The New Gold Standard in Quality Payments: Alternative Payment Models

Should Your Practice Reach for the Gold?

As healthcare shifts from a fee-for-service to a value-based system, Medicare is making sweeping changes to how it pays physicians.

The Centers for Medicare and Medicaid Services (CMS) has introduced new regulations and reporting requirements – as well as unprecedented potential for financial rewards and penalties.

Medicare’s far-reaching impact

CMS is responsible for about half of all U.S. medical claims – setting the standard for the industry. In other words, where CMS goes, commercial payers follow.

Indeed, doctors who achieve the highest levels of “value” will earn substantial increases in their Medicare Part B payments. Conversely, those who do little or nothing to address the new requirements will incur significant reductions. Commercial payers are adopting similar models, further expanding the potential impact of these changes—positive or negative—on a practice.

Physicians need to start acting now, so as not to fall behind and put their practices at risk. Fortunately, doctors don’t have to do it alone: a qualified enablement partner can efficiently manage this complex transition.


Choose your path:   

The Medicare Access & CHIP Reauthorization Act (MACRA) of 2015 created the Quality Payment Program (QPP), which offers physicians a choice between two different reporting paths. Both started in the 2017 reporting year:

  • The Merit-Based Incentive Payment System (MIPS). This new structure encompasses CMS’s current models for measuring physician quality and cost of care, and adds “clinical practice improvement” activities, such as expanding patient access or being a patient-centered medical home.
  • Advanced Alternative Payment Models (APMs). These are payment arrangements in which clinicians accept financial risk for providing coordinated, high-quality care. As an incentive to take on this risk, CMS offers increased monetary rewards. CMS has designated specific payment models as Advanced APMs – including certain medical homes, accountable care organizations (ACOs) and bundled payment models — and it will continue to approve new models. Advanced APMs are similar to one another, with variations based primarily on the different quality measures they use — such as those for primary care, oncology, and end-stage renal disease. In addition, CMS provides Advanced APM options that incorporate non-Medicare payment arrangements to encourage these advanced, value-based models across commercial payers and state Medicaid programs.

The APM track offers higher financial rewards than the MIPS track, but requires more advanced levels of value-based activities. APMs also require physicians to be part of a larger group (such as an ACO or medical home*), and to bear greater financial risk.

Most physicians who see Medicare patients were required to report under either the MIPS or Advanced APM track starting in January 2017. Those in Advanced APMs were still required to complete MIPS reporting for the first year (2017), so CMS can determine whether they meet the Advanced APM criteria. Additionally, 2017 MIPS reporting will provide spending benchmarks for a prospective Advanced APM.

*CMS has not yet defined the term “medical home.”

“We need to empower patients with information so they know when they’re picking a provider… is this a high value doctor? What’s the cost of the service and what are the outcomes? What’s the value for it?” – Seema Verma, CMS Administrator, in an interview with Forbes December 5, 2017


Weighing The Options

Although these systems are complex, one thing is clear: Doctors must determine where they stand – and where they want to go – in order to plan effectively for their future success. Whether they report under MIPS or pursue the Advanced APM track will depend upon their goals, interests and preferences for their practice.


  • Do you want your income to be more certain but with lower potential rewards (MIPS) or less certain but with higher rewards (Advanced APM)?
  • Would you rather be measured on your own (MIPS) or as part of a virtual group (MIPS or APM)?
  • What would your future revenue look like under each model?

The status quo is not an option. At minimum, most physicians must meet MIPS requirements or face increasing penalties. The components of MIPS are shown below. For more information about MIPS, download our white paper titled “How Physicians Can Win in the New Healthcare Environment.”

Components of MIPS (MIPS Score: 0 – 100 Points)

Advancing Care Information (successor to Meaningful Use): 25% Advancing Care Information includes measures related to patient engagement, patient electronic access, and use of certified electronic health record technology (CEHRT).

