attempt to implement every new alternative payment model using the approaches that are currently being used by CMMI, it would take many years before even a fraction of the physicians in the country would have the ability to meet the APM requirements under MACRA.  This would mean relatively few Medicare beneficiaries could benefit from the higher quality care that would be possible under APMs and the Medicare program would not achieve the savings that APMs could generate.  This is clearly not what Congress intended either in the Affordable Care Act or in MACRA.
A complete re-engineering of the processes HHS uses to implement alternative payment models is needed.  This re-engineering process should start with the goal that is implicit in MACRA - every physician should have the opportunity to receive at least 25% of their Medicare revenues from alternative payment models in 2019, 50% of their revenues in 2021, and 75% in 2023.  HHS should then work backward from those dates and design processes and timetables for implementing APMs in every medical specialty that will achieve that goal.
Just as many physicians, hospitals, and other healthcare providers are now re-engineering their care delivery processes to eliminate steps that do not add significant value, HHS should use Lean design techniques and other approaches to identify and eliminate all steps and requirements in its implementation processes that do not add value or that impede achieving the goals that Congress has set.  Moreover, since MACRA allows alternative payment models to be implemented using statutory authorizations other than Section 1115A (the enabling legislation for CMMI), HHS should use all of the options available under MACRA in order to implement desirable alternative payment models in the most efficient way possible.
In order for a physician to be participating in an APM during 2019, the processes for approving and implementing the APM and for approving the physician's participation in the APM will have to be completed no later than the end of 2018.  However, in order for physicians to succeed under APMs, they will need to have sufficient lead time to form or join an alternative payment entity and to redesign the processes by which they deliver care with the flexibility provided by the APM, and so both the structure of the APM and the approval for a physician's participation will need to be completed long before the end of 2018.  Some physician groups and medical specialty societies have already developed physician-focused alternative payment models that should be able to meet the criteria under MACRA; these could and should be implemented by CMS as soon as 2017.
To ensure that the MACRA goals are achieved, HHS should establish specific milestones that are designed to implement as many alternative payment models as possible and as quickly as possible.  For example, the following timetable would allow payments under an alternative payment model to begin flowing to a physician within one year after the model is recommended by the PTAC:

• When a physician-focused alternative payment model is recommended for implementation by the Physician-Focused Payment Model Technical Advisory Committee (PTAC) that was created by Congress under MACRA, CMS should plan to implement it unless there is a compelling reason not to do so.  The decision to implement the model should be made within 60 days after it is recommended by the PTAC.
• Once a physician-focused alternative payment model is recommended by the PTAC and approved by HHS, the applications that physician practices and alternative payment entities would need to complete in order to participate in the approved APM should be made available within 90 days. 
• Physicians and alternative payment entities should be permitted to apply to participate in an approved APM no less frequently than twice per year. 
• Applications to participate in an approved APM should be reviewed and approved or rejected within 60 days.  Applications should only be rejected if an applicant cannot demonstrate that it has the ability to implement the model, not because of arbitrary limits on the size of the program or the locations where providers can be located.  If an application is rejected, CMS should provide feedback to the applicant on the reasons for rejection and methods of correction.  If a rejected application is revised and resubmitted, CMS should re-review it and approve or reject it within 30 days. 
• CMS should implement an approved APM with the approved physician applicants no later than 90 days after the applications by physician practices to participate have been approved.
• Once a physician or other clinician begins to participate in an APM, they should be permitted to continue doing so as long as they wish to, unless CMS can demonstrate that Medicare spending under the payment model is higher than it would be under the standard physician fee schedule or that the quality of care for beneficiaries is being harmed. 

Creating the Capability at HHS to Implement a Broad Range of Physician-Focused APMs
A second key reason why only a small number of physicians are participating in alternative payment models under Medicare is the problematic structure of the current models that CMS and CMMI have been using.  Most of the payment models that are currently being implemented or tested by CMS use a very similar approach - no changes in the current fee for service structure, holding individual physicians accountable for the costs of all services their patients receive from all providers, adjusting payment amounts based on shared savings calculations for attributed patients, etc. - and these approaches not only fail to solve the problems in the current payment systems, they can actually make them worse.
The components used in most CMS payment models are very problematic for physicians and therefore they are likely problematic for their patients as well.  Although CMS may view some of these payment models as "physician-focused" because they are targeted at individual physicians or physician practices, the goal should be to create physician-focused payment models that are successful in improving care and improving costs in ways that are feasible for physician practices, particularly small practices, to implement.  To date, the alternative payment models implemented by CMS have not been successful in reducing costs because they do not provide the kinds of support that physicians need to redesign care.  New physician-focused payment models should not be required to use the same flawed approaches that are being used in current CMS payment demonstrations.
At a minimum, HHS should create the administrative capabilities to implement seven different types of physician-focused APMs that can be used to address the most common types of opportunities and barriers that exist across all physician specialties.  These are:

