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Invited Commentary
Health Policy
September 24, 2021

Refining the Recipe for Alternative Payment Models for Surgical Care—Importance of Patient Mix and Venue Match

Author Affiliations
  • 1Olin Business School, Washington University in St Louis, St Louis, Missouri
  • 2Division of Transplant Surgery, Department of Surgery, University of California, San Francisco
  • 3Division of General Medicine, Department of Internal Medicine, University of Michigan, Ann Arbor
JAMA Netw Open. 2021;4(9):e2128258. doi:10.1001/jamanetworkopen.2021.28258

The transition from fee-for-service payment to a value-based reimbursement has proven challenging. Since its creation, the Center for Medicare and Medicaid Innovation (Innovation Center) has implemented more than 50 alternative payment models that reward health care practitioners for delivering high-quality, patient-centered, and cost-efficient care. To date, 6 of these models have generated savings to taxpayers: Accountable Care Organization (ACO) Investment Model; Home Health Value-Based Purchasing Model; Medicare Care Choices Model; Pioneer ACO Model; Prior Authorization of Repetitive, Scheduled Non-emergent Ambulance Transport Model, and the Maryland All-Payer Model (MAPM).1

The MAPM—which applies global caps on annual hospital expenditures and mandates reductions in avoidable clinical complications—generates a strong incentive by uncoupling revenue from the volume of services provided, and therefore has broad implications because it encompasses a substantial portion of health care spending. One of the key aims of this innovative all-payer approach is to provide incentives to clinicians to reduce preventable adverse patient outcomes and to decrease the use of unnecessary clinical services.

Aliu and colleagues2 compare the quality of care and costs of hospitalization for several elective surgical procedures in Maryland to control states before and after implementation of the MAPM program. Global budgets, like the many other alternative payment models being implemented and evaluated by the Innovation Center and by private payers, alter the financial incentives for provision of clinical services, including the decision to perform elective surgery. Using a difference-in-difference method, the authors conclude that Maryland experienced significantly reduced rates of avoidable surgical complications and lower increases in hospital costs. Although these positive results are notable, the authors acknowledge the uncertainty regarding whether these welcome findings are driven by the new payment model or by other factors, such as a documented shift in case mix toward younger and healthier patients in Maryland, or unmeasured influences such as potential spillover effects of these procedures being performed at ambulatory surgery centers.

In addition to its potential impact on the reported outcomes of adverse effects and expenditures, the observed shift in case mix to younger, healthier patients raises the possibility of reduced clinical appropriateness of the procedures evaluated in certain circumstances, as the rates of coronary artery bypass graft, carotid endarterectomy, spinal fusion, cesarean delivery, hysterectomy, and joint arthroplasty vary widely across geographic regions, and these procedures are frequently performed in circumstances for which outcomes are of marginal, unknown, or no clinical benefit to the patient (eg, carotid endarterectomy in absence of symptoms). Thus, before solid conclusions can be made regarding how a change to global hospital budgets impacts health outcomes and expenditures of elective surgical care, more detailed information on equity effects, clinical appropriateness, and site of care are warranted.

These data on elective surgical procedures add to the growing evidence base examining the effect of the MAPM on primary care use, hospitalizations, and cost of care.3 Maryland has built on its global hospital budget program to move to a Total Cost of Care Medicare model, where more outpatient care is capitated along with inpatient hospital services. Recently, the Innovation Center and health policy experts have advocated for reducing the number of payment models and working to ensure that those remaining are systematically aligned with each other and broader health system transformation efforts.1,4

An example of the challenges faced by current voluntary alternative payment models and an evolution toward better model alignment is the Comprehensive Care for Joint Replacement Medicare program. When participation in the model became voluntary rather than mandatory, only those hospitals that benefited financially continued their participation, blunting model savings and illustrating the difficulty of learning from voluntary value-based payment models.5 That said, mandatory participation might have negative tradeoffs as well, particularly within the context of surgical care. For example, some centers may be at a disadvantage if they care for more complex patients or those with higher levels of social risk (eg, dual-eligibility status). This stresses the importance of quality risk adjustment for mandatory APM’s in surgical care. Research recently published in JAMA Health Forum by Navathe and colleagues6 reported synergies between bundled payment and accountable care organization participation compared with participating in the bundled payment model alone. Simultaneous inclusion in both ACOs and bundled payment programs was associated with reduced readmissions and lower institutional postacute care spending.

