10 FAQs about Advanced Alternative Payment Models (APMs)
Updated January 2017
On October 14, 2016, CMS released the final rule for one of the most bipartisan and significant legislative changes to Medicare in a generation, the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA repeals the Medicare Part B Sustainable Growth Rate (SGR) reimbursement formula and replaces it with a new value-based reimbursement system called the Quality Payment Program (QPP). The QPP consists of two major tracks:
Advanced APMs are value-based payment programs operated by CMS which meet minimum requirements for the use of certified EHR technology, quality measurement and the level of financial risk placed upon clinicians. These minimum requirements distinguish Advanced APMs from APMs generally. Qualifying participants in Advanced APMs can earn an annual 5% Part B incentive (paid 2019 - 2024) and are exempt from MIPS. In addition, starting in 2026, Advanced APM qualifying participants will accrue a higher annual Part B physician fee schedule (PFS) increase of 0.75%, rather than 0.25%. CMS predicts that 100,000 Part B clinicians will participate in Advanced APMs in 2017, the first QPP performance year.
Read on for some of the most frequently asked questions about APMs and Advanced APMs, in particular.
- What are Alternative Payment Models (APMs) and Advanced APMs?
- How does a clinician participate in an APM?
- What are the benefits of participating in APMs?
- What are the risks of participating in APMs?
- How does CMS approve and publish APMs?
- How does a clinician “sufficiently participate” in an Advanced APM to earn the benefits?
- How is the Advanced APM incentive calculated and paid?
- What are APM reporting requirements?
- How do you select an appropriate APM?
- How do you apply and prepare for an APM?
1. What are Alternative Payment Models (APMs) and Advanced APMs?
The primary purpose of APMs is to move clinicians away from fee-for-service payment mechanisms to pay-for-value or value-based payment programs. Value, driven by the quality of care in relation to its cost, is measured and rewarded in APMs implementing value-based payment principles.
In order to understand Advanced APMs, a subclass of APMs, we must first understand how the QPP defines APMs. In the regulatory context, an APM is defined only as these payment programs operated by CMS (not by commercial payers):
- CMS Innovation Center (Center for Medicare & Medicaid Innovation, or CMMI) Model (other than a Health Care Innovation Award)
- Medicare Shared Savings Program (MSSP ACOs)
- Demonstration under the Health Care Quality Demonstration Program
- Demonstration required by federal law
However, as will be noted below regarding an entity’s qualifying participation in an Advanced APM, there is the term “Other Payer Advanced APMs,” which are models run by commercial payers and playing a peripheral role in the QPP. Other than this one exception, the term APM should be understood as Medicare-only payment models.
Advanced APMs are APMs fulfilling these additional requirements:
- Participants use certified EHR technology
- Payment based on quality measures comparable to those in the MIPS quality performance category
- APM entities must either bear more than “nominal financial risk” for monetary losses or the APM is a Medical Home Model expanded by the CMS Innovation Center
CMS has posted the approved set of Advanced APMs for the 2017 performance year:
- Comprehensive ESRD Care (CEC) (large dialysis organization or LDO arrangement and non-LDO two-sided risk arrangement)
- Comprehensive Primary Care Plus (CPC+)
- Medicare Shared Savings Program Track 2
- Medicare Shared Savings Program Track 3
- Next Generation ACO Model
- Oncology Care Model (OCM) (two-sided risk arrangement)
We discuss in Question 5 how CMS updates the list of Advanced APMs.
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2. How does a clinician participate in an APM?
The QPP defines “eligible clinicians” as those clinicians who can participate in an APM. Note that eligible clinicians may or may not also be “MIPS eligible clinicians,” which is separately defined by the QPP. If a clinician is “sufficiently participating” in an Advanced APM then that clinician will earn an annual 5% Part B incentive (for 2019-2024) and an exemption from MIPS.
