MedPAC to Medicare: Cut Down on Those Alternative Payment Models

WASHINGTON — Medicare needs to streamline its portfolio of alternative payment models (APMs), the Medicare Payment Advisory Commission (MedPAC) said Tuesday in its annual report to Congress.

“CMS [the Centers for Medicare & Medicaid Services] is to be commended for the vigor with which it has approached its mandate of implementing a wide variety of APMs over the last 10 years,” MedPAC said in its report. “The strategy of implementing a plethora of models over the last decade has given the agency an opportunity to build up the evidence base about what works and what does not. While this strategy has yielded valuable information, the commission contends that continuing to test a large number of independent APMs is likely to inhibit the ability of APMs to reach their full potential. We therefore recommend that CMS now take a more holistic approach that involves implementing a smaller, more harmonized portfolio of APMs.”

In 2021, CMS expects to operate 12 APMs offering 25 distinct tracks for providers to choose from — tracks that each involve different payment options and risk arrangements, the report noted. Studies have shown that accountable care organization (ACO) models and episode-based care models (i.e., bundled payments) “have generated relatively small gross savings for the Medicare program, before model payments (e.g., performance bonuses) are taken into account,” the 403-page report said.

Once the bonuses are paid to providers, savings are reduced and in some cases, Medicare actually ends up spending more on the beneficiaries in the APMs than they would have spent otherwise. But a few models resulted in savings even after bonuses were accounted for, including the Medicare Shared Savings Program — in certain years — and the Comprehensive Care Joint Replacement model for hip and knee replacements, according to the report. Models focused on primary care, on the other hand, have generated small financial losses, although there were some improvements in quality of care, such as reduced emergency department visits and faster follow-up after hospitalization, MedPAC found.

The report listed several unintended consequences of allowing providers to participate in multiple APMs at the same time. For example, “when a provider participates in multiple APMs, each covering a different subset of a provider’s patient panel, it can dilute each individual APM’s incentives,” the report said. “Participating in multiple models at once can increase the chances that a provider will be faced with different payment methods, different care processes they are encouraged to implement, and different reporting requirements.”

Conflicting incentives is another potential problem for providers in multiple APMs, MedPAC Executive Director Jim Mathews, PhD, said on a webinar with reporters. “For example, an ACO set of participants might be facing incentives to reduce their spending on behalf of their assigned population, relative to a benchmark, but to the extent to the participants in that ACO are also participating in certain bundled payment models, they might have an incentive to keep the cost of care within a given episode low, and have an incentive to generate more episodes, inconsistent with the overall ACO incentives of keeping spending low,” he told MedPage Today. “We think that the risk of these kinds of inconsistent incentives would be minimized if the models were developed in a manner that they would work together at the outset, so that all of the models were aligned towards achieving a defined set of strategic goals.”

MedPAC’s recommendation on reducing the number of APMs — which it previewed at its March meeting — states that the Health and Human Services Secretary “should implement a more harmonized portfolio of fewer alternative payment models that are designed to work together to support the strategic objectives of reducing spending and improving quality.” But the recommendation doesn’t specify a number — or even a number range — of APMs for the secretary to aim for.

“We don’t have any guidance on a specific target number of APMs; we do think it should be a smaller number, again more focused on certain strategic goals in an integrated way, rather than having a large number of kind of independently developed alternative payment models operating in the environment all at once,” Mathews said. “We think this would bring some administrative simplicity to the process that would benefit both CMS and the model participants.”

At the request of the House Ways & Means Committee, the report also examined healthcare usage by Medicare beneficiaries living in rural areas, and found that rural and urban beneficiaries had similar access to care, although there were some differences. For example, rural beneficiaries had fewer visits for evaluation and management services in 2018 than urban beneficiaries, with the difference driven largely by rural beneficiaries visiting fewer specialists compared to their urban counterparts. Rural and urban beneficiaries also had similar hospital inpatient usage rates in 2018, but inpatient use varied greatly depending on geographic region, the report found.

The commission also looked at the effect of rural hospital closures on rural beneficiaries. “We found that a major driver in the closure of rural hospitals over the last 5 years has been a decline in inpatient admissions, and this is not just a Medicare phenomenon, but an all-payer phenomenon,” said Mathews. In many instances, the decline “is driven by the fact that rural beneficiaries are bypassing their local hospital for inpatient care and going to a more distant, perhaps larger urban hospital to receive inpatient care.” However, he added, “they do still rely on their local hospital for outpatient services.”

Those communities where a rural hospital closed “experimented with a number of ways to maintain care in their communities, such as bolstering urgent care centers or federally qualified health centers, and it is likely that the new ‘rural emergency hospital’ designation that was established by law last year — very consistent with a MedPAC recommendation from 2018 — would help ensure access to care in rural areas,” Mathews said.