The Year in Review: A Year of Twists and Turns for APMs
The year 2021 has been a dramatic one for the evolution of alternative payment models (APMs) in U.S. healthcare, from every type of accountable care organization (ACO) to bundled payments, to the rollout of the Direct Contracting program for physician groups under Medicare. That has been true both in the public and private spaces, but policy changes on the federal level have involved the most dramatic developments.
To begin with, one must start with the change in administrations. The change from the Trump administration to the Biden administration in January was dramatic. Out was Health and Human Services Secretary Alex Azar, and in was new HHS Secretary Xavier Becerra, formerly the California Attorney General. Out went Administrator of the Centers for Medicare and Medicaid Services Seema Verma, and in came new CMS Administrator Chiquita Brooks-LaSure. Out went Brad Smith, who had served only one year as Director of the Center for Medicare and Medicaid Innovation (CMMI), himself replacing Adam Boehler, who had served in the post from April 2018 until January 2020; and in came Elizabeth Fowler, Ph.D. The shifts in personnel reflected a dramatic shift in focus and, frankly, ideology.
During their tenures, Azar and Verma constantly touted the dual concept of market-driven healthcare-plus-consumer-choice as being the future of U.S. healthcare. Yet there were some major contradictions embedded in their approach, particularly that of Verma, who insisted throughout her slightly-under-four-year tenure (she became Administrator in March 2017) that she wanted the open, capitalist market to lead change in healthcare—while simultaneously constantly hectoring the provider groups leading ACOs, and becoming ever more aggressive in trying to force them as early and quickly as possible into downside risk in the Medicare Shared Savings Program (MSSP), even as several leading national value-based healthcare associations made clear their willingness to enter into ongoing, pitched battle with her over the terms of the MSSP.
Meanwhile, after having to overcome a three-month confirmation delay unrelated to her qualifications or even to her as an individual, Chiquita Brooks-LaSure was finally confirmed as CMS Administrator on May 25. From the very beginning, Brooks-LaSure made it clear that she was going to run CMS in a way absolutely opposite of how Verma had done so, without ever saying so explicitly. Brooks-LaSure already knew well how the agency worked; as the Wikipedia article on her notes, “She began her career as a program examiner and lead Medicaid analyst in the Office of Management and Budget. She also worked as a staffer for Democratic members of the United States House Committee on Ways and Means before joining the Center for Consumer Information and Insurance Oversight, where she was tasked with managing policy related to the Affordable Care Act. After the end of the Obama administration, Brooks-LaSure became the managing director of the Health Division of national law firm Manatt, Phelps & Phillips. She also served on the Virginia Health Benefit Exchange Advisory Committee.”
Early on, Brooks-LaSure made it clear that health equity would be a focus of CMS policies. For example, as Senior Contributing Editor David Raths wrote on July 2, “The Centers for Medicare & Medicaid Services (CMS) is proposing actions that aim to close health equity gaps by providing Medicare patients battling End-Stage Renal Disease (ESRD) with greater access to care, through the ESRD Prospective Payment System (PPS) annual rulemaking. This proposed rule would update ESRD PPS payment rates, make changes to the ESRD Quality Incentive Program (QIP), and modify the ESRD Treatment Choices (ETC) Model. The proposed changes to the ETC Model policies would aim to encourage dialysis providers to decrease disparities in rates of home dialysis and kidney transplants among ESRD patients with lower socioeconomic status, making the model the agency’s first CMS Innovation Center model to directly address health equity.”
In that article, Raths noted that, “According to CMS Office of Minority Health studies on racial, ethnic and socioeconomic factors, disadvantaged Medicare patients suffer from ESRD at higher rates. They are also more likely to experience higher hospital and costs, as well as receive in-center hemodialysis because their kidneys are no longer able to perform their function. Studies also indicate non-white ESRD patients are less likely to receive pre-ESRD kidney care, become waitlisted for a transplant or receive a kidney transplant.” And he quoted Brooks-LaSure’s statement that “Health equity is at the center of our work here at CMS,” said CMS Administrator Chiquita Brooks-LaSure, in a statement. “Today’s proposed rule is grounded in measures to ensure people with Medicare who suffer from chronic kidney disease have easy access to quality care and convenient treatment options. When CMS encourages dialysis providers to offer more options for Medicare patients to receive dialysis treatments, it can be life changing and lead to better health outcomes, greater autonomy and better quality of life for patients with kidney disease.”