A clinician may either join an existing APM entity, such as a Medicare Shared Savings Program (MSSP) accountable care organization (ACO), or apply to CMS to create a new APM entity. CMS maintains a global participation list for each APM defining which clinicians and their associated tax IDs (TINs) are participating in each APM entity. Most APM entities allow clinicians and TINs to join the entity throughout the calendar year on a rolling basis to accommodate new clinicians joining an organization mid-year. For example, typically a TIN and its clinicians may join an ACO by contracting with that ACO anytime during the year.
An organization that wishes to create a new APM entity must adhere to application deadlines published by CMS. Application deadlines may recur annually, such as those for the MSSP program, or every few years for an APM at an earlier stage of development. Typically, organizations research and apply for APMs in the first half of the calendar year in order to begin participation in the following year. We discuss below some of the considerations involved in selecting appropriate APMs for participation.
Note that the MACRA final rule alluded to a potential re-opening of some application periods in 2017 to encourage more clinicians to join Advanced APMs beginning in the 2018 performance year.
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3. What are the benefits of participating in APMs?
For provider organizations committed to moving towards pay-for-value paradigms, APMs provide a CMS-sponsored on-ramp to transition towards new ways of delivering care and being reimbursed for it. Some APMs provide fully capitated payment mechanisms where there is a fixed fee per beneficiary, so that the provider organization assumes the full downside risk. As organizations vary markedly on where they are on the journey from fee-for-service to pay-for-value, APMs provide an array of participation options with varying levels of upside potential and downside risk to ease the transition.
In particular, if an entity sufficiently participates in an Advanced APM, CMS rewards the entity’s clinicians with an annual incentive (for 2019 – 2024) equal to 5% of the previous year's Part B annual payments for covered professional services. The Advanced APM incentive is paid irrespective of the entity’s level of performance within the APM. Even if an Advanced APM entity is the lowest performing entity within a given Advanced APM, the entity will still receive the 5% incentive. Similarly, a sufficiently participating Advanced APM entity also earns a MIPS exemption for all of its participating clinicians.
It’s interesting to note that a clinician earning the 5% incentive for Advanced APM participation in the performance year will carry that incentive to a new organization that the clinician switches to prior to the payout by CMS. This can benefit the clinician’s position with respect to recruitment and contracting with a provider organization.
As indicated by the fact that the Advanced APM incentive terminates after five years, the overriding desired outcome of participating in an Advanced APM is transforming care to improve quality while lowering costs to the system and patients. Participation in an Advanced APM requires significant investment, cultural transformation, operational changes, and senior leadership commitment. Organizations are well-served by considering factors and goals beyond the immediate direct benefits of the 5% Advanced APM incentive and MIPS exemption when deciding to join an Advanced APM. We discuss the APM decision and selection process in greater depth below.
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4. What are the risks of participating in APMs?
Although successful APM entities, such as the Medicare Shared Savings Program (MSSP) ACO program, have earned millions of dollars in CMS incentives, these entities have also taken on considerable investment and operational risks. The majority of MSSP ACOs have yet to realize shared savings incentives despite many having achieved top quality scores. CMS is altering aspects of the MSSP program to increase the chances for ACOs to earn incentives, but it is unclear to what extent those incentives will offset and exceed the financial investments ACOs have made.
As all Advanced APMs must impose some downside reimbursement risk on participating clinicians, there is a clear risk that underperformance will reduce Medicare revenues. A number of the APMs, such as MSSP, effectively compare APM entities to national benchmarks of quality and cost performance, creating a competitive playing field where not all players will win. In addition, many APMs currently or intend to publicly publish quality and cost performance of participating entities, which has potential reputational impacts on clinicians. This aligns with CMS’ overall objective of increased transparency and the yearly publication of clinicians’ MIPS scores.
Another risk to APM participation is how the results of the 2016 federal elections may impact certain APMs operated by the CMS Innovation Center (CMMI). While MACRA is highly bipartisan and unlikely to undergo major changes due to the election outcome, CMMI was created by the Affordable Care Act (ACA) and therefore is more vulnerable to repeal by Congress. Although there are clear operational and political reasons to support the continuation of CMMI, in the event that CMMI is shut down, then the particular APMs it operates are at risk of being disrupted or discontinued. Notably, MSSP, which is not run by CMMI, has one of the largest populations of participating organizations among APMs (i.e. highest number of entrenched interests), and is soon opening Track 1+, an eagerly anticipated Advanced APM variant. In selecting APMs, it will be important to track regulatory and other happenings at the federal level to properly balance the benefits and risks of the different models.
