What Is an APM According to CMS?

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The Medicare Access and CHIP Reauthorization Act (MACRA) passed last spring is transforming physician payment and standardizing requirements for APMs. ​Adam Borden and Jared Alves cover Advanced APMs, incentives CMS offers for providers to participate in APM, and the exclusion of specific tracks.
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This interview was originally published as a podcast. The audio is no longer available, but you can read the transcript below. For updates on our newly released content, visit our Insight Subscription page.


Adam: What is an APM?

Jared: An APM is a new way to pay providers other than traditional fee-for-service, such as bundled payments. APMs are different from traditional fee-for-service because they create financial incentives for providers to invest in care coordination, patient engagement, and preventive services to reduce spending from complications of care, readmissions, and other bad outcomes.

An APM Entity is the legal entity created by a group of providers or facilities to participate in the model, such as an ACO. Congress, CMS, Medicaid, and commercial payers have created a variety of APMs, all with differing requirements. However, the Medicare Access and CHIP Reauthorization Act (MACRA) passed last spring is transforming physician payment and standardizing requirements for APMs.

Adam: Why should providers participate in APMs?

Jared: Payers are looking to replace traditional fee-for-service with APMs. Most APMs are voluntary, but the ones that succeed at reducing spending without compromising quality of care will likely become mandatory over time. Just look at Medicare’s Comprehensive Care for Joint Replacement Model. It’s a mandatory hip and knee bundled payment model for all hospitals within 67 metropolitan areas. If you join a model before its mandatory, then you may have a leg up on your competition by the time payers force them to participate.

Adam: What incentives does CMS offer for providers to participate in APMs?

Jared: Each APM by definition offers new payment incentives for providers to reduce spending without compromising quality of care. For example, Medicare ACOs split the savings they achieve, from things like fewer hospitalizations and readmissions. With CMS, MACRA created an extra set of incentives: a five percent bonus payment from 2019 to 2024 and higher payment rate updates thereafter for providers participating in what CMS now calls Advanced APMs

2019 might sound a ways off, but providers can’t wait too long to decide whether to join an Advanced APM. Their participation in 2017 will determine whether or not they can receive the additional incentive payments in 2019, participation in 2018 for 2020, and so on. In addition, providers in APMs do not face payment adjustments under the Merit-Based Incentive Payment System (MIPS).

Adam: What is MIPS?

Jared: We don’t have time today to describe MIPS in detail, but it is a single program that consolidates Meaningful Use, the Physician Quality Reporting System, and the Value-Based Payment Modifier. Although providers in Advanced APMs do not face MIPS payment adjustments, all providers—in APMs or not—need to report data under MIPS. CMS specifies that MIPS APMs do not need to report data for each MIPS category, since they already have reporting requirements from the APM. Importantly, CMS will determine which APMs count as MIPS APMs and Advanced APMs independently.

Adam: So which models are Advanced APMs?

Jared: Advanced APMs must meet three requirements: (1) use certified health IT, (2) report on quality measures, and (3) bear financial risk.

CMS has identified six:

  • Comprehensive ESRD Care model for large dialysis organizations
  • Oncology Care Model for organizations accepting two-sided risk
  • Medicare Shared Savings Program Track 2
  • Medicare Shared Savings Program Track 3
  • Next Generation ACO model
  • Comprehensive Primary Care Plus

Collectively, CMS calls these initiatives Advanced APMs. At least annually, CMS will identify Advanced APMs and, moving forward, will indicate if new APMs are advanced in announcements.

Adam: Why are certain tracks excluded (e.g., MSSP Track 1 and small dialysis organizations)?

Jared: APM Entities in these tracks do not meet the financial risk requirements. The proposed rule specifies that in Advanced APMs must feature a payment mechanism that withholds payment for services, reduces payment for services, or requires providers to repay losses when actual spending exceeds expected spending. That said, it’s not sufficient to have this mechanism, since CMS also sets thresholds for the amount of revenue that APM Entities might have withheld, reduced, or be required to repay.

Adam: How does the Comprehensive Primary Care Plus Model meet the risk requirement?

Jared: CPC+ is a medical home model, and CMS proposes a fourth payment mechanism limited to medical homes. Medical home Advanced APMs can require repayment of upfront incentives. In the case of CPC+, APM Entities earn upfront incentives (separate from case management fees) that they can keep or repay depending how they do on performance metrics. That said, if HHS expands a successful medical home model tested by the innovation center, then MACRA exempts the Advanced APM from the financial risk requirement entirely. Congress waived this requirement for expanded Medical Home Model Advanced APMs because they need to be certified as reducing spending without compromising quality of care before they can be expanded. Although the innovation center has tested several medical home APMs, HHS has not yet expanded any.

Adam: Is it enough to be in an Advanced APM to earn the payment incentives you mentioned earlier?

Jared: No, providers also need to earn/see an increasing proportion of their payments or patients through the APM. I say providers and not APM Entity because some providers, such as specialists, may participate in multiple APM Entities and can qualify for the payment incentives through the aggregate payments/patients associated with the two or more APM Entities. If providers fail to meet the proportion of payments/patients, then they may be partially qualifying. In that event, they do not earn the Medicare APM payment incentives, but they can choose whether or not to receive the MIPS payment adjustment. Initially, these payments or patients can only come from Medicare Advanced APMs. After the first two years, providers can also earn/see payments or patients from Other Payer Advanced APMs.

Adam: Whoa. Hold on, what’s an Other Payer Advanced APM?

Jared: Medicare Advantage, Medicaid, and commercial payers create Other Payer Advanced APMs to meet the same three requirements established for Medicare Advanced APMs. Just in case there was any doubt, Medicare Advantage contracts in themselves do not count as Other Payer Advanced APMs unless the contract with the provider meets the three requirements for Advanced APMs.

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