But that was just a hint of what was to come. Brooks-LaSure, Fowler, and two other CMS colleagues, Meena Seshamani, M.D., Ph.D., and Daniel Tsai (whose titles are Deputy Administrator & Director, CMS, and Deputy Administrator and Director of Center for Medicaid and CHIP Services, respectively), authored an article in Health Affairs, published online on August 12, entitled “Innovation At The Centers For Medicare And Medicaid Services: A Vision For The Next 10 Years,” in which they laid out very explicitly a set of guiding principles that they would use to evolve CMS and CMMI forward in the coming decade.
In the article, the four officials wrote that, “After launching more than 50 alternative payment models that reward health care providers for delivering high-quality and cost-efficient care, the Innovation Center has learned a great deal and is ready to build a stronger and more sustainable path forward. Beneficiaries, providers, and other stakeholders are encouraged by the work of existing models and are calling on the Innovation Center to leverage those lessons. Don Berwick and Rick Gilfillan, a former leader of the Centers for Medicare and Medicaid Services (CMS) and an Innovation Center Director, respectively, recommended ways to connect the Innovation Center’s agenda to CMS’s and U.S. Department of Health and Human Services’s (HHS) goals for improving health and health care delivery; they also offered proposals to improve the Innovation Center’s model performance through, for example, changing the way Innovation Center models set payment and financial goals and measure quality. And MedPAC, a non-partisan legislative branch agency that provides the U.S. Congress with analysis and policy advice on the Medicare program, is considering draft recommendations related to the Innovation Center’s work that support a streamlined and more harmonized portfolio of models.”
Importantly, the four officials wrote that, “As now incoming leaders at CMS under a new administration, we have taken stock of lessons learned and begun to chart a path for the next ten years of value-based care. In undertaking this review, we concluded that we need a shared vision of the health system that we are collectively striving toward; we explicitly acknowledge health equity as a central goal for this vision. This focus aligns with President Biden’s day-one executive order charging each agency within the Administration to advance racial equity and justice for underserved communities.”
So here’s how the models have shaken out, as far as Brooks-LaSure and the other three CMS officials see it: “We learned something from every model launched to date,” they wrote in the August 12 blog. “So far, six models have generated statistically significant savings to taxpayers and Medicare: ACO Investment Model; Home Health Value-Based Purchasing Model; Medicare Care Choices Model; Maryland All-Payer Model; Pioneer ACO Model; and Repetitive, Prior Authorization of Repetitive, Scheduled Non-Emergent Ambulance Transport Model. Four models have met the requirements to be expanded in duration and scope: Home Health Value-Based Purchasing Model; Pioneer ACO Model; Repetitive, Prior Authorization of Repetitive, Scheduled Non-Emergent Ambulance Transport Model (expanded under MACRA, not section 1115A, authority); and Medicare Diabetes Prevention Program Expanded Model. The Innovation Center’s models span efforts to coordinate care for patients across care settings, such as through Accountable Care Organizations (ACOs); disease-specific approaches to improve care for people with kidney disease, cancer, and diabetes; and approaches that try to address social determinants of health, such as Accountable Health Communities. Providers have risen to the challenge and participated throughout the Innovation Center’s evolution, from grant-based models to sophisticated total-cost-of-care models with shared financial risk.”
Very significantly, the four CMS officials laid out a very explicit core principle, to whit: “The Innovation Center [CMMI] should make equity a centerpiece of every model. Models to date have been largely Medicare-oriented, and voluntary models have primarily drawn only those health care providers and organizations with resources and capital to apply and participate, resulting in limited attention to Medicaid and safety net providers. From here on, the Innovation Center will embed equity in every aspect of its models by seeking to include more providers serving low- and modest-income, racially diverse, and/or rural populations; the Innovation Center will aim to ensure everyone has access to providers at the leading edge of transformation.”
And, identifying their second key takeaway, they wrote that “Offering too many models is overly complex, particularly when models overlap. The Innovation Center has launched over 50 models since its inception and is currently running 28 models concurrently. Testing too many models at once can create opposing, even conflicting incentives and burden model participants with figuring out the model hierarchies and interactions. Ultimately, this not only makes decisions about joining or continuing to participate in models difficult but also stymies systemic, scalable transformation.”
