Risk-Based Alternative Payment Models Aid Chronic Disease Management

Alternative payment models that put financial risk on healthcare providers improved care quality for patients with diabetes more so than fee-for-service and incentive payment programs, according to a new study published in Health Affairs.

“Models that place greater financial risk on providers, such as global payment and shared savings, tend to demonstrate greater improvements in diabetes quality metrics compared with lower-risk pay-for-performance models,” the study’s authors wrote.

For example, all process-related quality measures improved in the Blue Cross Blue Shield Massachusetts Alternative Quality Contract, a global budget demonstration in which providers received annual per-patient global budget payments for the entirety of care for assigned patients. Most significantly, eye examinations increased by 7.2 percent, the study found.

Eye testing and frequency of HbA1c testing also improved significantly among providers in track 2 of the Comprehensive Primary Care Plus (CPC+) initiative run by Medicare. Under track 2, Medicare paid providers a prospective lump sum quarterly payment since participating practices received reduced fee-for-service payments.

In contrast, the study found modest improvements across diabetes care management measures, such as frequency of HbA1c testing, glucose testing, and nephropathy monitoring. For instance, the study shows less than 1 percent improvements across evaluated measures in the CPC+ track 1 initiative, which has lower levels of financial risk compared to track 2.

Meanwhile, fee-for-service models with a link to quality either modestly improved diabetes outcomes or did not improve the outcomes at all. The study examined five of these so-called pay-for-performance models, including Blue Cross Blue Shield Michigan’s Physician Group Incentive Program.

The findings support the expectations that alternative payment models with higher levels of financial risk incent providers to make larger investments in program components, they added.

However, that is not to say even the higher-risk alternative payment models could use some changes to promote better chronic disease management. Nearly all of the alternative payment models analyzed in the study used only process measures to determine quality of care for patients with diabetes, according to the study’s authors. They explained that “improvements in these processes might not translate into improvements in outcomes.”

Making the necessary changes to earn bonus payments and shared savings is also a major barrier for many providers.

“New workflows must be designed and implemented, electronic records must be upgraded to provide timely performance reports, and practitioners must use the measures to change how they provide care,” the authors wrote. “Some programmatic investments, such as developing a community health workforce, require up-front costs, whereas downstream savings might not materialize during the short length of [alternative payment model] contracts.”

Furthermore, providers typically participate in more than one alternative payment model across their payer partners. This “juggling” of alternative payment model participation in combination with maintaining fee-for-service payments can hinder success with value-based models.

“Given the considerable investment associated with implementing [alternative payment models], it should be no surprise that some practices and providers, particularly those that are part of integrated health systems, are more likely to participate in [alternative payment models] than others,” the authors stated.

Across all major payers, just about 18 percent of healthcare payments were tied to alternative payment models with downside financial risk in 2020, the most recent year for which the Health Care Payment Learning & Action Network (HCP LAN) had complete data. The majority of payments (39 percent) that year were under fee-for-service models, while nearly 20 percent were linked to quality and 23 percent were part of models with upside-only financial risk.

The transition to risk-based alternative payment models has been slow as providers overcome risk aversion.

To accelerate alternative payment model adoption and improve chronic disease management, the study’s authors suggest increased experimentation for Medicaid patients, which represent a very diverse population at risk for long-term complications from chronic conditions like diabetes.

“Experimentation in payment reform in this population is necessary to ensure that innovative strategies are promoting health equity,” they explained.

Additionally, they advised policymakers to standardize diabetes quality measures across alternative payment models to promote more comprehensive chronic disease management. Standardized measures would also reduce the administrative burden for providers.

Incorporating outcome measures would also promote better chronic disease management, they stated.