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Understanding APMs

‚ÄčThere is no single APM that will work for all physicians and their patients. Below is a guide to the most common types of APMs. Practices need to evaluate each in light of their own practice, priorities, and market. 

Pay-for-Performance: Under the models, physicians are paid based on an agreed-upon evaluation of the provider's performance for a designated population according to acknowledged benchmarks.

These models offer providers incentives retrospectively based on quality and cost metrics.

Pay for performance arrangements are relatively quick to implement, shields providers from downside risk and can offer providers additional revenue they may not see otherwise. Plus, it can be used in conjunction with other payment models like fee-for-service or bundled payments. However, this type of contracting hinges on choosing the right quality metrics, because you won't see payments until you are able to accomplish quality and/or cost goals.

Shared Savings: By coordinating care, providers and payers believe they can deliver quality care at a cost that is below current budgeted amounts, and the resulting savings is shared between the payer(s) and providers. Not only does this model align payer and provider incentives for cost reduction, but it also offers both parties added benefits. Providers find it attractive because they are shielded from catastrophic risk and have more control of patient experience and engagement. On the other hand, payers have the opportunity to benefit without any of the outlays, it requires high volumes of patient membership, there is a notion of diminishing returns as costs can only be reduced so far, and the timing of reconciliation occurs after a performance period so revenues are delayed.

Providers need to be cautious and calculate what practice enhancements will be necessary to achieve the savings and whether the payer will provide upfront funding for infrastructure support.  The practice will need to understand how the payer calculated the quality and cost benchmarks used to assess your practice.  Also important to understand is how the payer intends to set your cost budget from year to year and how benchmarks are adjusted. 

Bundled Payments/ Episode of Care Payment: Under bundled payments, health care providers (hospitals, physicians, other health care providers) share one payment for a specified range of services or defined episode of care as opposed to paying each provider individually. For example, all of the inpatient and outpatient care for maternity care or for perinatal care. The intent of bundled payment is to foster collaboration among the multiple providers to coordinate services and control costs, thereby reducing unnecessary utilization. However, the risk borne by the provider is that the patient may utilize additional or higher-cost services above the amount agreed on by the provider.

Capitation and Global Budget: Sets a flat per-member per-month price for certain or all services.

Global payments (aka, global capitation) cover a comprehensive array of services for a defined population over a defined period of time. Global payments cover more services than traditional capitated arrangements. For example, global payments would cover all of a population of patients' health care needs over the course of a year, as opposed to a capitated plan that would only cover a specified set services associated with a given condition or procedure. Capitation, especially full capitation, is usually used in large health systems. As with bundled payments, providers would incur risk if utilization is greater than budgeted.  

Risk Adjusted Payment:  Ideally, any APM that puts the provider at risk for payment needs to include a means for determining whether patient characteristics will necessitate higher utilization of medical services, thereby putting the provider payment at risk. APMs lacking an adequate risk adjustment tool may end up penalizing practices that take on a proportionally higher rate of sicker patients, such as children with complex conditions. Risk adjusted payments will account for the severity and acuity of the patient panel.

Additional Resources on Understanding APMs