E9 – Get the Facts on COVID-19: Alternative Payment Model Impacts

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Tune into the ninth episode of our podcast series, Get the Facts on COVID-19. In episode 9, Avalere experts from the Health Plans and Providers practice and the Center for Healthcare Transformation discuss the near- and long-term impacts of COVID-19 on value-based contracting and Alternative Payment Models (APMs). The conversation focuses on Medicare programs, such as specialty Accountable Care Organizations (ACOs) and bundled payment models, and newer Center for Medicare and Medicaid Innovation (CMMI) programs.
Please note: This is an archived post. Some of the information and data discussed in this article may be out of date. It is preserved here for historical reference but should not be used as the basis for business decisions. Please see our main Insights section for more recent posts.
“Our past analyses have shown that it takes at least 3-4 years for ACOs to start to realize savings in these programs. So, to have these new providers in these new programs while also having to think through and navigate a pandemic, it creates a lot of uncertainty.” Gabriel Sullivan


Fred Bentley , Managing Director, Center for Healthcare Transformation

Fred Bentley advises clients on health delivery and payment innovation, providing analytic and strategic insight on issues related to the delivery of care.

John Feore , Associate Principal, Center for Healthcare Transformation

John Feore advises healthcare providers, plans, and life sciences companies on the transformation of the healthcare system.

Gabriel Sullivan , Consultant II, Center for Healthcare Transformation

Gabe Sullivan supports clients with research and analysis that span a variety of healthcare sectors and stakeholders.

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.


Matt: Hello and welcome to Avalere’s ninth episode in a series of podcasts focused on COVID-19. My name is Fred Bentley and I serve as the Managing Director of Avalere’s Health Plans and Provider practice. In today’s episode, we will focus on the near- and long-term impacts of COVID-19 outbreak on value-based contracting and Alternative Payment Models (APMs) in Medicare programs, specifically the Account Care Organizations (ACOs), bundled payment models – which includes the Oncology Care Model (OCM) – and newer programs that the Center for Medicare & Medicaid Services Innovation (CMMI) has pushed forward. Joining me today is John Feore, an Associate Principle in Avalere’s Center for Healthcare Transformation, as well as Gabriel Sullivan, a Consultant also in the Center for Healthcare Transformation. Gabe, to get started, the Centers for Medicare & Medicaid Services (CMS) has been busy developing guidance on a range of programs. What do we know about the guidance related to value-based care programs?

Gabe: Thank you, Fred. At this point there has not been broad sweeping statements about value-based care initiatives. What we have seen so far is more specific tailored comments. For example, last week CMMI posted the application process for the Medicare Part D Senior Savings Model, which is expected to begin January 1, 2021. This indicates CMMI is planning to move forward with some models. However, in the beginning of April, CMMI is pushing back the start date to the Emergency Triage, Treat, and Transport (ET3) Model from May 1, 2020 to Fall 2020. They stated their main reason for pushing back the start date of this model was because of the current impacts of the COVID-19 pandemic. This indicates that CMMI is thinking about how COVID-19 is impacting models, and I think what we will start to see is a model by model announcement.

Fred: That is helpful. Now those two are important but relatively small programs compared to some larger and long-standing initiatives that CMMI has underway. John, I would like to get your take on what CMS has left unaddressed? What are those big questions and unknowns that the industry is facing relative to APMs?

John: Yes, thank you, Fred. That is the biggest question right now. We know a couple of things, but there is a lot left to be decided. There are two main categories:

  • what will CMS and payers do, which will inform the second category; and
  • what will the APMs will do. Which is what we are focusing on today.

Looking at the APMs, the biggest uncertainty is how COVID-19 will affect their spending. There are two competing forces here. One is the substantial increase in spending and hospital utilization for infected patients. The other is the sudden halting of elective procedures, regular appointments, and office visits. There is a big increase in a smaller number of patients offset by drastic reduction in the utilization. This spending impact is going to vary substantially across regions and states depending on the impact of the COVID-19 pandemic in any given area. APMs themselves will have drastic varied spending impacts. Despite the uncertainty, CMS can alleviate the burden and unknown for APMs. We know they have offered regulatory flexibilities for providers, and there is an interim final rule currently at the White House Office of Management and Budget (OMB), which we believe will contain additional flexibilities focused on APMs. But we do not know if it will be enough to keep APMs interested to continue to participate. If CMS does enough – there are plenty of examples – the impact on APMs could be temporarily mitigated. Some options CMS could do to mitigate the impact of COVID-19 include:

  • eliminating downside risk penalties
  • allowing shared savings to continue to be earned
  • reducing quality reporting penalties
  • eliminating reporting burdens
  • adjusting the benchmark in expenditure calculations
  • carving out COVID-19 patients from all expenditure calculations
  • extending application deadlines
  • extending reporting programs
  • extending programs themselves
  • making 2020 a whole harmless year

These are all things that could happen, we just do not know what CMS and other payers might do.