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5. How does CMS approve and publish APMs?
MACRA creates the Physician-focused Technical Advisory Committee (PTAC), composed of 11 appointed industry experts to vet and recommend proposed new APMs for approval by CMS. Approved APMs are then typically published as a proposed rule by CMS and followed by a public comment period prior to publication of a final rule. CMMI may then pilot the model before further expansion across the country. CMS publishes an updated list of all available APMs. Monitor this list for publication of the highly anticipated MSSP Track 1+ model, designed to provide Track 1 ACOs with an easier transition to participation in an Advanced APM.
Prior to publishing a new APM, CMS determines two key attributes of the model. First, CMS decides whether the APM design satisfies the additional requirements to be deemed an Advanced APM. Second, CMS determines whether MIPS APM requirements are met for the APM’s participating entities to be subject to a constrained version of MIPS, rather than full MIPS, should certain conditions hold true. An APM may be an Advanced APM, a MIPS APM, both, or neither.
Finally, CMS also determines how many automatic points (minimum is half of maximum) will be granted in the MIPS improvement activities performance category to every clinician participating in a given APM. CMS compares the APM’s participation requirements against the list of MIPS improvement activities to decide how many activities are satisfied by a clinician simply participating in the APM. All APMs deemed “MIPS APMs” in the CMS APM list for the 2017 performance year will automatically receive the maximum MIPS improvement activities score. However, this may not be true for new APMs to be published and available for 2018 and beyond.
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6. How does a clinician “sufficiently participate” in an Advanced APM to earn the benefits?
The QPP clearly defines MIPS as the default value-based program for Part B clinicians. For a given clinician type (e.g. MD, DO) subject to MIPS, sufficient participation in an Advanced APM is one of three ways to gain a MIPS exemption.
By defining and setting thresholds for an APM entity (and, by extension, its participating clinicians) to “sufficiently participate” in an Advanced APM, CMS ensures that entities shoulder a sufficient portion of the responsibility for the cost of care of their patients to warrant gaining the 5% Advanced APM incentive and MIPS exemption for their efforts. If an APM entity does not meet certain thresholds, then the entity and its clinicians are subject to either full MIPS or a constrained version of MIPS.
The QPP defines two alternate methods for participation measurement: the Payment Amount Method and the Patient Count Method. CMS will calculate both methods and select the method that is most favorable to the clinician in terms of sufficient, or qualifying, participation.
The Payment Amount Method consists of the following steps for the relevant performance year:
- Divide step 1 by step 2 to derive a threshold score as a percentage, then:
- Sum the collective Part B allowed payments for services delivered by the entity’s clinicians to all patients who could, but may not, be attributable to the entity (attribution-eligible, e.g. includes patients who might be attributed to another APM entity);
- Sum the collective Part B allowed payments for services delivered by the Advanced APM entity’s clinicians to patients attributed to the entity according to the attribution rules of the Advanced APM;
- For the 2017-2018 performance years, if the threshold score is at least 25%, then all the clinicians in the Advanced APM entity are deemed qualifying APM participants (QPs), who earn the 5% Advanced APM incentive and MIPS exemption for that year, or
- For the 2017-2018 performance years, if the threshold score is somewhat lower (20% to less than 25%), then all the clinicians in the Advanced APM entity are deemed “partial qualifying APM participants” (PQPs), who do not earn the annual 5% bonus but can opt into MIPS participation for that year. The decision to opt into MIPS is made at the APM entity level and all clinicians abide by the APM entity decision.
For subsequent performance years, the 25% and 20% thresholds increase. In addition, for the 2019+ performance years, participation in other payer Advanced APMs (mentioned above), which could be models defined by commercial payers, Medicaid, or other payers, can also count towards QP and PQP determination.
