Bundled Up: Alternative Payment Models for Physicians

Alternative payment models (APM) are a way of rewarding and paying providers who deliver cost-effective, high-quality healthcare services to their patients.

“Nationally, nearly 25% of payments are in APMs supporting better care coordination and patient care,” according to the Health Care Payment Learning & Action Network. The model takes a step away from fee-for-service—where providers are paid whether the treatment is good, bad or indifferent—and instead focuses on quality and outcomes.

Also known as bundled payments, APMs secure one sum of money to pay for a single healthcare event and are best used with procedures that occur frequently, such as knee surgery. Providers use evidence-based medicine to understand healthcare data, which arms them with proven treatment options. “Physicians have traditionally used their judgment when making treatment decisions, but in the last few years there has been a move toward evidence-based medicine, which involves systematically reviewing clinical data and making treatment decisions based on the best available information. Aggregating individual data sets into big-data algorithms often provides the most robust evidence, since nuances in subpopulations (such as the presence of patients with gluten allergies) may be so rare that they are not readily apparent in small samples.”

Today, APMs are tested in public-healthcare settings, and private insurers also engage with the model. (The federal government has sponsored large-scale APMs to understand the cost and health effectiveness of the programs. However, the current administration recently stopped the programs, which are now on hold.)

Nevertheless, private payers are interested in APMs and large employers are starting to ask for bundled payments as part of overall healthcare benefits.

Pay to Play

Paying for improved health outcomes is nothing new and, just like in the early days of care management, success can be difficult to prove. Positive outcomes can depend on the population served and the way results are calculated. APMs typically pay for a specific patient episode, rather than for the management of an entire population.

“Episode bundled payments may help address one weakness of population-based payment models, namely that many clinicians—such as surgeons or other specialists—can have an important impact on quality and costs for specialized groups of patients, but are not well-positioned to help manage the total care of a population.”

Through APMs physicians concentrate on explicit episodes of care for a specific patient, rather than care for an entire population, which may make it easier to meet quality and care goals.

Another part of the APM model is risk. Providers are at risk for delivering coordinated, high-quality care and receive a single payment to do so. If it costs more to provide the care than they were paid, the provider absorbs the extra cost. If providers deliver agreed-upon outcomes and stay within the payment structure, they make money through the difference between treatment costs and the full payment and may be eligible for a bonus.

While it’s impossible to control all patient outcomes, providers can use assessment tools to mitigate potential negative outcomes. In the same way actuaries score drivers for auto insurance rates, providers can use procedure-based scores to understand how to assess patients, potential outcomes and how a treatment event may impact the provider.

For an episode of care like knee surgery, multiple physicians and clinics are involved. The communication and data links between all the players are crucial to APM success with a commercial health plan. Clearinghouses, like TriZetto Provider Solutions, have thousands of existing data connections with providers and health plans. It makes sense to bring medical clearinghouses into the mix to securely transmit data between the groups.

Clearinghouses specialize in confirming eligibility, submitting claims, managing denials and other areas essential to the payer/provider process. Submitting a claim and receiving payment through an APM, for example, can be complex and time-consuming. As part of the revenue cycle, bundled payments via an APM must be divided among multiple providers and facilities. Attempting this through a manual process is problematic, but an automated system can help lower the chance of coding and remittance errors, which is especially important when a single payment must be distributed among multiple caregivers.
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