An Alternative Payment Model (APM) is a payment system that gives added incentive payments to provide high-quality and cost-efficient care. APMs can pertain to a clinical condition, a care episode, or a patient population type.

Of the two payment tracks under MACRA’s Quality Payment Program (QPP), APMs have proven difficult for many to comprehend. As the name suggests, though, an APM is simply a model of a new, or alternative, payment approach that’s based on quality and cost metrics.Examples of APMs include:

• Pay-for-Performance

• Bundled Payment Models (also known as Episode-based Payment Models)

• Medicare Shared Savings Programs (consists of several tracks/options)

• Accountable Care Organizations (ACO)

• Patient Centered Medical Homes

• Models tested by the Center for Medicare and Medicaid Innovation (CMMI)

The Medicare Shared Savings Program (MSSP), for instance, is a type of APM, and the rules and structure of the MSSP model determine the way the Centers for Medicare & Medicaid Services (CMS) pays for healthcare—or, in this case, shares cost savings with participating healthcare organizations.The rules and structure of an APM define which healthcare organization are eligible to participate. Participants belong to an APM Entity, which is a legal entity voluntarily created by a group of providers or facilities for the purpose of participating in the model.In other words, eligible clinicians, hospitals, and suppliers might participate in the MSSP by establishing or joining an ACO, which is a type of APM Entity. The MSSP then rewards the ACO for lowering their healthcare costs while meeting high quality, patient-first performance standards.The relationship between the APM and the clinician is hierarchal:

• APM

  • APM Entities

    • Healthcare organizations

      • Clinicians

To qualify for APM incentives in 2022, eligible clinicians must receive 25% of their Medicare payments through an APM.

Types of APMs

• Advanced APMs

• MIPS APMs

Advanced APMs

Advanced APMs are a CMS-approved subset of APMs where APM Entities invest more deeply in value-based care and assume greater revenue risks and rewards. All Advanced APMs must meet legislative criteria.Criteria for Advanced APMs include:

• Entity's eligible clinicians must use certified electronic health record technology (CEHRT).

• Payments must be based on reliable, evidence-based, and valid quality measures. In addition to quality measures on the Merit-Based Incentive Payment System (MIPS) final list, Advanced APM quality measures include:

  • Measures endorsed by a consensus-based entity [National Quality Forum (NQF)]

  • Measures submitted in the annual call for quality measures

  • Measures developed using QPP Measure Development funds

  • Measures determined by CMS to meet standards

• The Advanced APM Entity must bear more than nominal financial risk (or is a CMMI Medical Home Model expanded by the secretary of the U.S. Department of Health and Human Services).

For the last criteria, the Advanced APM Entity must meet the General Nominal Amount Standard, meaning that the total financial risk must be equal to at least 8% of the average estimated total Medicare Parts A and B revenues, or 3% of the expected expenditures for which the Alternative APM Entity is responsible. For the Medical Home Model, financial risk is set at 2.5% of Medicare Parts A and B revenue.Advanced APM Entities that meet all defined criteria are exempt from MIPS and qualify for a 5% lump-sum bonus based on Part B revenues for 2019 to 2024 payment years (2017–2022 performance years). Additionally, beginning in 2026, Advanced APM qualifying participants will also receive an annual Part B fee schedule increase of 0.75% (versus 0.25% received by other clinicians).

Participating Providers

Advanced APM “participating providers” are eligible clinicians and clinician groups that have applied and been accepted to a qualified Advanced APM.In Year 6 (2022), an Advanced APM Entity must do one of the following for its eligible clinicians to meet the criteria of Qualifying APM Participants (QPs):

• Receive at least 50% of its Medicare Part B payments through the Advanced APM

• See at least 35% of its Medicare patients through the Advanced APM

CMS will evaluate the aggregate scores of all eligible clinicians in an entity and determine if the aggregate score meets the required threshold to get a 5% annual lump sum bonus. If the threshold is met, all eligible clinicians associated with the entity are considered QPs, which means they all get the bonus. If they don’t meet the threshold as a group, none get the bonus.But Advanced APM Entities that don’t meet QP criteria can attain Partial QP status for their eligible clinicians if the Advanced APM Entity meets at least one of the following thresholds:

• Receives at least 40% of its Medicare Part B payments through the Advanced APM

• Sees at least 25% of its Medicare Part B patients through the Advanced APM

While QPs will be excluded from MIPS reporting requirements, Partial QPs can opt to participate in MIPS and will be scored using the APM Scoring Standard. If they do, they’ll receive extra MIPS APM credit in their scores, but no APM bonus.Beginning with the 2021 performance period, the APM Performance Pathway (APP) is used to calculate the MIPS final score for Partial QPs:

• Quality: 50%

• Improvement Activities: 20%

• Promoting Interoperability: 30%

• Cost: 0%

APM clinicians who don’t reach QP standards whatsoever will receive favorable scoring under certain MIPS categories.