• Payment for a High-Value Service.  Under this APM, a physician practice could be paid for delivering one or more desirable services that are not currently billable, and the physician would take accountability for controlling the use of other, avoidable services for their patients.
• Condition-Based Payment for Physician Services.  Under this APM, a physician practice would have the flexibility to use the diagnostic or treatment options that address a patient's condition most efficiently and effectively without concern that using lower-cost options would harm the operating margins of the physician's practice.
• Multi-Physician Bundled Payment.  Under this APM, two or more physician practices that are providing complementary diagnostic or treatment services to a patient would have the flexibility to redesign those services in ways that would enable high-quality care to be delivered as efficiently as possible.
• Physician-Facility Procedure Bundle.  This APM would allow a physician who delivers a procedure at a hospital or other facility to choose the most appropriate facility for the treatment and to give the physician and facility the flexibility to deliver the procedure in the most efficient and high-quality way.
• Warrantied Payment for Physician Services.  This APM would give a physician the flexibility and accountability to deliver care with as low a rate of complications as possible.
• Episode Payment for a Procedure.  This APM would enable a physician who is delivering a particular procedure to work collaboratively with the other providers delivering services related to the procedure (e.g., the facility where the procedure is performed, other physicians who are involved in the procedure, physicians and facilities who are involved in the patient's recovery or in treating complications of the procedure, etc.) in order to improve outcomes and control the total spending associated with the procedure.
• Condition-Based Payment.  Under this APM, a physician practice would have the flexibility to use the diagnosis or treatment options that address a particular health condition (or combination of conditions) most efficiently and effectively and to work collaboratively with other providers who deliver services for the patient's condition in order to improve outcomes and control the total spending associated with care for the condition.

More detail on each of these physician-focused Alternative Payment Models and examples of how they could be used to improve care for a wide range of patient conditions is available in a report developed by CHQPR and the American Medical Association entitled A Guide to Physician-Focused Alternative Payment Models (available at www.CHQPR.org).
HHS should begin immediately to implement the administrative systems needed to support all of these types of payment models.  This would not only ensure that the APMs can be implemented by 2019, but it would encourage physician groups and medical specialty societies to design payment models in a common framework, which will reduce implementation costs for HHS. 
Re-engineering the processes for implementing alternative payment models as discussed above should dramatically increase the capacity of HHS to implement more payment models more quickly than it can today.  However, if there are insufficient staff or resources at HHS/CMS/CMMI to support implementation of a sufficient number of new alternative payment models to enable all physicians to participate, additional resources should be provided to achieve the necessary "bandwidth."  Failing to allocate sufficient resources to implement alternative payment models that will save money for the Medicare program would be "penny wise and pound foolish."
 

Greater Accountability is Needed by CMS As Well As By Physicians
It would obviously be a tremendous waste of time and energy for physician groups, medical specialty societies, and others to develop alternative payment models that meet the requirements of the regulations if they will not be implemented by CMS.  Consequently, it will be essential that CMS create the necessary systems and processes so that it can implement alternative payment models that meet the statutory and regulatory requirements.  MACRA and the implementing regulations significantly increase the accountability that physicians will need to accept in return for payment.  CMS needs to make comparable commitments to greater accountability for improving its own efficiency and effectiveness in designing and implementing new payment models.
 
(The points above as well as additional comments on the proposed MACRA regulations are included in the Center for Healthcare Quality and Payment Reform's formal comment letter to CMS on the proposed MACRA regulations, which can be downloaded here.)

Harold D. Miller is the President and CEO of the Center for Healthcare Quality and ... Miller is a nationally-recognized expert on healthcare payment and delivery...