2018 Alternative Payment Models (APMs) Overview

2018 Alternative Payment Models (APMs) Overview

The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) was updated by CMS to continue to move healthcare providers from fee-for-service payment, or volume-based, to value-based patient care. As a part of the reform, Quality Payment Program (QPP) policy reforms Medicare Part B payments for clinicians across the country, and is a major step in improving care across the entire health care delivery system. Clinicians can choose how they want to participate in QPP based on their practice size, specialty, location, or patient population.

The Alternative Payment Model (APM) and the Merit-Based Incentive Payment System (MIPS) are the two reimbursement paths used in the Quality Payment Program (QPP).

These two paths consolidate existing quality reporting programs to reduce data measuring redundancies that support the provision of quality value-based care.

The Alternative Payment Model (APM) is a form of payment reform that incorporates quality and total cost of care into healthcare reimbursement. Additional compensation is provided as an incentive for high-quality, cost-effective, coordinated care with a focus on better patient outcomes.

Alternative Payment Models (APM)

An Alternative Payment Model (APM) is a payment approach with added incentives and risk for providing high-quality, cost-effective care. An APM can apply to the care of specific conditions, care episodes or populations. A risk and reward arrangement is created between providers and payers with the most common being the Medicare Shared Savings Program (MSSP) or an Accountable Care Organization (ACO). When a provider joins an APM entity, they can earn financial incentives to provide high-quality and cost-effective care.

Three Broad Categories of APMs:

  • Advanced Alternative Payment Models (AAPM)
  • MIPS Alternative Payment Models (MIPS)
  • Other APMs

Examples of APM Models in Medicaid:

  • Patient-Centered Medical Homes
  • Medicaid Health Home
  • Bundled Payments
  • ACOs

To qualify as participating in an APM a physician must receive a certain amount of fee-for-service revenue. This threshold has been too high for many physicians who primarily see Medicare Advantage Patients. Therefore, currently CMS is being urged to consider Medicare Advantage Patients as APM. An APM can be difficult to sustain because providers are generally assessed based on historical benchmarks. Once costs are low, they must remain low or be further reduced for the provider to earn shared savings.

Value-Based Reimbursement

MIPS requires that physicians meet and report on the specific quality goals. The burden for smaller providers with 15 or less eligible physicians was eased in 2018 to allowed them to potentially earn a bonus and encourage success if they report on at least one category. The MACRA Quality Payment Program (QPP) is a value-based reimbursement framework which allows providers to participate in MIPS or APM to receive a positive, neutral or negative Medicare payment adjustment in subsequent years.

Changes in 2018 were consistent in economic risk for physicians if they do not participate or if they perform poorly. Anticipated payment adjustments include:

  • 4 percent payment adjustment for 2019
  • 5 percent payment adjustment for 2020
  • 7 percent payment adjustment for 2021
  • 9 percent payment adjustment for 2022 and beyond

Focus on Quality Care

Payment adjustment would be based on specified measures and activities within the MIPS four performance categories:

  • Quality: 50 percent – The reporting measures, which replaced the Physician Quality Reporting System, were reduced from 9 to 6 and allowed for options to accommodate differences in specialties.
  • Cost: 10 percent – This score is based on Medicare claims and this percentage is expected to increase to 30 percent by 2019.
  • Advancing Care Information: 25 percent – This replaces the electronic health record (EHR) incentive program known as meaningful use to better reflect how EHR technology is used in daily practice.
  • Clinical Practice Improvement Activities: 15 percent – This includes care coordination, patient safety and other options based on the goals of the practice. Credit is received for participating in an APM or Patient-Centered Medical Homes.

Many physicians may have chosen the MIPS reimbursement path to avoid penalties while striving to achieve performance incentives based on quality and value measures. Although if quality of care is met in relation to cost, with increased risk more opportunities for financial rewards can be achieved with an Advanced APM.

Advanced APMs

Advanced APMs are a subset of APMs with greater revenue risk and opportunities for financial rewards. Each performance year, The Centers for Medicare & Medicaid Services (CMS) reviews and determines which APMs meet the requirements of an Advanced APM. If specific thresholds are achieved, providers can be excluded from the MIPS reporting requirement and payment adjustment. To qualify for the Advanced APM the provider must meet the requirements of the APM and:

  • Use Certified EHR technology
  • Receive payment is based on quality measures of MIPS through participation in an APM
  • Bear more than nominal financial risk and may be required to refund Medicare if spending exceeds a projected amount

In the Advanced APM of the Quality Payment Program (QPP), providers can earn a 5 percent incentive for 2020 for achieving threshold levels of payments or patients through the Advanced APM 2018 Performance Year. They may also earn a higher physician fee schedule starting in 2026.


Not all APMs will meet the definition of Advanced APMs and be excluded from MIPS reporting requirements and payment adjustments. APMs that do not qualify as Advanced APM but fall into one of the defined categories may be considered a MIPS APM. This could be an Advanced APM that a physician participates in but doesn’t meet minimum thresholds for data. MIPS APMs may need to submit the required MIPS data to avoid downward payment adjustment and will not earn the 5 percent bonus.

The MIPS APM provider may be scored using a special APM scoring standard which accounts for activities required by the APM and attempts to eliminate duplicate submissions of Quality Activity and Improvement. To qualify as a MIPS APM participant it:

  • Requires an agreement with an APM
  • Includes at least one MIPS eligible clinician
  • Bases incentive payments on performance in cost, utilization and quality measures

Value-Based Care is Here to Stay

As providers work to successfully manage their practice and serve their patients, it appears that value-based care is here to stay. The fifty-percent weight given to quality out of the four reporting measures, and the expectation that cost reporting measures will increase from ten-percent to thirty-percent by 2019, makes it appear that the key to success is striving for continued reduction in healthcare costs while providing quality patient care.


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