1. William E. Kobler, MD September 18, 2015 Alternative Payment Models: The Role of the AMA in their Development and Implementation

2. Market Context 2

3. © 2015 American Medical Association. All rights reserved. Delivery & Payment: Summary of Current State –Benefit design imposing greater costs on patients –Provider/site of delivery silos –Fee schedule/RVUs drive payments –Lack of rewards for reducing total costs –Mounting administrative burdens & costs –Performance measures 1.0 : physician & payer dissatisfaction –Providers treating vulnerable populations are penalized –Referrals driven by physician relationships 3

4. © 2015 American Medical Association. All rights reserved. Delivery & Payment: Future State –Heightened patient cost sensitivity –Greater integration across sites of care –Enhanced patient engagement –Payment incentives shift from per service to total cost of care-----shared savings –Leverage shift in payment fundamentals to reduce reporting burdens –Performance measures 2.0: leaner, less reporting burden (EHRs/registries), more outcomes focused –Better risk adjustments for serving vulnerable populations –Drive to maximize care in network & manage referrals will leave some physicians isolated 4

5. AMA/Rand Research 5

6. © 2015 American Medical Association. All rights reserved. Data collection primarily via semi-structured interviews Market context interviewees –Medical societies –MGMA chapters –Hospitals with significant market share –Health plans with significant market share Physician practice interviewees in 34 practices –with non-physician practice leaders –with physician practice leaders –with physicians who did not have practice leadership roles 6

7. © 2015 American Medical Association. All rights reserved. AMA/Rand “Effects of Health Care Payment Models on Physician Practice in the United States” AMA/Rand “Effects of Health Care Payment Models on Physician Practice in the United States” New Physician Payment Models A proliferation of new payment models impacting physician practices… –Global payment (a.k.a., capitation) –Shared savings (e.g., ACO) –Medical home –Bundled payments …How these practices are reacting remains a black box 7 Payment models Physician practices Patient care –Hospital-physician gainsharing –Pay-for-performance –Subscription/retainer models

8. © 2015 American Medical Association. All rights reserved. High levels of concordance across various practice and respondent types on the impacts of alternative payment models on physician practices was striking At the organizational level, alternative payment models have… …encouraged practices to consider merging or become affiliated with large provider or hospital organizations …encouraged practices to develop team approaches to care management and new modes of patient access to care. Relationships between physicians (e.g., referral patterns) have changed. …increased the importance of data and data analysis, highlighting data deficiencies and inaccuracies …conflicted with each other and with government regulations, complicating practices’ abilities to respond in a constructive manner Key Findings of Study 8

9. © 2015 American Medical Association. All rights reserved. At the individual physician level, alternative payment models have… …not been passed through to individual physicians without significant alteration by practices. Instead, practices applied non-financial incentives and interventions to encourage cost containment. …not changed physicians’ core clinical activities but have increased non-clinical activities (e.g., documentation) as well as the overall quantity and intensity of work. Physicians in leadership positions were more enthusiastic about these changes than physicians not in leadership positions. Features of payment model implementation –Problems in data integrity and timeliness, errors in payment model execution (including inaccurate measure specification and patient attribution), incomprehensible incentives, and concerns about measure validity. Key Findings of Study, continued 9

10. © 2015 American Medical Association. All rights reserved. Implications Physician practices need support and guidance to optimize the quantity and content of physician work under alternative payment models Challenge: manage multiple simultaneous changes without burning out physicians Addressing physicians’ concerns about the operational details of alternative payment models could improve their effectiveness To succeed in alternative payment models, physician practices need data and resources for data management and analysis Harmonizing key components of alternative payment models, especially performance measures, would help physician practices respond constructively 10

11. MACRA Implementation 11

12. © 2015 American Medical Association. All rights reserved. MACRA overview P.L. 114-10 (H.R. 2) the Medicare Access and CHIP Reauthorization Act of 2015 Developed in bipartisan, bicameral process over 2+ years Supported by over 750 national and state-based physician organizations Passed House of Representatives March 26, 392-37 Passed Senate April 14, 92-8 Permanently eliminates the SGR, which has been producing Medicare physician payment cuts annually since 2002 12

13. © 2015 American Medical Association. All rights reserved. The Merit-based Incentive Payment System: General Structure Consolidates three current incentive programs and adds one –PQRS = 50% in 2019; 45% in 2020; 30% 2021 onward –Resources (VBM) = 10% in 2019; 15% in 2020; 30% 2021 on –MU = 25% but could drop to 15% if 75% qualify –New Clinical Practice Improvement (CPI) section = 15% Secretary can modify the percentages to fit a specialty Starts in 2019 but may be based on 2017 performance Will incorporate many measures from current programs Excludes physicians in qualified or partially qualified APMs Practices with low Medicare volume also excluded 13