In addition to the positive cost and adverse-event outcomes associated with alternative payment models reported by Aliu and colleagues,2 a departure from fee-for-service payment may influence care delivery in predictable and unpredictable ways, warranting further rigorous evaluation by the Innovation Center and other researchers. Examples of understudied areas of value-based payment models that might impact care delivery from a systemic and individual patient perspective include (1) access and equity effects; (2) system investment and hiring decisions; and (3) staffing, particularly to support the consistent focus on primary care in most APMs. Linking investment and hiring decisions to model outcomes would allow for greater understanding of the kinds of system priorities that lead to improved outcomes, which could inform future payment models. In addition, future research could explore how alternative payment models like the MAPM affect physician specialty and practice location choices. Along these lines, the definition of surgical episodes is a key consideration in the design of APMs. One size fits all time intervals may not be sufficient to engage each stakeholder or fully capitalize on the opportunities brought about by surgical APMs in particular.

Quality-driven alternative payment models such as the MAPM explicitly recognize the critical role of practitioners in determining clinical and financial outcomes. Chernew4 notes that APMs presume there is substantial waste in the health care system, and that a departure from fee-for-service payment would provide incentives for clinicians and health care systems to benefit financially if low-value care is eliminated and if quality is improved. While capitated programs like the MAPM change incentives more broadly, blunt approaches such as global budgets that lack clinical nuance may not always be sufficient to incentivize clinically appropriate care and to deter care that does not improve patient outcomes. This point can be illustrated by the frequent use of unnecessary preoperative testing prior to the use of clinically indicated, low-risk surgical procedures.7 Incorporating more detailed clinical information that would better determine whether a service was clinically indicated is a critical element in order to determine impact of APMs. Moreover, moving from a volume-driven to value-based system requires a change in both how we pay for care and how we engage consumers to seek care. Better alignment of clinically nuanced payments for practitioners with value-based insurance designs can incentivize more clinically appropriate care, enhance equity, and improve efficiency of medical spending.

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Article Information

Published: September 24, 2021. doi:10.1001/jamanetworkopen.2021.28258

Open Access: This is an open access article distributed under the terms of the CC-BY License. © 2021 Schwartzman DA et al. JAMA Network Open.

Corresponding Author: A. Mark Fendrick, MD, Division of General Medicine, Department of Internal Medicine, University of Michigan, Ann Arbor, MI (amfen@med.umich.edu).

Conflict of Interest Disclosures: Dr Fendrick reported receiving consultant fees from AbbVie, Amgen, Bayer, Centivo, Community Oncology Association, Covered California, EmblemHealth, Exact Sciences Corporation, GRAIL, Harvard University, Health Forum, Health & Wellness Innovations, Inc, Health[at]Scale Technologies, MedZed, Merck, the Montana Health Co-Op, Penguin Pay, LLC, Phathom Pharmaceuticals, Risk International, Sempre Health, Inc, the State of Minnesota, the US Department of Defense, VBID Health, LLC, the Virginia Center for Health Innovation, Wellth, Yale New Haven Health System, and Zansors outside the submitted work; receiving research support from the Agency for Healthcare Research and Quality, the Gary and Mary West Health Policy Center, Arnold Ventures, the National Pharmaceutical Council, the Patient-Centered Outcomes Research Institute, Pharmaceutical Research and Manufacturers of America, the Robert Wood Johnson Foundation, the State of Michigan, and the Centers for Medicare and Medicaid Services outside the submitted work; serving as co-editor of the American Journal of Managed Care; serving on the Medicare Evidence Development & Coverage Advisory Committee; and partnership with VBID Health. No other disclosures were reported.

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