The Patient Count Method is similar to the Payment Amount Method except that the numbers of attributed and attribution-eligible patients (e.g., patients for whom Part B claims have been filed by an APM entity’s clinicians) are used instead of the Part B allowed payments, and the 25% and 20% thresholds for QP and PQP are replaced by 20% and 10%, respectively, for the 2017-2018 performance years. These thresholds also escalate for the 2019+ performance years.
In order to determine QP/PQP status for each Advanced APM entity, CMS utilizes three performance year-to-date snapshots for Part B claims filed in the periods ending on March 31, June 30 and August 31. The snapshots use the APM entity’s clinician participation lists, maintained by CMS, at the end dates of the snapshots to attribute patients. The second and third snapshots can only add additional QPs for the performance year, not subtract them. In other words, a clinician’s QP status cannot change for the performance year once they are deemed a QP by one of the snapshots. The purpose of the in-performance-year snapshots is to enable an APM entity to clearly know which clinicians have been deemed QPs/PQPs prior to the MIPS data submission deadline (March 31 of the succeeding year.) By omission from the entity’s participation list, other clinicians would have to report for MIPS unless they gained a different MIPS exemption.
Advanced APM entities are informed of the QP/PQP determinations by CMS about four months after the ending data of each data snapshot to allow for a three-month claims run-out period after each data snapshot. Hence, entities are informed by CMS around July 31, October 31 and December 31 of the three QP/PQP determinations during the performance year. Note that December 31 may be a late date to find out if a clinician is a QP or PQP, given that the MIPS data submission deadline of March 31 is only three months later. For those clinicians who are not deemed QP/PQP or are left off the APM entity’s participation list, it is important to monitor MIPS performance throughout the performance year.
PQPs are exempt from MIPS by default, unless they opt into MIPS after being deemed a PQP by CMS. However, PQPs won’t be informed by CMS of their MIPS scores or payment adjustments until well after the performance year is over, so PQPs may want to estimate their MIPS scores before deciding to opt into MIPS for that performance year.
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7. How is the Advanced APM incentive calculated and paid?
How the Incentive is Calculated
Unlike the MIPS payment adjustment, which is calculated as a percentage of Medicare Part B annual payments for covered services and items, the Advanced APM incentive is 5% of estimated Part B annual payments for covered services only.
If a clinician participating in an Advanced APM entity bills Part B through multiple TINs, whether those TINs are in the Advanced APM entity or not, then the total estimated Part B annual payment to the clinician across ALL such TIN/NPI combinations is used to calculate the Advanced APM incentive. The estimate is based upon payments in the “incentive payment base period,” defined as the full year prior to the payment year. For example, 2018 is the incentive base period for the 2019 payment year, which corresponds to the 2017 performance year. Even if the APM entity’s contract with CMS ends during the incentive payment base period, the entire base period is still used to calculate the Advanced APM incentive to be paid in the payment year.
To Whom the Incentive is Paid
It is important to understand which TIN will receive the incentive for a given clinician who is an Advanced APM qualifying participant (QP). The entire Advanced APM incentive is paid to the TIN associated with the Advanced APM entity through which the clinician was deemed a QP. The TIN is free to redistribute some or all of that payment to the QP via a physician compensation plan, provider contract, etc. If the clinician is affiliated with a different TIN during the payment year, the 5% bonus payment will be paid to the new organization's TIN, even if that TIN had no involvement in the Advanced APM during the performance year. If a clinician is deemed QP multiple times for a given performance year through participation in multiple Advanced APM entities, then CMS splits the Advanced APM incentive proportionally among TINs based upon the payments used to make each QP determination. For the rare situation where a clinician is not able to be deemed a QP through any single Advanced APM entity but rather through a single clinician’s aggregate participation in multiple Advanced APM entities, then CMS similarly splits the incentive proportionally among the TINs where the clinician participated.
