As the U.S. healthcare system transitions towards value-based care and payment, it is crucial that healthcare professionals, including general internists, understand alternative models of care and payment and their potential impact on the medical care of patients and on practice workflow. This article will describe the evolution of value- and population-based payments, the concept behind these alternative payment models, and how general internists can shape the payment policy that will influence the future practice of medicine.
Evolution of Value- and Population-based Payments
Historically, physicians have been reimbursed under a fee-for-service (FFS) system per encounter, in cash or kind. The evolution of population-based payments in the United States began during the Great Depression. In the 1930s, industrialist Henry Kaiser paid Dr. Sidney Garfield prospective premiums and a monthly rate per employee to provide medical care to construction workers experiencing workplace injuries at his construction sites. Around the same time, Baylor University in Texas initiated the Blue Cross program as an incentive for teachers, allowing them to enroll in a prepaid plan to cover hospitalizations. Both programs expanded their services to the public in subsequent years and continue to be a meaningful influence on health care today.
The call to hold providers accountable for patient outcomes started to echo in policy corridors a few decades ago as the United States grappled with steeply rising costs of the Medicare program, inefficiencies of its healthcare system, and calculations predicting near-future insolvency of the Medicare trust fund. The accountability efforts began with the Health Maintenance Organization (HMO) Act of 1973 that promoted prepaid group practice service plans (HMOs) and found support in the Patient Protection and Affordable Care Act (ACA) of 2010, aiming to move Medicare away from FFS payments towards value- and population-based payments. The creation of the Center for Medicare and Medicaid Innovation under the ACA enabled the Centers for Medicare and Medicaid Services (CMS) to test innovative models of care and payment with the goal of expanding the models that demonstrate improvement in clinical outcomes and cost. While these efforts have been stalled by the COVID-19 pandemic, the transition to alternative models of payment will likely accelerate in the coming years.
The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) created the Quality Payment Program (QPP) to allow CMS to initiate alternative payments under two models—the Merit Based Incentive Payments System (MIPS) and the Advanced Alternative Payment Models (APMs). MIPS was developed for FFS practices, linking adjustments in physician payments to performance on quality metrics, and allowing practices to gradually transition to population-based payments. The Advanced APMs allow practices to be testing sites for innovative CMS models or to bear financial risk for quality of care. The theme common to both programs is tying payments to quality metrics while holding healthcare providers responsible for outcomes.
Alternative Payment Models
We describe two major categories of APMs implemented by CMS of interest to general internists and primary care disciplines as follows:
Value-Based Purchasing (VBP) Program
In this model, the quality of care in a healthcare practice is compared to national standards based on quality metrics. A part of Medicare’s reimbursements to the practice are held back, to be paid later as incentive payments if the practice achieves or shows improvement in scores on quality metrics relative to benchmarks. However, if performance falls below the set benchmarks, the practice may experience financial penalties. CMS has implemented VBP programs in a few healthcare settings nationally, including hospitals (e.g., hospital VBP, Medicare’s Hospital Readmission Reduction Program, Hospital-Acquired Condition Reduction Program), Skilled Nursing Facilities, and Home Health Care settings.
Medicare Shared Savings Program (MSSP)
MSSP is the largest APM from CMS, reaching 11 million Medicare beneficiaries, and is a permanent part of the Medicare program. This payment strategy offers Accountable Care Organization (ACO) participating providers a percentage of net savings in return for their efforts to reduce healthcare spending for their patient population. To be eligible for MSSP, an ACO must accept full responsibility for the care of at least 5,000 patients for at least 5 years. There are five tracks with variable levels of shared savings and financial risk. CMS pays ACO-participating healthcare providers using customary FFS payment systems but reconciles the ACO’s spending benchmark with their actual average spending at the end of the year. If the ACO’s actual average spending per patient is lower than the spending benchmark, CMS pays the ACO a percentage of the generated savings. In two-sided risk models, if an ACO’s actual spending is higher than the benchmark, it pays back the CMS a percentage of the losses.
