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What It Takes For Alternative Payment Models To Succeed

posted by AHIP

on July 24, 2018

We Need to Better Address Provider Readiness and Capability to Participate

Moving from a health care delivery system that rewards volume of services to one that pays for value has drawn considerable attention. This important shift involves the adoption of alternative payment models.

With respect to the Medicare program, the U.S. Department of Health and Human Services (HHS) in 2015 set a goal to have 50 percent of all Medicare payments in these types of models by 2018. The majority of Medicare Advantage plans already had implemented alternative payment model contracts in some form with their providers, according to a 2016 report from the Centers for Medicare & Medicaid Services (CMS) to Congress.

Medicare Advantage plans enter into these arrangements hoping to move their network providers into more sophisticated risk-based payment arrangements over time, and many health plans ultimately want their providers to assume full risk. When providers are at risk for the total cost of care they deliver, financial incentives are fully aligned to produce better, more efficient care that is held accountable to high quality standards and customer satisfaction. For example, recent research has found these types of value-based payment arrangements result in more doctor visits in the office and fewer trips to the emergency room or hospital.

Yet challenges exist for health insurance providers in Medicare and other insurance markets to move towards value-based care. To better understand these challenges and inform efforts to find solutions, AHIP surveyed its members offering Medicare, Medicaid, and commercial coverage and identified the top barriers to implementing alternative payment models with providers.

Health Plans Face Challenges with Provider Readiness

Twenty-two AHIP health plan members with alternative payment model contracts ranked seven challenges to implementation, from least important to most important, and revealed that readiness and capabilities of individual providers and provider logistics (e.g., infrastructure, staff, training) were the biggest challenges they faced.

Meanwhile, the costs of implementing and managing alternative payment model contracts and the additional reporting requirements for plans were lower on the list of barriers to adoption. This finding may suggest that once providers are willing, able, and have addressed the logistical issues to implement an alternative payment model, the maintenance of these contractual relationships with health plans is not overly costly or burdensome. The readiness of providers to take risk and put infrastructure in place to manage that risk are the major upfront barriers to providers adopting alternative payment models.

Policy Implications: Meet Health Care Providers Where They Are

As our member survey indicates, if we want to guide more providers toward value-based care, we need to make sure providers have assistance in developing the infrastructure needed to successfully transform clinical care while simultaneously bearing financial risk. This infrastructure may include skilled clinicians to coordinate care, interoperable electronic health records, analytic software and staff, and administrative and financial processes, as well as access to capital to fund these investments.

AHIP believes CMS should consider investments that allow health care providers to develop this infrastructure, perhaps through demonstrations under the Innovation Center. With these investments, providers in risk-sharing arrangements could take on greater risk, and providers in fee-for-service arrangements could move into value-based contracts—this would ultimately lead to better outcomes for beneficiaries and lower costs for the Medicare and Medicaid programs overall. As providers respond to the same financial incentives across payers, synergies will accelerate the transition to value-based care and lead to high-quality services and better patient outcomes at a reduced cost across the entire health care delivery system.

Without policies to address provider readiness and capability to manage risk under alternative payment models, it will be difficult for health insurance providers to achieve successful, widespread adoption of these arrangements to drive value.


Methods in Brief
In 2017, working in partnership with CMS’s Healthcare Payment Learning and Action Network, AHIP conducted a survey of its member health plans on their experiences entering into alternative payment model contracts with health care providers. The survey was sent to 113 AHIP member plans that offered products in the commercial, Medicare Advantage, or Medicaid managed care insurance markets. Responses were collected between May 9, 2017 and September 5, 2017. Responses from 42 health plans (37 percent response rate) were collected. Of these 42 plans, 30 had active alternative payment model contracts with network providers and 22 of those 30 completed the survey questions regarding challenges to implementation.