When and How the Incentive is Paid
The Advanced APM incentive will be paid by CMS no later than by the end of the payment year. CMS is unwilling to commit to an earlier date to allow for the three-month claims run-out period after the end of the incentive payment base period (the calendar year prior to the payment year) and subsequent data processing to be completed before CMS can calculating the incentive. The APM incentive will be paid outside of the Medicare claims processing system, and notifications of incentive amounts will be sent to both Advanced APM entities and individual QPs.
Incentive Follows Clinicians Who Switch TINs
If a clinician QP changes to a new TIN after the performance year, then the Advanced APM incentive follows the QP to the new TIN as identified on the CMS-588 EFT form for the payment year in question. Similar to how the MIPS score follows the clinician, the tying of the incentive to the individual clinician has a big impact on clinician recruitment, credentialing, contracting, and compensation (p1842).
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8. What are APM reporting requirements?
Each APM imposes its own data reporting requirements on participating entities and clinicians, which may vary widely across models. However, per the MACRA legislation, Advanced APMs must base payment on quality measures comparable to those in the MIPS quality performance category. This criterion is evaluated when CMS decides whether an APM is an Advanced APM. Consequently, Advanced APMs tend to have MIPS-like measures and data submission mechanisms to satisfy CMS reporting requirements. An example of this is the Medicare Shared Savings Program (MSSP) Track 3, an Advanced APM which requires APM entities (ACOs) to submit quality measures using one of the MIPS data submission methods, CMS Web Interface.
Should a clinician either not sufficiently participate in an Advanced APM or participate in a non-Advanced APM, then either the clinician is also subject to full MIPS reporting requirements or, if the APM is deemed a MIPS APM, then the clinician is subject to a constrained version of MIPS which varies depending upon the type of APM (e.g. MSSP, Next Generation ACO, etc.).
A large class of APM reporting requirements relates to those APMs deemed MIPS APMs by CMS, as discussed above. An APM may be deemed an Advanced APM, a MIPS APM, neither, or both.
The MIPS APM concept provides some relief to those APM clinicians who otherwise would be subject to full MIPS requirements in addition to their APM obligations. CMS defines MIPS APMs as a class of APMs which meet all of the following criteria:
- APM entities participate under an agreement with CMS
- APM entities include one or more MIPS eligible clinicians on an APM participation list
- APM bases payment incentives on performance on cost/utilization and quality measures
The above criteria for determining whether an APM is a MIPS APM are separate from the criteria for identifying an APM as an Advanced APM. Therefore, it is possible for an APM to be a MIPS APM, an Advanced APM, both, or neither. For instance, an Advanced APM may not include MIPS-eligible clinicians on its participation list and, thereby, would not be deemed a MIPS APM.
For a performance year, all MIPS-eligible clinicians listed as participants in the MIPS APM entity on at least one of the three participation snapshots taken by CMS are considered to be MIPS APM clinicians for that performance year. All resulting MIPS payment adjustments deriving from the earned MIPS scores are applied at the TIN/NPI level (TIN = tax identification number a clinician bills Medicare through; NPI = CMS’ unique clinician identifier) for each of the MIPS-eligible clinicians within a MIPS APM entity. Note that MIPS-eligible clinicians not included on the list of APM entity participants but providing services under a sub-contract with the entity would not be considered MIPS APM clinicians.
An example of a MIPS APM is the Medicare Shared Savings Program (MSSP). APM entities (ACOs) within MSSP Track 1 (one-sided, incentive-only) and Tracks 2 and 3 (two-sided) of MSSP meet the above criteria and are MIPS APM entities. CMS deems a Track 1 MSSP ACO to be a non-Advanced APM entity. Therefore, each of a Track 1 ACO’s clinicians is subject to MIPS, unless a clinician otherwise earns a MIPS exemption by also participating in one or more Advanced APM entities and meeting the QP threshold. As a Track 1 ACO is also deemed a MIPS APM entity, then the ACO’s MIPS-eligible clinicians would benefit from special MIPS APM rules governing MIPS scoring and data submission, otherwise known as the APM scoring standard.