Highlights of Alternative Payments
Payer and Patient-level Outcomes
Six of the 21 models tested by CMS, including ACO and surgical bundle models, demonstrated net savings by reducing inpatient hospitalizations and utilization of post-acute care services. Four models demonstrated improvement in mortality by incorporating value-based payments for End Stage Renal Disease care and preventative services for cardiovascular disease, global payments to hospitals (in Maryland), and Home Health VBP.1 Among private insurers, Blue Cross Blue Shield of Massachusetts Alternative Quality Contract demonstrated net saving on claims in later years.
Concerns Related to Health Equity
Besides peer grouping, the current value-based models do not adjust payments based on social determinants of health (e.g., housing or food insecurity) or clinical risk factors (such as frailty, functional decline, etc.) of the beneficiaries. Therefore, the existent quality metrics and risk adjustment calculations penalize healthcare systems2, 3 which provide care to medically and socially complex patients. Analysis of CMS’s bundled payment program has raised concerns about the widening of health disparities in access to joint replacement procedures among African American beneficiaries.4 To address these concerns, CMS plans to roll out its “ACO-REACH” model in year 2023, which aims to test innovative payment models to support delivery of care for Medicare patients in underserved communities.
How Internists Can Get a Seat at the Policy Table
Internists and other primary care clinicians bring valuable insights into studying models of payments and the quality metrics that dictate medical care of their patients and grade their performance. There is need for studying the impact of the models on quality-of-life and clinically meaningful outcomes of patients with complex medical and social needs. Additionally, metrics related to the well-being of the healthcare workforce including healthcare provider burnout, administrative costs to practices, and hours spent by healthcare providers in administrative tasks, should be included in analyses of these models of payment.
Advocacy and Professional Development
To ensure that the valuable perspective of internists regarding the challenges in provision of medical care is transmitted to health policymakers, internists should consider getting involved in health policy initiatives at regional and national levels. The following is a list of a few professional development resources for medical students, residents, and clinicians:
- Society of General Internal Medicine’s Leadership in Health Policy Program
- Courses in health law and policy at local law schools
- Health Policy Fellowships (e.g., Health and Aging Policy Fellows Program, Robert Wood Johnson Foundation Health Policy Fellows Program)
- American College of Physician Health Policy Internship Program
To begin your journey in the health policy world, the following are a few options:
- American College of Physicians’ Advocates for Internal Medicine Network
- A regional council relevant to your policy interest (e.g., State Council on Aging, State Council on Substance Abuse)
- Academic society’s health policy committee (e.g., SGIM Health Policy Committee)
As models of payment in the United States evolve towards value-based payments, General Internists and Primary Care clinicians should be knowledgeable about and work to influence development of these models to ensure that the outcomes prioritized are in line with what matters most to their patients.
- Synthesis of evaluation results across 21 Medicare Models 2012-2020. CMS. https://innovation.cms.gov/data-and-reports/2022/wp-eval-synthesis-21models-aag. Accessed January 15, 2023.
- Wadhera RK, Vaduganathan M, Jiang GY, et al. Performance in federal value-based programs of hospitals recognized by the American Heart Association and American College of Cardiology for high-quality heart failure and acute myocardial infarction care. JAMA Cardiol. May 1 2020;5(5):515-521. doi:10.1001/jamacardio.2020.0001.
- Burke RE, Xu Y, Rose L. Skilled nursing facility performance and readmission rates under value-based purchasing. JAMA Netw Open. Feb 1 2022;5(2):e220721. doi:10.1001/jamanetworkopen.2022.0721.
- Kim H, Meath THA, Quinones AR, et al. Association of Medicare mandatory bundled payment program with the receipt of elective hip and knee replacement in white, black, and hispanic beneficiaries. JAMA Netw Open. Mar 1 2021;4(3):e211772. doi:10.1001/jamanetworkopen.2021.1772.
Advocacy, Clinical Practice, Health Policy & Advocacy, Medical Education, Research, SGIM
Dr. Syed (email@example.com) is an advanced fellow in Geriatrics at the Birmingham/Atlanta VA Geriatric Research, Education, and Clinical Center (GRECC) in Atlanta, GA. Dr. Turbow (firstname.lastname@example.org) is an associate professor of medicine and preventive medicine at Emory University School of Medicine in Atlanta, GA. Dr. Vaughan (email@example.com) is Atlanta Site Director for the Birmingham-Atlanta GRECC and an associate professor of medicine at Emory University School of Medicine in Atlanta, GA.
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