The Benefits of Implementing Alternative Payment Models in Medicare

Physicians and patients want to transition from fee-for-service payment systems that incentivize high volume and low quality to a value-based system. APMs offer the potential to reduce wasteful inefficiencies and health disparities while better stewarding taxpayer dollars. However, voluntary participation in APMs is often limited by their complexity and the allure of traditional fee-for-service. 


Increased Patient Satisfaction

The shift to value-based care is changing how payers pay physicians and impacting patient satisfaction. Patients can now make informed decisions about their care, which helps them feel more engaged with their healthcare providers. This, in turn, leads to better patient outcomes and satisfaction.

Physicians participating in APM in healthcare may be rewarded for providing high-quality and cost-efficient care. However, they must take accountability for implementing the changes, considering the models are designed to support them. 

The high costs of healthcare combined with the looming insolvency of Medicare’s trust fund require a greater focus on spreading the use of APMs. While bundled payment models have produced modest per-episode savings for certain procedures, like joint replacement, they have not yet demonstrated significant improvements in health equity or other important outcomes.


Increased Quality

Traditional payment methods have prevented physicians from delivering the care that individual patients need most effectively. As a result, quality could be better. But, well-designed alternative payment models can benefit patients and the healthcare system enormously.

Physician-focused APMs can move patients away from fee-for-service and toward value-based payments. But for APMs to succeed, CMS must articulate a strategic vision and create clear paths to implementation for all publicly financed health care, driving change beyond Medicare. The agency also must speed up the transition from upside-only shared savings to risk-bearing APMs and expand the use of bundled payments.


Reduced Cost

Physicians and purchasers have moved away from fee-for-service incentives toward value-oriented payment in response to spiraling healthcare costs. However, a decade of experimentation has produced only modest savings and quality gains. Medicare needs to increase participation in advanced forms of these models to address growing deficits and the threat to future generations.

Some models can be bolstered to improve their impact on health equity, for example, by requiring participants to screen for social risk factors, track them in electronic health records, and provide services to address them. To achieve the full potential of these models, Medicare and other public payers should coordinate their financial designs, reduce the burden on clinicians by reducing add-on fees, and accelerate a move to risk-bearing APMs that replace fee-for-service arrangements.


Increased Revenue

New reimbursement structures shift payments away from volume-based pay-for-service toward outcomes-based payment.

The most prominent examples include:

  • Accountable care organizations (ACOs).
  • Bundled payment models for specific clinical conditions and procedures.
  • Population-based capitated payment models that reward entities for managing the cost and quality of a defined patient population.

However, the extensive complexity of the current value-based payment landscape discourages participation. It has also encouraged some providers to chase small pools of shared savings rather than systematically transform their practices.

To move the nation further into a value-based healthcare system, CMS must articulate a bold strategic vision for the U.S. healthcare system and a public path for executing that vision, including more advanced APMs. This must include a clear roadmap for moving away from the flawed fee-for-service model to deliver high-quality care at lower costs.