Fred: Got it. I am curious, as we shift out thinking from what CMS has or has not done, given the circumstances, there are a lot of hospitals, physician groups, and other provider organizations who are participating as Accountable Care Organizations (ACOs) or in bundle payment models. How is the COVID-19 pandemic impacting APM participants? John, can you provide some insight here?

John: Sure. Plain and simple: uncertainty. It is the biggest fear and it permeates the thought process and planning of ACOs, who are debating on their participation in the Medicare Shared Savings Program or to join the Direct Contracting Model once the next generation model ends this year. For other organizations, they may be thinking about if they should drop their program and go back to the comfort of Medicare Fee-for-Service (FFS). At this point it is impossible to project the financial impact and we may not know that until after the year is over. The best APMs have been doing this for years by planning their cost, interventions, staff, and back-office capabilities, but now it is all uncertain, which is not how a successful business model takes root and moves forward. There is opportunity here to:

  • push CMS to make some of these temporary waivers permanent and available to all types of APMs.
  • invest in telehealth capabilities to demonstrate to CMS and other payers the value in this technology.
  • invest in data assets to determine what patients are at risk for COVID-19, which patients’ social determinants of health may impact their ability to get care, and what partnerships with other stakeholders could take root.

Gabe: I think to add on, and echo John’s point, there is uncertainty in two big categories for APM providers, one being APM providers who have just joined a downside risk option within a model. For example, new practices within the OCM, are now experiencing downside risk for the first time. As well as new providers to APMs. Our past analyses have shown that it takes at least 3-4 years for ACOs to start to realize savings in these programs. So, to have these new providers in these new programs while also having to think and navigate through a pandemic, it creates a lot of uncertainty. This is also reflected in a recent National Association of ACOs (NAACOS) survey, where nearly 60% of respondents said they are likely to quit the ACO program to avoid financial losses due to the pandemic. On top of that 77% of respondents said they were very concerned about the impact of COVID-19 on their 2020 performance. So, what this is leading to is uncertainty for new providers, who are bearing risk for the first time. These providers are forced to not only think of the here and now, but also of what their performance and participation look like in 2021.

Fred: Very helpful. The uncertainty is impacting current participants and those organizations who may have been, until now, on the sidelines waiting to evaluate their participation in business programs and models with downside financial risk. I want to put this in context of the election year since the attention has shifted away from the 2020 elections for the White House and Senate given COVID-19. John, if possible, setting aside COVID-19 related impacts, what is at stake in the potential change of the presidential administration? What does this mean for APMs?

John: Fred, I think at best, or worst, depending on how you look at it, the impact is a temporary pause, even with COVID-19. Everyone from APM participants to policy makers to payers need to work together to ensure that we continue this transition away from FFS. Once we are return to some level of normalcy, we need to continue to accelerate this momentum and push. Our hope, and my optimism is that policymakers will take advantage of what learn this year’s from the crisis, to help shape APMs to be nimble enough to address COVID-19 and ensure CMS continues to be nimble enough to address any public health emergency that arise. If we see a change in administration or not, we believe the movement from FFS to APMs will continue. Value-based care and APMs will continue to have bipartisan support, it is one of the rare healthcare policy issues that can continue to move forward even with a split or change in government leaders. The flexibilities and powers of CMMI can be used by either party in the White House to pursue new and innovative APMs. So, if there is a change in administration, we may see a pause as new political staff come with their priorities. A continuation of the current administration will probably mitigate any type of pause in CMMI, and they will continue to push forward more comprehensive APMs.

Fred: Great, thank you John. I would like both of you to weigh in, and clearly there is an undertone of uncertainty throughout our conversation, but I am wondering if you have heard of anything from CMMI, associations, or other payer organizations about models that focus on COVID-19 patients? Part of me is hopefully that we will contain COVID-19 and march forward with several of the value-based contracting models or APMs already in place. However, I have also heard organizations talk about the investment in more at-home interventions to manage those moderately ill COVID-19 patients. Any thoughts on models that could be focused for COVID-19?

John: I think you can have a carve-out of a model that can focus not only on a COVID-19 patient but any patient with a viral infection or at any risk of going to a facility. So, whether it is a carve-out of an existing model or new bundled payment for these types of patients, you can create the incentives to have more care at home. We have seen a hospitalization-at-home, home-hospital models or independence at-home demonstrations proposed and I think there is an existing infrastructure to provide care to patients who are not seriously ill in their home and have home visits. I think there is the ability now and appetite to pursue this.

Gabe: There is also another approach too, beyond a carve-out of a model. There is a lot of opportunity and encouragement from CMMI to create new innovative models. There is opportunity for waivers to create some flexibility for providers to see patients at home and avoid hospitalization when pursuing care.

Fred: Excellent! John and Gabe, I appreciate your insights. Thank you to those listening today. If you would like to hear more on Avalere’s take on telehealth, home health, or vaccinations feel free visit to our COVID-19 intel center. Thank you for your time!



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