Alternative Payment Modules

As the costs for healthcare in the United States continues to climb and has peaked at all-time highs, alternative payment models are getting a second look.

In the U.S., there are some alternative payment models emerging that are designed to help reduce healthcare spending costs.  Alternative payment models pose an opportunity for those employers who are self-funded to reduce the amount they spend on healthcare. Furthermore, clinicians can receive financial incentive for sufficiently participating in these programs. But, are they working?  We’ll take a look at some recent articles that propose changes for more effective alternative payment models.

The Rising Healthcare Costs Crisis in the United States

How much is spent per person in the United States per year on healthcare? According to the Centers for Medicare and Medicaid Services (CMS), in just 2015 nearly $10,000 was reached on healthcare spending per each individual, and an article in CFO claims that certainly that mark was surpassed in 2016.

This is a peak for the U.S. healthcare spending, and this comes in contrast to the ultimate goal of the Affordable Care Act (ACA) that included provisions designed to decrease the overall cost of healthcare while improving quality. Medicare promotes alternative payment programs as a way to decrease the costs burdened on the U.S. government. The Medicare Shared Savings Program is the most popular one offered, which has saved more than $400 million per year over the last two years, along with other models with less significant savings reported.

How MACRA Ties into Alternative Payment Models

MACRA’s Quality Payment Program that was recently launched by CMS includes two value-based reimbursement tracks. RevCycle Intelligence reports that the federal government predicts that most clinicians who are eligible to participate in Merit-Based Incentive Payment System will take part. This program “offers the greatest incentive payments to those partaking in an Advanced Alternative Payment Model.”

The tricky part about Advanced Alternative Payment Models is that the eligible clinicians must take on what is known as two-sided financial risk for either care episodes or patient populations. What’s the incentive for clinicians? They will earn an automatic 5 percent value-based incentive payment for adequate model participation in 2017. RevCycle Intelligence points out that, “CMS intends for the higher incentive payments to encourage more eligible clinicians to join a risk-based alternative payment model.”

How Might Alternative Payment Models Work Better?

HealthcareIT News reports that Hashed Health and Altarum Institute believe that blockchain could be the answer to improve alternative payment models and they are partnering together to create technology that will benefit value-based reimbursement.

The companies have partnered together with the focus of developing blockchain healthcare technology in order to help create alternative payment models ledger networks. The fund’s founder Charles Martin, told HealthcareIT:

“The healthcare industry must be drastically reformed in order to address problems related to quality, cost and waste. Hashed Health is poised to drive innovation and collaboration to reach these goals.”

Are Behavioral Economics Needed to Improve Alternative Payment Models?

A recent study from the American Journal of Managed Care concluded that behavioral economics that are responsible for provider prescribing habits may need to be accounted for in order to reduce healthcare costs by lowering the use of expensive medications and treatments.

According to the researchers, the alternative payment models that merely shift focus away from financial incentives for prescription drug use to patient care interactions do not amount to significant healthcare cost savings. As stated in the study:

“Furthermore, removing economic incentives from drug prescribing did not alter the pattern of prescribing. Our research should make economic Darwinists take heed as the bedrock on which much of reimbursement reform is founded assumes a more rational economic behavior.”

It’s clear that the current alternative payment models still need some fine-tweaking and changes in order to make them effective at reducing healthcare spending. However, these programs offer potential to help curb the rising costs of healthcare. We will continue to monitor and report on the developments surrounding alternative payment models.