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January 3, 2024
David Burda
Economics Outcomes System Dynamics

Catching Up on Alternative Payment Models

I couldn’t remember off the top of my head what I was doing Monday, Oct. 30, 2023, so I looked at my at-a-glance monthly planner. My oldest son started his first full-time job, so I wished him good luck before he started. I interviewed a healthcare supply chain expert. I had a weekly status call.

Nowhere on my monthly planner was I checking to see if the Health Care Payment Learning & Action Network (HCPLAN) released its latest report. I suppose I should have been looking for it — the data includes information on the industry’s transition from fee-for-service to alternative payment models (FFS to APM), where providers are paid based on outcomes rather than the type and volume of services performed.

I forgot to put the report on my calendar but as it turns out, I didn’t miss much. HCPLAN’s latest annual report, released Oct. 30, 2023, is another reminder that the transition to APMs has stalled out.

Many consider HCPLAN’s annual report as the gold standard for measuring the transition to APMs. It breaks down payment models into four categories, starting at no risk and escalating to full risk reimbursement:

  • Category 1: Fee-for-service with no link to quality and/or value.
  • Category 2: Fee-for-service with a link to quality and/or value (with three subcategories).
  • Category 3: APMs built on a fee-for-service architecture (with two subcategories).
  • Category 4: Population-based payment (with three subcategories).

HCPLAN uses contract data from public and private health plans to monitor how many contracts and payments to providers fall into each of the four categories and subcategories. The 2023 report is based on 2022 contract data from 64 commercial health plans, four fee-for-service state Medicaid plans and traditional Medicare, covering about 264 million people in the commercial, Medicare Advantage, Medicaid and traditional Medicare markets, per the report.

Comparing calendar year 2022 with calendar year 2021, here’s what HCPLAN said in its latest report:

  • 40.6% of all payments in 2022 were in Category 1, virtually unchanged from 40.5% in 2021.
  • 18.1% of all payments in 2022 were in Category 2, down from 19.5% in 2021.
  • 31.7% of all payments in 2022 were in Category 3, down from 32.6% in 2021.
  • 9.6% of all payments in 2022 were in Category 4, up from 7.4% in 2021.

Basically, FFS went unchanged with the slight falls in low-risk categories adding up to a slight rise in the highest-risk category. Not exactly a ground-shaking, positive change for consumers.

Other recent studies and reports on the transition to APMs elicited similar yawns. For example, you can read about an American Journal of Managed Care study in “US Healthcare Continues to Be Risk Adverse.” You can read about an American Medical Association report in “Physician Participation in APMs Is Like Eating Cauliflower.”

Taken together with the HCPLAN report, it’s quite a body of evidence that suggests APMs aren’t going anywhere fast.

Yet, hope springs eternal. The HCPLAN report includes the results of a survey of health plans conducted by AHIP, the health insurance trade group, and the Blue Cross Blue Shield Association, which represents Blues plans. Seventy-two percent of surveyed plans said they think provider payments flowing through APMs will increase compared with 20% that said they’ll stay the same or decrease. Seven percent either didn’t respond or said they didn’t know.

I’ve already got Oct. 30 circled on my 2024 planner.

Thanks for reading.

About the Author

David Burda

David Burda began covering healthcare in 1983 and hasn’t stopped since. Dave writes this monthly column “Burda on Healthcare,” contributes weekly blog posts, manages our weekly newsletter 4sight Friday, and hosts our weekly Roundup podcast. Dave believes that healthcare is a business like any other business, and customers — patients — are king. If you do what’s right for patients, good business results will follow.

Dave’s personnel experiences with the healthcare system both as a patient and family caregiver have shaped his point of view. It’s also been shaped by covering the industry for 40 years as a reporter and editor. He worked at Modern Healthcare for 25 years, the last 11 as editor.

Prior to Modern Healthcare, he did stints at the American Medical Record Association (now AHIMA) and the American Hospital Association. After Modern Healthcare, he wrote a monthly column for Twin Cities Business explaining healthcare trends to a business audience, and he developed and executed content marketing plans for leading healthcare corporations as the editorial director for healthcare strategies at MSP Communications.

When he’s not reading and writing about healthcare, Dave spends his time riding the trails of DuPage County, IL, on his bike, tending his vegetable garden and daydreaming about being a lobster fisherman in Maine. He lives in Wheaton, IL, with his lovely wife of 40 years and his three children, none of whom want to be journalists or lobster fishermen.

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