PQRS/VBM Quality: 50% Physician Quality Reporting System—now being replaced by MIPS reporting—required physicians and other eligible providers to report quality data in order to avoid Medicare payment penalties. Value-Based Modifier is the measurement program that preceeded MIPS. VBM quality is based on PQRS data, including outcome measures and patient surveys.

VBM Cost: 10% in 2018, 30% in 2019 Value-Based Modifier cost is a provider’s Medicare cost data.

Clinical Practice Improvement: 15% CMS lists more than 100 qualifying activities, from increased patient access and care coordination, to enhanced patient engagement and being a patient-centered medical home.

MIPS: More Information

MIPS features a continuum of financial incentives and penalties, which will increase annually through the 2022 payment year. These adjustments can range from +/- 4% of Medicare Part B payments in 2019, to +/- 9% in 2022. Additional payments are available for exceptional performance. (There is a two-year lag between reporting and payment years.)

Alternatively, the Advanced APM option provides a 5% incentive payment for the first five years (payment years 2019-2024), followed by higher fee schedules than MIPS. In addition, this track will feature larger annual Medicare Physician Fee Schedule updates in 2026 and beyond.1 The risks and rewards are explained in more detail on the following pages.

This is “a historic opportunity to finally move to a system that promotes quality over quantity and begins the important work of addressing Medicare’s structural issues.” – Congressman Fred Upton, Chairman, House Energy and Commerce Committee

Criteria for Advanced APMs

It is important to distinguish between APMs and Advanced APMs. APMs include key features that enhance value and help physicians earn payment incentives. However, only certain APMs – those considered Advanced – are eligible for greater incentives over MIPS payments and are not subject to MIPS penalties.

An Advanced APM must meet the following criteria:

  1. Use certified electronic health record technology (CEHRT) to document and communicate clinical care. In its first year, 50% of the APM’s eligible clinicians (ECs) must use CEHRT. After the first year, 75% of ECs must use CEHRT. (Under the CMS Shared Savings Program only, ECs may receive a penalty or reward based on their degree of CEHRT use.)
  2. Report quality measures comparable to those of MIPS. The APM can use actual MIPS measures or other measures that are evidence-based, reliable and valid. At least one outcome measure must be used, unless none are available under MIPS. The APM’s Medicare Part B payments are based on these quality measures.
  3. Assume sufficient financial risk. The APM entity must assume risk for monetary losses of a certain magnitude. These losses are CMS penalties that kick in if the APM exceeds its expenditure benchmark by a specific amount. Or, the APM can avoid the risk requirement by being an “expanded” medical home model per the CMS Innovation Center. Moreover, CMS applies lower financial risk standards to medical homes that are not expanded to accommodate entities with 50 or fewer clinicians.

The standard risk requirement is as follows:

  • Total risk of at least 8% of the average estimated Parts A and B revenue of the participating APM entities for the qualifying-participant performance period in 2017 and 2018 (the revenue-based standard), OR 3% of the expected expenditures that an APM entity is responsible for under the APM for all performance years. The 8% revenue-based risk will continue through the 2020 performance year. (Total risk is the maximum amount of possible losses.)2
  • Marginal risk of at least 30%. (Marginal risk is the percentage of expenditures above the APM benchmark for which the APM entity is responsible.)
  • Minimum loss ratio (MLR) of no more than 4%. (MLR is the amount by which spending can exceed the APM benchmark before the APM entity is responsible for losses.) In other words, CMS has established provisions to cap potential losses associated with assuming downside risk.