And, at least equally importantly, they added that “Providers find it challenging to accept downside risk if they do not have tools to enable and empower changes in care delivery. The Innovation Center should ensure providers have options for manageable levels of risk as well as what they need to take on more risk, such as waivers, support in transforming care (particularly for vulnerable populations), and data. This will require the Innovation Center to provide strong, consistent signals and expectations about where CMS is heading in value-based care.” And, “Challenges in setting financial benchmarks have undermined our models’ effectiveness. To address these technical issues, the Innovation Center is evaluating options to ensure models are not resulting in overpayment and exploring opportunities to improve or replace the current risk adjustment methodology.”
As I wrote in an August 26 blog, “So, yes: there’s a new sheriff in town, or rather, a whole new sheriff's posse. What’s clear is that Verma, Fowler, and their fellow officials at CMS and CMMI, have developed a strong, clear, conceptually consistent rationale for policy development in the APM space, and that they plan to follow through on that rationale, as they rationalize the value-based programs at CMS/CMMI. Expect them to move relatively quickly and decisively. Time for a new map to this new value-based policy world.”
The core set of challenges that CMS and CMMI officials will face in the short and medium term has to do with the COVID-19 pandemic, which is wreaking havoc on hospital and health system finances right now. As I wrote on December 1, “The multiple impacts of the COVID-19 pandemic continue to hammer U.S. hospitals and health systems, a just-published report from the Chicago-based Kaufman Hall consulting firm has found. On Tuesday, Nov. 30, Kaufman Hall industry analysts reported that “U.S. hospitals and health systems were hit with a second consecutive month of margin declines in October as mounting labor expenses continue to weigh down overall hospital performance, according to the November issue of Kaufman Hall’s ‘National Hospital Flash Report.’ The margin declines in October came even as pressures from treating high levels of serious COVID-19 cases eased. And with cases and related hospitalizations on the rise in recent weeks—coupled with the uncertainties of the newly emerging Omicron variant—the future outlook for hospitals remains uncertain,” the press release announcing the publication of the report, said.”
In other words, at a time when finances are deeply insecure, it remains to be seen how rapidly hospital and health system leaders will be in the coming year to move ahead into risk-based contracting, at a time of real instability. There’s no question that Administrator Brooks-LaSure, Director Fowler, and their colleagues at CMS and CMMI understand that. Yet at the same time, the leaders of physician groups continue to forge ahead, with those most in the lead in terms of taking on risk, pointing out that, during the huge downturn early on in the pandemic in the spring and summer of 2020, those medical groups with the highest level of capitated payment, did relatively quite well during the four-plus months when in-person care delivery had been reduced to a minimum, as they were able to rely strongly on per-member-per-month reimbursement, at a time when their fee-for-service-heavy brethren were experiencing massive losses.
Indeed, the leaders of some of the most innovative nationwide associations have been pushing back on pushback against some forms of alternative reimbursement.
“Family fight”
As I wrote on December 17, “Don Crane, in an opening presentation at the APG [America’s Physician Groups] annual meeting, held Dec. 9-11 in San Diego, and entitled “Emerging from the Pandemic: The Path Forward,” gave an impassioned defense of the value-based contracting in which APG member physician groups are involved, and tilted directly at the charges lodged against certain types of value-based contracting” by Donald M. Berwick, M.D., and Richard Gilfillan, M.D. Those two prominent physician leaders had written an absolutely scathing blog in the Health Affairs Blog on September 30, entitled “Medicare Advantage, Direct Contracting, And The Medicare ‘Money Machine,’ Part 2: Building On The ACO Model,” in which they essentially accused the Medicare Advantage program of being a “gold rush” for greedy health plans and providers, and derided the new Medicare Direct Contracting program. Drs. Berwick and Gilfillan did not hold back in any way. They made it clear that they believe that Medicare Advantage must be completely ended—even though MA not only provides care management for tens of millions of Medicare beneficiaries; it is also the single biggest federally sponsored program facilitating innovation in healthcare delivery right now.