Track 2 or 3 ACOs who do not meet the qualifying or partial-qualifying Advanced APM participation criteria (QP or PQP) are subject to MIPS, unless a participating clinician otherwise earns a different MIPS exemption. However, as Track 2 and 3 ACOs are deemed MIPS APM entities, then their MIPS eligible clinicians would benefit from the special MIPS APM rules governing MIPS scoring and data submission.
The special MIPS scoring and reporting rules governing MIPS APMs are designed to grant some automatic performance credit and reduce reporting burdens for MIPS-eligible clinicians participating in MIPS APM entities. All MIPS-eligible clinicians participating in a MIPS APM entity inherit the MIPS performance of the entire entity. For instance, all clinicians within an MSSP ACO inherit the same single MIPS score. CMS requires the MIPS Quality category to be reported at the ACO level using the CMS Web Interface method and the MIPS ACI category must be reported by each TIN participating in the ACO. Depending on the ACO’s situation, either of these reporting tasks may be easier or harder to accomplish compared to alternative reporting methods available under full MIPS.
The MIPS APM scoring and data submission rules (referenced in the QPP final rule as the “APM scoring standard”) vary, depending upon whether the APM is an MSSP track, the Next Generation ACO program, or any other APM. For example, for all MSSP tracks for the 2017 performance year, the APM scoring standard for MIPS is as follows:
- Quality: 50% weight
- Requires group data submission on behalf of the entire ACO via CMS Web Interface
- Advancing Care Information (ACI): 30% weight
- Requires group data submission for each TIN participating in the ACO, and the ACO’s score is calculated as the weighted average across TINs based upon the number of MIPS eligible clinicians in each TIN
- Improvement Activities: 20% weight
- Automatic maximum credit for MSSP ACOs
- Cost: 0% weight
- Cost performance is already evaluated within the MSSP so set to zero weight
Should an APM entity participate in a MIPS APM and be subject to MIPS, some suggested activities are:
- Estimate the number of MIPS eligible clinicians within the APM entity and their Medicare Part B annual payments at risk under MIPS (see our MIPS Financial Calculator to translate Part B payments to MIPS top-to-bottom potential payment adjustments) to gauge the entity’s exposure to MIPS payment adjustments. The exposure magnitude informs the amount of attention the entity should devote to optimizing MIPS performance for its clinicians.
- Estimate the MIPS score for the APM entity to determine the MIPS baseline and areas for improvement.
- Improve MIPS performance, particularly in high-weight performance categories designated by the relevant MIPS APM scoring rules.
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9. How do you select an appropriate APM?
Deciding to create or participate in an APM entity is not a decision to be taken lightly. As shared earlier, one can expect successful participation to require significant investment, cultural transformation, operational changes, and executive-level commitment. SA Ignite reviewed the potential benefits and risks of APM participation. Both qualitative and quantitative considerations should be evaluated in prioritizing which APMs may be most suitable for an organization to apply for and operate. For example:
- How does the design of a particular APM align with the organization’s transformation, growth and delivery strategy?
- What is the required infrastructure as compared to the organization’s ability to invest and implement?
- What competing priorities may distract the organization from fully executing the vision of the APM?
- How will clinicians be engaged and incentivized to transform care to perform well according to the APM’s performance metrics?
- How do the revenue impacts compare across different APMs and as compared to MIPS?
Often such evaluation questions are interdependent, where a certain answer to one may affect the answer to another. Consider seeking expert advice and knowledge regarding APMs to inform your selection decisions.
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10. How do you apply and prepare for an APM?
CMS publishes application procedures and deadlines to create a new APM entity for each APM, e.g. MSSP. Alternatively, an organization can join an existing APM entity, such as a particular group (TIN) joining an MSSP ACO. A very helpful form of preparation is to review the selection criteria for that APM, shared above, to identify resource, process, or other organizational gaps which must be addressed in order to succeed. Most APMs operate on an annual cadence of performance evaluation and require APM entities to apply to renew their APM contracts every few years. Also, given that APMs frequently update their rules and requirements, APM entities should look at each performance year as bringing new potential opportunities and challenges in regard to their own sets of preparation activities. Essentially, continuous learning, improvement and adaption rarely end when an organization is participating in an APM.
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