A Buffet of Hospital Alternative Payment Models: Will Too Many Entrees Be Overwhelming? - McDermott+Consulting

A Buffet of Hospital Alternative Payment Models: Will Too Many Entrees Be Overwhelming?

A Buffet of Hospital Alternative Payment Models: Will Too Many Entrees Be Overwhelming?

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May 30, 2024 –Over the last several months, the Center for Medicare and Medicaid Innovation (CMMI), within the Centers for Medicare & Medicaid Services (CMS), has introduced several alternative payment models (APMs) geared toward hospitals. Some of them seemingly overlap with other ongoing initiatives, others are more restrictive, and two would actually require selected hospitals to participate. To help me dig into this buffet of hospital APMs, I’m bringing in my colleagues Julia Grabo and Leigh Feldman.

As described in a recent Regs & Eggs blog post, CMMI proposed the Transforming Episode Accountability Model (TEAM) in the Fiscal Year 2025 Inpatient Prospective Payment System (IPPS) proposed regulation. This was the first model proposed under the Biden administration that would require certain types of providers (in this case, hospitals) to participate. Just a few weeks later, CMMI proposed another mandatory model with hospitals as the participants – this one related to organ transplantations.

The proposed Increasing Organ Transplant Access (IOTA) Model is part of the Biden administration’s broader effort to reform and modernize the Organ Procurement and Transplant Network. The model aims to test whether performance-based incentive payments to or owed by hospitals increase access to kidney transplants for patients with end-stage renal disease. To determine participation, CMS would randomly select approximately half of the 56 designated service areas (DSAs) that provide kidney transplants. All eligible hospitals within the 28 DSAs selected would participate in the model, including any non-pediatric transplant hospitals with an active kidney transplant program that perform an annual average of 11 or more kidney transplants in the three years before the model begins. Given the eligibility criteria, CMS estimates that 90 hospitals would participate in the model. The non-selected DSAs and their associated hospitals would serve as the comparison group.

The proposed mandatory model would last for six years, from January 1, 2025, through December 31, 2030. Participating hospitals would be evaluated across three domains (achievement, efficiency and quality) and receive a compiled performance score, which would determine payment. The payment would be made either to the hospital or to CMS depending on performance, which the chart below details by performance year (PY).


Final Performance Score PY 1 PYs 2 – 6
60 – 100 Upside risk payment Upside risk payment
41 – 59 No payment No payment
0 – 40 No payment Downside risk payment
  • Upside Risk Payment: Participants that score above 60 points would qualify for an upside risk payment, which could be up to $8,000 per Medicare fee-for-service (FFS) kidney transplant depending on hospital performance.
  • Downside Risk Payment: Participants that score below 40 points in PYs 2 – 6 would be required to pay CMS a downside risk payment, capped at $2,000 per Medicare FFS kidney transplant. The payment would be adjusted depending on performance.

So, what does the back-to-back announcement of two proposed mandatory models mean? Plain and simple, it means that some hospitals could be required to simultaneously participate in multiple initiatives that might cause them to lose money if they aren’t able meet certain performance targets. CMMI is clear in both the TEAM and IOTA model proposals that it would be possible for hospitals to be selected for both. CMMI also states that hospitals wouldn’t get a pass from the mandatory models if they also participate in other APMs, including accountable care organization (ACO) initiatives such as the Medicare Shared Savings Program or the ACO Reach model. With respect to the IOTA model, CMMI acknowledges that some transplant hospitals are eligible for and participating in other kidney care payment models but claims that there won’t be significant interference.

CMMI seeks comment in the IPPS reg on allowing overlap between TEAM and the States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model. Under the AHEAD model, up to eight states will enter into agreements with CMMI to establish total cost of care targets. Hospitals that choose to participate in the model will receive global budgets in lieu of FFS Medicare payments. While CMMI proposed that hospitals in Maryland – which uses hospital global budgets – would be excluded from TEAM, it did not explicitly propose to also exclude hospitals that participate in AHEAD. In explaining its reasoning, CMMI noted concerns that excluding hospitals that participate in AHEAD might reduce the volume of beneficiaries in TEAM.

Thus, all in all, hospitals could find themselves in a situation where they are in many APMs at the same time – some of which, one could argue, have overlapping financial incentives. There are total cost of care incentives (AHEAD), shared savings incentives (ACO initiatives) and bundled payment financial incentives (TEAM). Those are a lot of incentives for hospitals (and CMS) to keep track of, and the administrative burden put on hospitals to do so could be substantial.

We will leave you with some food for thought (eggs, anyone?). The possibility of overlapping incentives raises the question of whether the costs of certain episodes of care and any associated savings or improvements in quality will be attributed to the correct initiative. In other words, if there are multiple initiatives all aimed at improving quality and reducing costs, which one is actually achieving the intended results? Being able to parse out cost and quality attribution in the model evaluations will be critical to expanding the model to other populations. And, the number of possible overlapping models for hospitals raises the question of how mandatory participation in one (or more) will impact participation in voluntary models. For example, is a hospital that is required to participate in TEAM or IOTA (or both) less likely to opt into a global budget under AHEAD?

It is important to remember that both the TEAM and IOTA model are just proposed at this time, and there is still an opportunity to submit comments. TEAM comments are due on June 10, 2024, and IOTA comments are due on July 16, 2024. Both models also would start under the Biden administration’s second term or a new Trump Administration, and priorities could potentially change before the models actually started.

Until next week, this is Jeffrey (and Julia and Leigh) saying, enjoy reading regs with your eggs.

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