As Crane said with great passion in his voice on December 9 in San Diego, addressing fellow APG leaders, “There isn’t a person in this room who doesn’t know how important primary care is, when 80 to 90 percent of the spend in America is for seniors and others with multiple chronic diseases; that is the domain principally of primary care. We saw that really clearly during the pandemic, where all of a sudden primary care shriveled in fee-for-service models, as it thrived in capitated models. So we need to triple down on those kinds of models that promote and support primary care, unless we want it to shrivel and die. So any kind of recommendation that would thwart these APMs that are calling for capitation, would be very much backwardizing, in our opinion.” He further argued directly that Drs. Berwick’s and Gilfillan’s assertion that “you get rich by upcoding,” is simply not correct. “That is not the business that my members are in. They all manage now, in one way or another, the total cost of care. And that’s where the profit lies, I’ll just say it; but it’s also where the Triple Aim lies. So they got that wrong. They have an inadequate appreciation of that,” he said.
And, most importantly per Medicare Advantage, Crane said clearly, “[E]viscerating MA will severely damage the value movement. So it was frankly fascinating to listen to Don and Rick talk during our board meeting a number of weeks ago, when it was shocking, but clear at least to me, that they didn’t have a complete understanding of the importance of MA, particularly as we’ve seen it grow up in California, but also in Texas and Florida, and now in every state of the union. It is MA that is the backbone of the value movement. It is capitated, it is closed-network, it is value-based; not perfect, because there’s a lot of fee-for-service and sort-of-watered-down MA that we’d like to talk more about. But in the main, MA is the launchpad and the laboratory for value. It is what enables groups to get their chops down, and then transfer those competencies into commercial and then Medicaid. If you eviscerate MA, you will really retard the value movement’s progress.”
Certainly, value-based contracting continues forward. As the Washington, D.C.-based NAACOS (National Association of ACOs) reported in October, “Accountable care organizations (ACOs) in the Next Generation (Next Gen) ACO Model, Medicare's most advanced, greatest risk-taking ACO program collectively saved Medicare $637 million last year, according to 2020 performance data made public today. Importantly, these 37 ACOs also hit an average quality score of 96.5 percent out of a perfect score of 100, improving care for 1.1 million seniors. After accounting for shared savings paid to ACOs for holding down costs and hitting quality targets as well as shared losses and discounts paid to the government, the Next Gen program netted $230 million to Medicare in 2020 alone. By comparison, Next Gen ACOs saved Medicare $519 million in 2019 and netted $194 million after shared savings and losses. Next Gen ACOs have increased savings every year of the program. Since 2016, Next Gens collectively saved more than $1.66 billion in gross savings and $836 million in net savings.” In other words, as NAACOS’s leaders pointed out in October, patient care organization leaders are learning how to do value-based care—and, of course, they believe that they should continue to be allowed to innovate, at a pace that they can handle. How Chiquita Brooks-LaSure, Liz Fowler, and their colleagues at CMS and CMMI handle this tricky moment will be fascinating. Seema Verma never seemed to be able to balance out the tension between her market-driven ideology and her insistence that providers take on downside risk as rapidly and as robustly as possible. Will LaSure et al find a better balance amid all the competing interests and challenges?
In any case, it is in this overall context that the value-based care delivery and payment movement is evolving forward, at the end of 2021—in a landscape of instability and uncertainty, with some internecine battles fracturing the advocates of value-based payment. In that regard, 2022 is going to be extremely interesting. But, with the Medicare actuaries announcing on December 15 that overall U.S. healthcare spending is surging healthcare system-wide, there’s no turning back, whatever the obstacles. As the actuaries reported on the 15th in an article published online in Health Affairs, ““US health care spending increased 9.7 percent to reach $4.1 trillion in 2020, a much faster rate than the 4.3 percent increase seen in 2019. The acceleration in 2020 was due to a 36.0 percent increase in federal expenditures for health care that occurred largely in response to the COVID-19 pandemic. At the same time, gross domestic product declined 2.2 percent, and the share of the economy devoted to health care spending spiked, reaching 19.7 percent. In 2020 the number of uninsured people fell, while at the same time there were significant shifts in types of coverage.”
The bottom line? Those eye-popping numbers guarantee that value-based, including risk-based, healthcare delivery and payment must evolve forward in 2022 and beyond; as a healthcare system, we really have no choice. So, stay tuned: this is a saga with many chapters and episodes. And there is much, much more to come.