14. © 2015 American Medical Association. All rights reserved. Current LawH.R. 2 PL 114-10 YearMax P4P Penalties Max P4P Bonuses UpdateSequesterMax P4P Penalties Max P4P Bonuses Update 2014-2%1.5%0.5%-2%No change 0.5% 2015-4.5%VBM (2015 was 4.89%) -21%-2%No change 0.5% on 7- 15 2016-6%VBM-2%No change 0.5% 2017-9% or moreVBM-2%No change 0.5% 2018-10% or moreVBM-2%No change 0.5% 2019-11% or moreVBM-2%-4%4% (x3?) +10*0.5% 2020-11% or moreVBM-2%-5%5% (x3?) +10*0% 2021-11% or moreVBM-2%-7%7% (x3?) +10*0% 2022-11% or moreVBM-2% (thru 2023) -9%9% (x3?) +10*0% FFS Penalty Risks, Bonuses, Updates Compared Top bonus could triple if many physicians get penalties and extra $ are available to increase bonuses. Exceptional Performers could earn another 10% funded with $500m a year in new money. +4.89 VBM 2015 bonus 14

15. © 2015 American Medical Association. All rights reserved. Alternative Payment Models (APMs) provisions in MACRA In 2019 through 2024, physicians participating in APMs receive annual lump sum bonus payments equal to 5% of their covered Medicare professional services –Bonus is on top of regular payment updates for all physician services –Bonus also on top of any extra revenue received from APM (e.g., monthly per- patient payments or shared savings) –Beginning in 2026, APM physicians receive annual updates of 0.75%, vs. 0.25% for all physicians To be eligible for these payments, physicians’ level of participation in the qualified APMs must reach certain threshold levels –Starts with 25% of revenues or patients in 2019-20; grows to 75% by 2023 –Physicians who are close to these thresholds can “partially qualify” 15

16. © 2015 American Medical Association. All rights reserved. APMs include Medicare Shared Savings Program ACOs, all CMS Innovation Center initiatives except Health Care Innovation awards, and certain demonstration programs –Physicians participating in patient-centered medical homes authorized by CMMI do not need to bear financial risk Threshold levels may be met either through Medicare APMs alone or in combination with other payers’ APMs Alternative Payment Models (APMs) provisions in MACRA 16

17. © 2015 American Medical Association. All rights reserved. Payment Updates for Physicians in APMs For 6 years, physicians who meet threshold participation levels are eligible for lump sum bonuses of 5% –5% is on top of the regular payment updates for all physician services –5% is also on top of any extra revenue the physician receives from the APM, such as savings achieved or monthly per-patient payments Beginning in 2026, physicians in APMs receive annual payment updates of 0.75% whereas other physicians receive payment updates of 0.25% 17

18. © 2015 American Medical Association. All rights reserved. MACRA Provisions to Support APM Development Physician-Focused Payment Model Technical Advisory Committee –Reviews proposed models submitted by stakeholders and makes recommendations to the HHS Secretary –11 members appointed by GAO; no more than 5 can be providers –Appointments to be made in October Technical Assistance –$20 million per year for FY 2016 through 2020 –Eligible entities include QIOs, regional collaboratives and others –Assistance to practices of 15 or less, rural and HPSAs for MIPS participation and transition to APMs 18

19. © 2015 American Medical Association. All rights reserved. Physicians Will Need Help Choosing a Path: It’s Not More Risk Than Today, It’s Just Different Risk Risks under FFS Will payments be adequate to cover the costs of delivering services? What utilization controls will payers impose on services? What “value-based” payment reductions will be made based on “efficiency” or quality measures? What payments will be retroactively recouped due to payer audits? Will the practice have enough patients to cover its practice expenses? Will accountable payment model networks disrupt FFS referrals? Risks under APMs Will APM payments be adequate to cover services patients need? Will risk adjustment be adequate to control for differences in need? How will costs of other APM providers involved in patients’ care be controlled? What portion of payments will be withheld based on quality measures? Will the practice have enough patients in the APM to cover the costs of managing the new payment and get the 5% Medicare bonus? 19

20. © 2015 American Medical Association. All rights reserved. Major Challenges Daunting set of tasks & time line CMS may lack the resources, knowledge and skill sets to conduct all the work in MACRA Fixing root problems with MU, PQRS, VBM New coding demands: patient relationship attribution and episodes of care; risk adjustment Payer alignment on metrics, incentives Develop fair risk standard (more than nominal?) 20

21. © 2015 American Medical Association. All rights reserved. New & Better Tools Required Effective, evidenced based patient engagement strategies/modules EHRs that ease performance reporting burdens & facilitate population health Dashboards to track resource use & performance metrics Data analytics to build/manage APMs 21

22. © 2015 American Medical Association. All rights reserved. AMA’s Goals Going Forward Goals: –Expand knowledge and understanding of MACRA and new payment model choices and drivers –Ease burdens associated with the challenges of delivery and payment reform and improve physician success in transitioning to new models AMA will: –Play a vital role in helping physicians see and take a successful pathway to new payment models –Help shape models that fit with a variety of practice models –Develop tools for various aspects of implementation –Engage with partners, including the Federation partners, to shape goals, desired outcomes and metrics 22

23. Thank You! 23

24. © 2015 American Medical Association. All rights reserved. 24