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4 New Alternative Payment Models Every Healthcare Provider Must Know

As we enter a new political landscape, much remains uncertain on the health policy agenda. However, one trend that seems likely to continue is value-based care, including the transition to alternative payment models (APMs).

APMs are one of the few generally supported ideas for pushing health care forward. They are designed to divert away from the unreasonable incentives connected to current payment-for-service systems and toward resident-centered health care.

Created in the 1960s, the Medicare fee-for-payment model tailored to therapy services centers instead of residents—and focused on sickness over preventive care.

APM models such as accountable care organizations, bundled payments, episode-based payment, and value-based purchasing align reimbursement around the resident and focus on coordinated, interdisciplinary care and improved outcomes.

An example: A study by the Centers for Medicare & Medicaid Services showed that accountable care organization initiatives put residents at the center of their care, while generating more than $1.29 billion in total Medicare savings since 2012.

Skilled Nursing Facilities across the country have

already made considerable investments to implement alternative payment models and are seeing positive returns, especially for long-term care residents.

Let’s take a closer look at these alternative payment models:

Accountable Care Organizations

Accountable care organizations are groups of doctors, hospitals, and long-term care facilities that come together to voluntarily give coordinated high-quality care to their patients/residents in hopes of limiting unnecessary spending. At the heart of each resident’s care is a primary care physician.

Accountable care organizations create an incentive for efficiency by offering bonuses when providers keep costs down. Skilled Nursing Facilities have to meet specific quality benchmarks, focusing on prevention and carefully managing residents with chronic diseases. Essentially, providers get paid more for keeping their residents healthy and out of the hospital.

Bundled Payments

Bundled payments align incentives for providers—hospitals, Skilled Nursing Facilities, physicians, and other practitioners—allowing them to work closely

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Accountable Care Organizations Seventy-five percent of healthcare providers participate in at least one type of value-based payment model, according to a report from Availity, a revenue cycle management and business solutions provider.

Bundled Payments More than 80 percent of providers implementing bundling payments report improved patient engagement and increased alignment with physicians. They also report decreased administrative costs. Almost half—40 percent—of healthcare providers using bundled payments achieved a 5 percent or more savings since 2014.

Episode-Based Payment By encouraging healthcare providers to improve care transitions and patient monitoring after discharge, episode-based payment can lower mortality rates and 30-day readmission rates, leading to cost reduction. An episode-based payment model can help healthcare providers save $170 million in the first five years of implementation.

Value-Based PurchasingIt is estimated that by early 2017, 85 percent of all Medicare fee-for-service payments will be tied to quality or value-based care, increasing to 90 percent by the end of 2018.

together across all specialties and settings. Under bundled payments, organizations enter into payment arrangements that include financial and performance accountability for episodes of care.

For example, if a patient undergoes surgery, payers would traditionally reimburse the hospital, surgeon, and anesthesiologist separately for their part in the treatment. Through a bundled payment model, the payer would collectively reimburse the providers involved, using a set price for the episode of care, which is usually based on historical costs.

Providers who exceed the pre-arranged reimburse-ment for the episode bear the financial responsibility for overages. This is intended to encourage standard-ized, cost-effective care decisions and can lead to higher-quality and more coordinated care.

Episode-Based Payment

Episode-based payments cover all the care a resident receives in the course of treatment for a specific illness, condition, or medical event. Episodes of care for which a single bundled payment can be made include all care for a particular illness.

Savings can be realized in three ways:

• By negotiating a payment so the total cost will be less than fee-for-service

• By agreeing with providers that any savings that arise because total expenditures under episode-of-care payment are less than they would have been under fee-for-service will be shared between the payer and providers

• From savings that arise because no additional payments will be made for the cost of treating complications of long-term care, as would normally be the case under fee-for-service

Value-Based Purchasing

Value-based purchasing is a strategy that measures, reports, and rewards excellence in long-term care delivery.

Effective therapy care service providers are rewarded with improved reputations through public reporting, enhanced payments through differential reimburse-ments, and increased market share through purchaser, payer, and/or consumer selection.

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Sources: Centers for Medicare & Medicaid Services, Becker’s Hospital Review, PwC Global, the JAMA Network

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75%

80%

85%

170million

$

Alternative Payment Models by the Numbers

Value-based purchasing programs are designed to make the Skilled Nursing Facility experience better for residents and provide better long-term care. They encourage long-term care providers to improve quality and safety for residents by:

• Eliminating or reducing adverse events (health care errors resulting in resident harm)

• Adopting evidence-based care standards and protocols that make the best outcomes for the most residents

• Changing Skilled Nursing Facility processes to make resident care experiences better

• Increasing care transparency for consumers

• Recognizing Skilled Nursing Facilities that give high-quality care at a lower cost to Medicare

Participating providers are paid based on the quality of care they provide, not the quantity of services they provide, in a given performance period.

Healthcare providers are gauged on measures of outcome such as:

• Mortality and complications

• Healthcare-associated infections

• Patient safety

• Patient experience

• Process

• Efficiency and cost reduction

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