All-Payer Combination Option

As of Year 3, MIPS eligible clinicians can possibly achieve QP status through the All-Payer Combination Option. This path allows clinicians who don’t meet the QP patient or payment threshold under their Medicare Advanced APM to count participation in another payer’s APM toward their QP status.The payment and patient thresholds remain the same under the All-Payer Advanced APM option, 50% and 35%, respectively. But an eligible clinician can reach these thresholds with a combination of payments or patients seen through the Medicare Advanced APM and the Other Payer Advanced APM.To become a QP through the All-Payer Combination Option, an eligible clinician must still meet minimum thresholds under the Medicare arrangement, which include:

• Receive at least 25% of Medicare Part B payments through the Medicare Advanced APM

• See at least 20% of Medicare patients through the Medicare Advanced APM

An eligible clinician can be considered a Partial QP through the All-Payer Combination Option if they meet the payment or patient threshold, 40% and 25%, respectively. Partial QPs must still meet Medicare’s minimum thresholds:

• Receive at least 20% of Medicare Part B payments through the Medicare Advanced APM

• See at least 10% of Medicare patients through the Medicare Advanced APM

APM entities or eligible clinicians can request that CMS use the All-Payer Combination Option to determine their QP status. To do so, they must submit payment and patient data from their Other Payer APM for CMS to make the determination.CMS will recognize clinicians as QPs if they appear on the Provider List during a snapshot period (March 31, June 30, August 31, and for MSSP participants December 31). Clinicians who are not participating in an APM during these “snapshots” will need to submit MIPS data using the MIPS individual or group option to avoid a negative payment adjustment.In addition to QP determinations at the APM Entity and individual eligible clinician levels, CMS allows for QP determinations under the All-Payer Option requested at the TIN level when all eligible clinicians who have reassigned their billing rights to the TIN are included in a single APM Entity.

MIPS APMs

Certain APMs include MIPS eligible clinicians as participants and hold these clinicians accountable for their cost and quality of care. CMS identifies these as MIPS APMs. MIPS APMs include APMs that don’t meet Advanced APM criteria.If an eligible clinician in an Advanced APM Entity doesn’t meet the QP threshold for the Advanced APM 5% lump sum bonus but is listed as a participating provider in the Advanced APM during the determination period, the clinician will be subject to MIPS and scored using the APM scoring standard.An APM is considered a MIPS APM if it satisfies the following criteria:

• APM Entities must participate in the APM under an agreement with CMS or by law or regulations.

• The APM must require that APM Entities include at least one MIPS eligible clinician on a participation list.

• The APM must base payment on quality measures and cost/utilization.

• The APM must not be a new APM for which the first performance period begins after the first day of the MIPS performance year.

• The APM must not be in the final year of operation for which the APM scoring standard is impracticable.

In the 2020 MIPS performance period, CMS expects the following 10 APMs to satisfy these requirements to be MIPS APMs:

• Comprehensive ESRD Care Model (all tracks)

• Comprehensive Primary Care Plus Model (all tracks)

• Next Generation ACO Model

• Oncology Care Model (all tracks)

• Medicare Shared Savings Program (all tracks)

• Medicare ACO Track 1+ Model

• Bundled Payments for Care Improvement Advanced

• Maryland Total Cost of Care Model

• Vermont All-Payer ACO Model

• Primary Care First (all tracks)

While MIPS APM participants receive special MIPS scoring under the APM scoring standard, it’s possible for an APM to have tracks that are MIPS APMs and tracks that aren’t MIPS APMs.Eligible clinicians participating in the MSSP are not assessed under the Cost performance category in MIPS because they’re already subject to cost and utilization performance assessments.