Selecting the Right Alternative Payment Model: 4 Factors to Evaluate

Payers are in the driver’s seat in the proliferation of Alternative Payment Models (APMs) whether it’s a performance based incentive, care management fee, MACRA options, CPC+, Next Gen ACO, Commercial ACO, bundled rate, capitated fee or other hybrid method.

Your practice must proceed carefully before agreeing to an APM. Every practice is unique. Your situation may be different than another provider that is already participating in an APM. How do you decide which, if any, APMs, are right for you? Are you asking right questions?

There are 4 important factors for providers to evaluate.

1. Payer’s Objective: What is the payer’s objective and how does the payer define success for you and for them?Payers are looking for value and predictability in their reimbursement arrangements with providers.

However, value creation using APMs add an element of uncertainty for the payer at the same time it adds costs for the provider. It is important that the arrangement cover both the cost of providing care but also the cost of the services and tools that providers utilize to create new value. Providers must do thorough  due diligence during the negotiation to determine whether the APM will pay for the needed system enhancements and add sufficient bottom line profit to the practice to make the effort worthwhile. Good payer partners should be willing to help you be successful.

2.  Alignment: How do the payer’s objectives align with your care delivery model and strategy?  Providers are focused on providing high quality care for their patients in a sustainable model as they try to meet the challenges and new expectations of changing reimbursement mechanisms.

Once you understand the payer’s objectives you’ll need to assess the fit with your care delivery model and strategy.  As an example, one of the most significant changes over the past 10-15 years has been the “anointment” of primary care as the conductor in charge of providing patient-centered and coordinated care. While this role makes sense, primary care practices require significant development and resources to successfully take on this expanded role. APMs from payers that fail to adequately “invest” in the changes needed to support enhanced primary care can be risky and are not likely to be a good fit with the organizational and business objectives of your practice.

3.  Operational Success Factors: Do you understand the formula for success for a proposed APM? What would you need to do differently in order be successful as a participant in this APM? What will it take in terms of time, resources and investment to implement these changes? How long will it take you to make the necessary adjustments? How will the changes impact the office workflow? How will the changes impact provider and staff morale?

Once you understand the payer’s objective, a detailed analysis of what is needed to be successful under the specific APM is essential. That analysis is followed by an vigorous assessment of whether you have the right structure, abilities, staff hours, provider hours, support systems, leadership (including ownership and board support) and readiness to execute successfully. Recognizing where there are gaps and developing a plan for implementing changes needs to occur before going “live” with a new APM.

4. Reward and Likelihood of Success: What’s the reward for participation? What’s the likelihood of success in the short term? Long term? And if there are downside risks, what is the worst case scenario and how would you fare? What is the opportunity cost of not participating?

All APMs require a provider to take on something new or to make adaptions in systems, workflow or processes. Assessing whether the “juice is worth the squeeze” is an important part of the evaluation process and participation decision. This includes both financial and non-financial return on investment considerations and realistic assessment of how long after the “investment in change” will it take to reap the rewards. If the reward is more long term then concretely weighing how your organization will adjust in the short term is an important reality to address. Setting clear expectations at the outset are important and reminders will be needed over the course of the arrangement. It should not come as a surprise that if the APM does not yield some form of reward in the short term, it will be a challenge to sustain the right level of momentum and participation from your organization.

We’re ready to be your APM Sounding Board Partner

• Assistance with evaluating APMs that are a “good fit” for your practice.
• Identifying complexity and hidden “gotchas” in proposed programs.
• Helping you determine whether, how and when to participate in APMs in your specific situation.

Contact us for an initial complimentary conversation to clarify your needs and the opportunity.