Payment & Delivery Models

Alternative payment models help physicians better care for patients

Troy Parks , News Writer

Physicians know there are many types of services that could help patients better manage their health conditions, but these services often aren’t paid for by Medicare and most health plans and can cause financial losses for the physician’s practice. Learn the types of alternative payment models (APM) that can give physicians the ability to offer new and improved services to their patients, thanks to new federal legislation supporting physician-focused payment models.

New payment models in the changing health care environment

The Medicare Access and CHIP Reauthorization Act (MACRA)—the legislation which repealed the Sustainable Growth Rate formula in 2015—provides incentives and resources to develop APMs that would give physicians the resources and flexibility to deliver care in new and better ways. 

It’s important for physicians in every medical specialty to begin working now toward APMs that solve the specific barriers they face in the current payment system. To help them in this effort, the AMA worked with Harold Miller at the Center for Healthcare Quality and Payment Reform, who is a member of the new federal Physician-Focused Payment Model Technical Advisory Committee, to develop the “Guide to Physician-Focused Alternative Payment Models.”

Seven payment models that address physician needs

No one approach to payment will work for every specialty, for every type of practice or for every type of patient. That’s why the guide describes seven different types of physician-focused APMs that address opportunities to improve care and help physicians overcome payment barriers. The common element of each APM is that they give practices greater resources and flexibility to improve the aspects of costs and quality that they can control or influence.

Physician need: Ability to deliver a high-value service that isn’t currently paid for

New APMs that can address this physician need include:

  • Payment for a high-value service. In this APM, the physician could be paid for currently unbillable, high-value services—such as care management, discharge planning, and shared or educational decision-making processes with patients—if the physician commits to use these services to increase quality and avoid undesirable services, such as hospitalizations.
  • Warrantied payment for physician services. In this APM, the physician practice can be paid more to prevent problems and complications of treatment, rather than being paid more to treat problems after they have occurred as they are today. This is similar to what other industries do when they offer warranties on their products. 

Physician need: Ability to share payments with other physicians and other providers

New APMs that can address this physician need include:

  • Multi-physician bundled payment. In this APM, two or more physicians can share a single, “bundled” payment to enable them to work together to diagnose a patient’s condition or deliver a specific treatment in a coordinated way without concern about individual practice revenue. For example, a primary care practice and a psychiatry practice could jointly receive payment for coordinated care of patients with depression.   
  • Physician-facility procedure bundle. In this APM, a physician could share in savings achieved in the cost of a hospitalization through more efficient scheduling of services, competitive purchasing of medical devices and supplies, and other care improvement and cost-saving efforts. 

Physician need: Flexibility to use lower-cost treatment options to improve outcomes without reducing profit margins

New APMs that can address this physician need include:

  • Condition-based payment for a physician’s services. In this APM, rather than basing the payment on the type of treatment the physician uses, payment is based on the extent of the patient’s needs. Under this model, physicians are no longer limited only to treatment options that can be billed under the current fee-for-service model.
  • Episode payment for a procedure. In this APM, physicians receive a single payment for an “episode of care,” which is defined as all of the care provided during and after a particular procedure or treatment. Physicians would have the flexibility to redesign and better coordinate all of the services during the episode to improve outcomes and efficiency—and could benefit financially if they can eliminate unnecessary spending. For example, for a patient receiving surgery, the episode payment would encompass not only the procedure, but the rehabilitation services and treatment of any post-operative complications.  
  • Condition-based payment for all services related to a condition. In this APM, physicians receive a single payment for all of the care needed to manage a particular health condition or combination of conditions during a particular period of time. 

In addition to the kind of flexibility in the episode payment to redesign care for a particular treatment, the condition-based payment would give the physician the flexibility to use completely different procedures or treatments if they will achieve better outcomes at lower cost. 

How physicians are leading the way in payment reform

Just because a payment model is different doesn’t mean it’s better. Many physicians have experienced problems with payer-designed “reforms” that are more focused on reducing spending or shifting risk than improving patient care. Physicians are voicing their need for properly-designed alternative payment models that are patient-focused and physician-friendly. More than 100 state and specialty medical associations recently joined the AMA in sending a letter (log in) recommending 10 principles that the Center for Medicare and Medicaid Services (CMS) should follow in implementing the MACRA, including principles as to how way APMs should be developed and implemented.

In order to help accelerate efforts to develop physician-designed APMs in all specialties, the AMA also compiled a step-by-step process that medical specialties can use to develop successful payment models for their physicians. Visit the AMA’s Medicare alternative payment models Web page to read more.

Further reading: Also from the “Guide to physician-focused alternative payment models” are the two most common barriers in current payment systems and the three characteristics that a payment model must have to be successful.