Using People, Processes, and Technology

For institutions entering into the alternative payment model (APM) landscape for the first time, there needs to be an appreciation of what this activity does and does not entail. It does not simply mean that the enterprise can package a reduced fee-for-service pricing structure into a different bag. Neither does it mean that the enterprise can expect “new money” for meeting quality benchmarks that it should already be meeting. Finally, in the words of one hospital executive, it does not mean that “everything can stay the same except I can write the doctors a check.”

Rather, a true APM offering creates the kind of clinical and financial integration that can help with federal and state antitrust compliance as well as with elimination of duplicative or redundant care. APMs can increase positive clinical outcomes and reduce cost, all without denying patients medically necessary services. So, as institutions transition from fee-for-service to APM reimbursement, changes in operations and in thought processes need to occur, often in parallel with ongoing efforts to stabilize revenues under the “old” way of doing things.

The biggest initial hurdle for institutions contemplating APM relationships is whether the information technology already within the enterprise is capable of gathering even basic clinical outcome data and sorting it within a variety of patient populations. Claims data, if made available by payors, and especially for a care-managed population, can show a variety of clinical activities such as medication compliance (with prescription refill information) and clinical activity outside of the APM enterprise (most hospitals and multispecialty physician groups do not include vision, dental, and other types of routine care services).  Integrating this claims data with the enterprise’s electronic health record (EHR) is a critical first step, and many legacy systems (and some modern EHRs) do not have this capability. Interface engines and bridging technology are expensive as well. So, a business decision whether the cost of new APM-assistive technology is less than the anticipated additional revenue from APM payors should be made.

While considering the capability of the EHR to gather and sort clinical data in a helpful way, the enterprise should also analyze its business systems to make sure than, among other things, revenue from care NOT provided can be linked to patients whose overall care is being managed within the APM framework. Many APMs link the payment of bonuses to decreases in the overall “spend” experienced by individual patients or patient groups, and linking these shared savings and other payments to providers who prevented unneeded (and therefore unbilled) patient care becomes important. A variety of regulatory schemes require that these savings be paid proportionally to the owners or participants in the APM venture as well, so business systems need to be able to track this and integrate this information into the back-end payments of bonus or savings revenues.

Once the capabilities of the enterprise’s various data systems have been established, the contract negotiation team, which should include providers as well as business executives, counsel, and other subject matter experts, should convene to discuss which data will be measured within the APM and what monetary value will be assigned to each of these measurable data points. Clinicians generally do not like being measured on things that don’t matter clinically; yet, “you can’t manage what you don’t measure” is still the order of the day. One strategy to gain compliance is to sort the measurable data into “baskets” or to create successive “gates” through which a successful provider must pass in order to qualify for higher and higher distributions of shared savings or non-care-related revenues. The unfortunate reality of APM contracting is that once one payor requires a healthcare provider to measure some performance capability, the APM ends up measuring it for ALL payors, on the theory that quality is payor agnostic and the enterprise doesn’t want to discriminate in the quality care it delivers based on payor type. Thus, controlling the number and quality of measurable data points at the outset of an APM relationship is critical to prevent participants from measuring everything and focusing on nothing of clinical significance. And APM participants can’t forget the various legal mandates not to create payment methodologies that incentivize providers to deprive patients of “medically necessary” care; however, what is “medically necessary” may vary depending on which regulatory scheme you apply and what a particular payor feels about therapeutically equivalent care.

Care must be taken as well not to agree to an onerous measurement framework for which there is no “new” money. Assuming there have been no problems with the quality of care in the past, APM providers should not agree to terms that allow the payor to “claw back” contracted rates by adding new preconditions to payment. There is enough value in increasing quality and decreasing the overall medical “spend” in any patient population such that only “new” money needs to be put at risk. The chief value of the APM gambit is that the providers “earn out” their efficiencies and quality improvements.

Monitoring compliance with all of the contract’s provisions is a necessary step, which is made more difficult by the traditional separation of enterprise oversight and management into different “silos” of responsibility. To the extent that a separate business organization has not been formed to deal with APM contracting and payment issues, close collaboration between clinical and administrative departments needs to be created and maintained. For example, physicians may not make critical distinctions between care pathways that have vastly different financial consequences unless they are both included in the conversation about developing those pathways and reminded of those pathways when atypical patients present. Similarly, clinical reasons need to be developed and explained when business office staff request additions to or changes to medical record documentation (such as hospital-acquired conditions or “present on admission” indicators); reimbursement as a motivator typically does not impress physician partners. Finally, frequent feedback on both clinical and financial benchmarks needs to be provided to all participants. Industry information shows that this “dashboard” information is more effective when presented as a comparison with other participants (on an anonymous basis, of course), as most providers do not want to be viewed as negative outliers.

If a separate organization has been established to manage the APM arrangements, then one compliance-related item of documentation should be a business associate agreement between each APM provider and the management organization. Unless the manager is a licensed entity under state insurance law, most likely it will be viewed as a “legal stranger” to the flow of “protected health information” (PHI) and will need a business associate agreement with each provider. Likewise, the provision of PHI to members of the APM collaborative NOT involved in direct patient care creates another compliance risk and such information should be “de-identified” before sharing with APM management and membership.

Barry S. Herrin, JD, FAHIMA, FACHE, is the founder of Herrin Health Law, P.C., in Atlanta. Herrin offers more than 25 years of experience practicing law in the areas of healthcare and hospital law and policy, privacy law and health information management, among other healthcare-specific practice areas. He is a Fellow of the American College of Healthcare Executives and a Fellow of the American Health Information Management Association. He also holds a Certificate in Cyber Security from the Georgia Institute of Technology.