How COVID-19 Could Improve Alternative Payment Models

The COVID-19 pandemic will likely go down in history as one of the most significant disruptors the U.S. healthcare industry has ever faced, but much of the negative financial impacts experienced by health providers throughout this ongoing public health emergency could have been mitigated through less reliance on volume-based payments and a greater shift toward alternative payment models (APM).

APMs are defined by Centers for Medicare and Medicaid Services (CMS) as payment approaches that give added incentive payments to provide high-quality and cost-efficient care. In volume-based schemes, on the other hand, payments are a direct function of services provided, thus more patients receiving more services equates to more payments and more revenue.

During the worst stages of the COVID-19 crisis, many communities were overwhelmed by a rapid influx of patients requiring emergency and critical care. At the same time, many healthcare providers were financially challenged due to a dramatic drop in demand for their services. Independent and employed healthcare professionals, large hospital systems, independent practices, home health organizations, and federally qualified health centers alike saw significant drops in revenue as patients opted to delay usual care and elective procedures due to stay-at-home orders or fear of contracting COVID-19. Some types of practices, such as primary care, pediatrics, and surgical specialties, were affected to such an extent that they felt compelled to furlough or even lay off staff. In extreme cases, some anticipate permanently shutting their practice doors.

Obviously, revenues associated with volume-based payment models dropped significantly as the pandemic forced people to stay home, but the pandemic’s impact on providers participating in Advanced APMs remains far less clear. As part of CMS’s Quality Payment Program, Advanced APMs reward providers that receive at least a minimum threshold of payments or patients through APMs. CMS made several modifications to Advanced APM rules during the pandemic to ease the burden on providers, including reductions in reporting requirements, changes in performance payment calculations, and extensions on model tests. The unique circumstances of the pandemic have provided a rare opportunity to better understand the impact of Advanced APMs on both healthcare providers and beneficiaries.

We’ve identified the following areas of exploration as key to understanding the effects of Advanced APMs as currently designed, and potentially instructive regarding the design of future payment models.

Although many Advanced APMs include population-based payments that allow for providers to deliver care in ways unconstrained by typical fee-for-service visits, few model participants made significant changes in the overall quantity of in-person visits. During the pandemic, many providers pivoted quickly to virtual visits when CMS and other commercial payers waived traditional telehealth requirements. We should explore whether providers participating in APMs were more agile in moving to virtual visits and whether or not APM participants were more likely to fully integrate virtual visits into their workflow and sustain their use beyond the public health emergency.

Many healthcare organizations made staffing changes during the pandemic that included the reallocation of staff to areas of increased need (e.g., emergency departments, COVID testing sites, critical care units, COVID screening stations). Many other providers were forced to lay off staff due to lost revenue. Were APM participants less likely to lose staff? Or were they able to bring staff back to full employment sooner than providers not participating in APMs?

Many practices participating in APMs reported adding new services to meet patient needs. Examples included outreach to high-risk patients to identify the impact of COVID on health and social risk factors (e.g., food insecurity), provision of mobile devices (iPads, tablets) for remote monitoring and/or virtual care, and curbside care. Did APM participants maintain greater patient access and engagement during the pandemic than non-APM providers? Did patients of APM participants report improved care experiences during the pandemic relative to patients not enrolled in APM participating practices?

The pandemic amplified health and healthcare disparities, including racial and ethnic, income, and geographic disparities. Although these disparities are not typically measured in CMS APM evaluations, it is now more important than ever to measure disparities and understand the causes. Do beneficiaries that are seen by providers participating in APMs receive more equitable care than non-APM providers? Do patients who are racial or ethnic minorities have better health outcomes when seen by providers participating in APMs? 

The COVID-19 crisis has further exacerbated feelings of stress and burnout among the nation’s healthcare professionals. In particular, an increasing number of independent practitioners have decided to retire early or sell their practice as a result of increased stress and dissatisfaction with the profession. Did providers in APMs report less stress or more resilience than non-APM providers? Did independent providers in APMs maintain financial solvency in greater numbers than non-APM practices? 

The COVID-19 pandemic further stressed an already stressed healthcare system. The U.S. has made incremental progress toward using value-based payments as a mechanism to advance quality and lower the cost of care, but most advanced APMs have yet to attain those goals. To improve cost and quality of care the nation will need to address a great many complexly interrelated factors. High among them is the design and testing of new payment structures built on a strong foundation of providers who will not only adapt to new healthcare environments but thrive in ways that continue to meet and even anticipate patient needs. The pandemic presents a unique opportunity to identify and advance the elements of APMs that foster more resiliency and innovation. It’s an opportunity that the nation must seize to realize a vision of an equitable, cost-effective, high-quality healthcare system.