Not for Everyone – Yet: What You Need to Know About Advanced Alternative Payment Model

Published: May 9, 2017
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Advanced Alternative Payment Models, or AAPMs, are a key vehicle by which U.S. healthcare will shift to a value-based system. These models aren’t just incentives – they’re designed to fundamentally reduce the total cost of healthcare and establish a new value proposition for the profession.

Advanced Alternative Payment Models are one of two tracks that MACRA defined for its Quality Payment Program; the other is MIPS. While Advanced Alternative Payment Models aren’t yet suitable for most practices, they will be soon. In 2017, CMS expects Advanced Alternative Payment Models to involve about 100,000 physicians and practices, compared to 600,000 in MIPS. The agency expects this proportion to shift steadily in subsequent years.

Benefits for Qualified Practices

An Advanced Alternative Payment Model offers three main benefits to physicians or practices that qualify:

Potential exemption from MIPS reporting requirements.
An annual Medicare Part B incentive, payable from 2019 through 2024, equal to 5 percent of the previous year’s Part B payments. This applies to every entity participating in the Advanced Alternative Payment Model, even those that fall short of performance goals.
A higher annual Part B fee schedule increase of .75 percent, beginning in 2026.

Requirements To Qualify

In 2017, an Advanced Alternative Payment Model (AAPM) must use one of eight designated CMS-administered Medicare payment programs. Certain commercial “Other Payer” programs will enter play in performance year 2019. In addition, an Advanced Alternative Payment Model must:

Employ certified EHR technology. This revolves around the concept of meaningful use – a set of criteria by which electronic health records must improve health quality, facilitate coordination, reduce disparities and guard privacy and security concerns. Since meaningful use may be defined somewhat differently by each payment program, understanding a program’s definition is critical in choosing a model.
Report quality measures comparable to those of MIPS. Advanced Alternative Payment Models will encounter little difficulty with this, since CMS has already required robust quality measures. “Comparable to those of MIPS” means evidence-based and driven by similar priorities – clinical outcomes, patient safety and various condition-specific measures.
Shoulder more than nominal financial risk or qualify as a Medical Home. Normally, an Advanced Alternative Payment Model has to incur risk. This is defined by MACRA as exposure to potential financial loss directly linked to performance (mere investment in ACO participation doesn’t count). So an Advanced Alternative Payment Model that misses targets will see its payments reduced or eliminated, or even find itself on the hook for payment to CMS. Like meaningful use, the dollar amount of risk is specific to the model: a percentage of price, total cost of care or the sum of Medicare A and B payments.

But the rule is flexible in defining how risk must be assigned. One ACO, for example, could shoulder all the risk and leave its members with none while another could do the opposite and place all the risk on its members. Still another could assign risk in a proportion somewhere between those extremes.

Exemption for Medical Homes

There’s an exception to the risk rule for Advanced Alternative Payment Models (AAPM) that acquire a medical home certification, which exempts them from the requirement. To achieve such certification, an organization must demonstrate a model for comprehensive care delivery that is coordinated by a PCP across various health entities and is patient-centered, accessible and committed to quality and safety.

A practice that has gotten its feet wet in a related alternative model – like Meaningful Use (MU), Physician Quality Reporting System (PQRS) or Value-Based Modifier (VBM) – will find an advantage over those that haven’t. These will be merged into MIPS in 2019.

Use 2017 to plan

Unless your practice is ready to move to an Advanced Alternative Payment Model – only around 17 percent are – make this your year for gathering data, analyzing options, thinking and planning. Understanding your payment mix, IT readiness and approach to risk will help you make any necessary adjustments and put you on a firm foundation for good choices next year and beyond.