Types of Advanced APMs


Shared Savings Program CMS Tracks 1+, 2 and 3

Next Generation Accountable Care Organization (ACO)

Comprehensive Primary Care Plus (CPC+)

Comprehensive End-Stage Renal Disease Care Two-Sided Risk (ESRD or CEC: large dialysis organization arrangement)

Comprehensive Care for Joint Replacement (CJR) Payment Model Track 1 – CEHRT

Oncology Care Model (OCM) Two-Sided Risk Arrangement


All-Payer Combination Model A combination of Medicare and Other Payer Advanced APMs (e.g., Medicaid and Medicare Advantage)


CMS Innovation Center models (under MACRA section 1115A, other than a Health Care Innovation Award)

Demonstration models under the Health Care Quality Demonstration Program or the Affordable Care Act


Advanced APMs: Potential Rewards

Qualifying Advanced APM entities will receive a 5% Medicare Part B incentive payment from 2019 through 2024. Starting in 2026, they will receive a higher fee schedule update: 0.75% for Advanced APMs versus 0.25% for physicians reporting under MIPS. Advanced APM participants will also be excluded from MIPS adjustments.

In order to receive incentive payments for Advanced APM participation, clinicians must meet either certain payment percentages or patient volumes through the APM. For instance, in the 2018 reporting year, clinicians must receive at least 25% of their payments or see at least 20% of their patients through an Advanced APM. These figures increase over time, as shown in the table below.

Participation in “Other Payer” Advanced APMs (such as those arranged through commercial payers) can count toward these requirements. (See next page for a potential example of an Other Payer Advanced APM). Moreover, an “All-Payer Combination Option”—based on a clinician’s level of Medicare plus “Other Payer” Advanced APM participation—offers another approach, starting in the 2019 reporting
year. These models will enable clinicians to more easily meet the minimum payment/ patient thresholds for Advanced APM participation. (A separate set of Medicare and non-Medicare thresholds applies to these models.)

Clinicians who participate in Advanced APMs but don’t meet these incentive payment requirements can still receive financial rewards under MIPS. They would receive MIPS credit in the Clinical Practice Improvement category. Providers can also avoid MIPS penalties if they meet a lesser standard: For the 2019 and 2020 payment years, they must receive at least 20% of their Medicare payments or see at least 10% of their Medicare patients through an Advanced APM. Those figures rise over time, reaching 50% and 35% respectively by the 2023 payment year.

CMS has already met a key goal: 30% of Medicare payments were based on quality and value by the end of 2016. The goal is now 50% by the end of 2018.

A Successful Example: ‘Other Payer’ Model   

Continuum Health has managed a rewarding, value-based payment arrangement since 2012 between a large commercial payer and a primary care and specialist group serving approximately 20,000 member patients ages 18 and over. This is an example of the type of models that could satisfy CMS’s “Other Payer” Advanced APM category*.

The model’s financial arrangement includes:

  • Up-front incentive payments by the payer based on each practice’s number of payer member patients (per-member-per-month fee).
  • The payer provides shared savings incentives based on performance: Physicians receive bonuses based on quality, overall cost of care and patient engagement.

Outcomes to date include:

  • 17% lower overall cost of care
  • 19% reduction in inpatient admissions
  • 90th percentile of care quality, as ranked by the National Center for Quality Assurance
  • Hospital 30-day readmissions reduced to 12%
  • Emergency department visits lowered by 6%
  • Provider revenue increased by 5-10% through value-based rewards

Disclaimer: This case study is intended to provide an example of how an actual Continuum client has benefited from Continuum’s services. Continuum does not claim that the outcome of this particular case study is a typical result, or that it is necessarily representative of all those who will use its services. Continuum expressly disclaims any representations or warranties in relation to this case study or the information presented in this whitepaper.

Keys To Success

The model uses a centralized and scalable care coordination program that includes the services of registered nurses, a social worker, a pharmacist and support staff. The care coordination team is responsive to both practices and patients, and works proactively to oversee each patient’s health. The centralized design makes the program affordable to practices of all sizes.

Care coordination is a vital element of “practice transformation” – the shift to a patient-centered, value-based approach that permeates every aspect of a practice. Continuum helps each practice transform through other enhancements as well. These activities are supported by actionable intelligence, as determined through reporting and analytics.

