On March 3, the Department of Health and Human Services (HHS) announced that it met its goal of tying 30 percent of all Medicare fee-for-service (FFS) payments to alternative payment models (APMs) by the end of 2016, almost a year ahead of schedule.

As of January 2016, the Centers for Medicare & Medicaid Services (CMS) identified 10 qualifying programs that achieved the outcome, which represents a 10 percentage point increase from January 2015. By the end of 2018, HHS intends to have 50 percent of payments tied to APMs.

HHS included several upside-only models (i.e., providers do not repay losses) among those counted as APMs, although CMS has expressed the belief that moving more providers into risk-bearing models is an essential step to achieving the long-term shift from volume to value.

Convincing providers to transition to models featuring downside risk has been challenging. For example, of the 463 Medicare ACOs, only 51 (11 percent) are currently in a track that features upside and downside risk. Still, HHS has signaled that the transition may not be voluntary in the long run. HHS does not include the Comprehensive Care for Joint Replacement (CJR) model among the 10 APMs (the model started April 1, 2016), but it is a mandatory bundled payment model for all acute care hospitals in 67 metropolitan statistical areas. Starting in the second year, CJR hospitals will be liable to repay losses. Over time, HHS may make other APMs mandatory.

Implementing the Medicare Access and CHIP Reauthorization Act (MACRA) will also create strong incentives for physicians to move into models with downside risk. Under MACRA, physicians participating in qualifying APMs will avoid the Merit-Based Incentive Payment System (MIPS), while also earning a five percent bonus payment for several years. However, some APMs identified by HHS for this announcement may not count as APMs under MACRA, as the statute requires the models to have a “non-nominal amount of risk.” In particular, CMS has suggested that Track 1 ACOs would not count because they are not at-risk to repay losses. ACOs and physician organizations have argued against this interpretation of the statute because they believe the upfront costs organizations bear to become Track 1 ACOs, with no guarantee of shared savings to recoup them, constitutes nominal risk.

Notably, MACRA creates an exception to the risk-bearing requirement for medical home models tested by the Center for Medicare & Medicaid Innovation (CMMI) and expanded by HHS. The Comprehensive Primary Care Initiative (CPCI) and Multi-Payer Advanced Primary Care Practice Demonstration could meet this criterion if they are certified to have reduced spending without decreasing quality or increased quality without increasing spending. The proposed rule to implement MIPS and define eligible APMs is under review at the Office of Management and Budget and is expected to be released this month.

Over the next couple years, CMS and CMMI will continue to expand, refine, and unveil initiatives to meet the 2018 APM goal. Notably, on April 11 CMS announced the new, multi-payer Comprehensive Primary Care Plus model. The five-year model builds on CPCI (although it is not a formal expansion by HHS) and is intended to include over 5,000 primary care practices when it starts in January 2017.

For more information, contact Josh Seidman at JSeidman@avalere.com.