Alternative Payment Models

In recent years, policymakers and payers have implemented alternative payment models (APMs) to incentivize improvements in value and experimented with different designs. RAND Health Care evaluated whether these changes are driving quality improvements. The work showed that value-based payment arrangements are driving changes in the way provider organizations deliver care. However, most of the investment has happened in hospital cost control, and physician payment incentives in general remain small and less likely to drive change.

Accountable Care Organizations and Primary Care Medical Homes are attempts to transform both delivery and payment. The success of pilot models are still being evaluated. An evaluation of a large-scale attempt to transform federally qualified health centers into medical homes found that this change was associated with increased access and improved primary care for Medicare beneficiaries, but also with higher spending and utilization.

In 2015, Congress enacted a major change in the way Medicare rewards physicians. MACRA (the Medicare Access and CHIP Reauthorization Act) created the Quality Payment Program, which allows clinicians to opt in to a payment model that rewards delivering for value over volume. RAND analysis found that MACRA will reduce Medicare costs and cut spending on physician services. Exact spending effects, however, depend critically on the specific incentives embedded in APMs.

RAND analysis showed that APMs, however, have had unintended consequences. Physician practices, health systems, and consultants find it difficult to keep up with pace and proliferation of new models, with some calling for a "time out" to allow them to adapt to current APMs. The accelerating growth of APMs has also increased risk aversion, leading practices to offload downside risk to partners, such as hospitals and device manufacturers.