Origins in Oregon: The Alternative Payment Methodology Project

Origins in Oregon: The Alternative Payment Methodology Project

Part 2: Building Trust and a Bridge to a New Way

(Note: Parts of this article originally appeared in Health Affairs Blog on April 14. An edited version is being reposted here as part of the research effort investigating the impact of APM on the delivery of primary care in safety-net populations. Part 1 was posted on April 17.)

In our prior post, we talked about how the traditional payment structure, which was linked to volume of visits, was a barrier to implementing high-performing, patient-centered primary care homes (PCPCH). PCPCH has the potential to enable comprehensive patient-centered care, focusing on overall health and reducing chronic conditions, but there is a glitch preventing its implementation. Community Health Center (CHC) providers were still paid by the number of patient visits at their centers. Under the PCPCH model, they also had to complete additional work, such as pre-visit planning and panel management. This increased workload wasn’t sustainable, which was the impetus for the Alternative Payment Methodology (APM).

The APM works as follows: Medicaid pays participating community health centers a monthly payment (a set amount per patient per month) for each enrollee, whether or not the person seeks care. One of the project’s first tasks was to negotiate the actual per-member-per-month reimbursement rates. To facilitate this process, the Oregon Primary Care Association (OPCA) brought in an external contractor with expertise in financial modeling and multiple community health center cost structures to help build the APM model. So many factors affect payment rates—patient complexity, Medicaid eligibility gaps, the movement of patients among clinics and providers, and how often patients utilize services.

Everyone—including OPCA, the health centers, and the state—recognized early on the need to develop a working pilot payment model—one that could change once they saw it in action. Everyone had to learn how APM payments work—and how they didn’t work. And they had to learn it on the job. Just the process of developing the initial rate was an exercise in building trust between the state and the health centers.

The participating pilot sites see a varied patient population. That means a one-size fits all approach would not work, so each site needed its own customized per-member-per-month rate. To come up with the rate, actuaries considered both individual fee-for-service rates and the utilization experience of each center in a given year. Because Medicaid patients aren’t necessarily consistently enrolled for 12 months, the rate accounted for the average length of time that individuals remained patients of a given health center. The state will study patient encounter data for the March 2013-March 2014 pilot year. It is comparing the payment each site would have received under the traditional fee-for-service structure with the amount they received under APM. If the APM amount is less, the state will make a supplementary payment to help the health center recoup its costs. The state will also monitor a set of quality and access measures to ensure that health center performance either improved or held steady.

To develop the payment rate, the team had to answer some tricky questions. Once you have someone in the primary-care patient home, how much work is it to care for that patient? The encounter estimates looked at historical visits, but patients can move between health centers. And once you change a team away from the provider centric visit model, how do you build that team to best improve care quality and access? Is it going to be more costly or less costly per patient? A lot of these possibilities are still unknown, and they will vary based on what services are already in a particular health center and a CHC’s specific population. “With all these unknowns, there’s really no reason a health center would do it unless they want to change the model [of care delivery]. Right? That should be the point of payment reform,” says Craig Hostetler of the OPCA. “I told the health centers to go into this with eyes wide open.” In a way, the APM will likely lead the state towards more accountable health care payments because CHCs are reporting cost, quality, and access indicators, versus just reporting visits.

While this model shifts payment from volume of care towards quality of care, this is not value-based pay. Value-based pay happens when the care delivery system rewards high-quality care using payment incentives and consequences that discourage inappropriate or unnecessarily costly care. The APM model is a bridge to value-based pay. It’s taking a fee-for-service system and converting it to a per-member-per-month rate, based on a fee-for-service baseline—with a promise to continue the movement toward value-based care. During the demonstration, we will collect data so we can work toward adjusting payments to a value-based system that also accounts for behavioral health and social determinants of health, and reimburses at a rate that allows the CHCs to succeed.

In future posts we will explore how the APM fits with other state and national health reform efforts and what was required to get the program off the ground in Oregon.

APM is currently being piloted at three Oregon Community Health Centers: Virginia Garcia Memorial Health Center, Mosaic Medical, and OHSU Family Medicine at Richmond. The clinics are receiving technical assistance from the OPCA and other community, regional and national partners.