*This model’s acceptance by CMS is pending

Requirements for Incentive Payments to Clinicians for Participation in Advanced APMs*

Clinicians must meet either payment or patient requirements.

ACOs: Threshold for Advanced APMs

Certain ACO models—Shared Savings Program Tracks 1+, 2 and 3—meet the minimum criteria for an Advanced APM and can therefore be a good starting point for physicians who choose the Advanced APM option. The models are similar, but Track 3 raises the bar with greater risk and greater financial incentives. Track 1, on the other hand, does not qualify as an Advanced APM but is also not subject to CMS penalties.

ACOs are groups of doctors and other healthcare providers who formally join together to provide coordinated, high-quality care to their Medicare patients—and to share in the savings they achieve for Medicare.
A well-designed ACO can be highly successful for both patients and physicians. Indeed, doctors will likely realize cost savings through the ACO’s operational efficiencies, in addition to earning incentive payments from CMS. For instance, care coordination helps reduce redundant services and avoidable hospitalizations.

An ACO and a medical home* (which is typically much smaller) share many of the same features, and both increase quality and save healthcare dollars over the long run:

  • Planned coordination of chronic and preventive care
  • Strong patient access and continuity of care
  • Risk-stratified care management
  • Coordination of care across providers
  • High level of patient and caregiver engagement
  • Shared decision-making
  • Payment arrangements in addition to, or substituting for, fee-for-service payments

*CMS has not yet defined the term “medical home.”

Public Reporting & Transparency

Physicians also need to be aware that their reported data will likely become publicly available at some point. CMS plans to post results of its Quality Payment Program (QPP) – for both MIPS and Advanced APM tracks – at the Physician Compare website (

This may include:

  • Names of clinicians who participate in Advanced APMs
  • Names and performance of Advanced APMs
  • MIPS scores for clinicians, including aggregate and individual scores for each performance category

Doctors should consider this transparency when determining which path to take and how quickly to move from MIPS to the Advanced APM track.


In today’s value-based healthcare landscape, advanced payment is no longer one-size-fits-all. Each practice must determine the path that will enable it to be most successful —with rewards based on high-quality care, wise spending, and strong patient satisfaction.

What should physicians do now?

Doctors must prepare right away for these changes, or risk being left behind. However, they don’t need to do everything at once. Practices can create a step-by-step plan, which they can implement over time. A qualified enablement company can provide invaluable assistance in this process.

Here are some tips to get started:

  • Focus on quality. Make sure you have the nuts and bolts of quality programs in place. Strategies include proactive gap closure at the point of care, care coordination, enhanced patient access, strong patient engagement, and referral management (making referrals to like-minded, value-oriented providers).
  • Continue to pursue MIPS quality measures. The effective use of electronic health records (EHRs) will also remain a key contributor to quality, although it is reported under the Advancing Care Information (ACI) component of MIPS. ACI (which has replaced Meaningful Use) accounts for 25% of a provider’s MIPS score.
  • Educate yourself about QPP and its two tracks (MIPS and Advanced APMs). Read up on the changes, or reach out to a knowledgeable advisor.

Where to get help

The right enablement partner can guide you in these decisions and their implementation – and keep up with CMS’s evolving regulations and requirements. At Continuum, we also help design value-based payment models that meet the needs of both physician enterprises and their commercial payers.

About Continuum Health

As a physician enablement company, Continuum Health delivers managed solutions to provider groups and aggregators, helping foster self-sufficiency by maximizing fee-for-service payments, transitioning them to value-based programs and preparing them for risk. Continuum also collaborates with payers to help drive value-based adoption among providers and improve the health outcomes of patients. The company optimizes performance through value-based care, practice management services, revenue cycle management, and specialty care solutions. Thousands of physicians, specialists and nurse practitioners caring for millions of patients depend on Continuum’s business and clinical experts to help achieve their goals.