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Our Take: Alternative payment models continue to gain traction, new survey shows

Nov 25, 2019

Editor’s Note: Because of the upcoming holiday, Our Take will not be published on Dec. 2. We wish you and yours a happy Thanksgiving. Look for the next issue of Our Take in your inbox on Dec. 9.

The Health Care Payment Learning & Action Network (LAN) recently released results of its 2019 APM Measurement Effort, an annual survey that seeks to measure the rate of adoption of alternative payment models (APMs) across the nation.

According to the LAN report, 35.8% of total U.S. health care payments in 2018 were tied to APMs, up from 34.0% in the previous year.
“[E]vidence shows that health care payment can improve quality of care and have the largest impact on cost,” said LAN co-chair Dr. Mark McClellan. “That’s why shared accountability is so important to the future of payment reform, and why the federal government, states, and private-sector leaders are taking new steps to support health care providers in moving away from fee-for-service. This shift is a critical part of ensuring high-quality care delivery, positive outcomes, and reduced costs.”

Our Take

Let’s dive a little deeper into the numbers. But first, we need to clarify something about LAN’s APM Framework, which is excellent.

LAN has four categories of payments. Category 1 is traditional fee-for-service; Category 2 is fee-for-service linked to quality and value, such as pay-for-reporting or pay-for-performance. Category 3 includes APMs that are built on a fee-for-service architecture, like ACOs — APMs with shared savings and upside or two-sided risk. Category 4 includes population-based payment models, such as capitation, global budgeting, and payer-provider systems.

To be specific, the 35.8% number given above refers only to Category 3 and Category 4 APMs, according to LAN’s model.

LAN provides us with more detail by payer type and, for Categories 3 and 4, by percentage of health care dollars:
• Medicare Advantage – 53.6% 
• Traditional Medicare – 40.9%
• Commercial insurance – 30.1% 
• Medicaid – 23.3% 
In 2018, 39.1% of payments were in Category 1, compared with 41.0% in 2017. Roughly one-fourth of payments were in Category 2 both years (25.1% in 2018 and 25.4% in 2017).

LAN’s sample is substantial. The APM Measurement Effort includes Medicare data, along with data from 62 health plans and seven fee-for-service Medicaid states — about 226.5 million people, representing a total of 77% of covered lives in the U.S. 

The beauty of LAN’s framework and methodology is that it defines APMs in a comprehensive way that we can all agree on.

For instance, in our ongoing integrated health system market study, one of the questions we ask executives during interviews is, “What percentage of your business is represented by alternative payment models?”

Here’s what one IDN executive recently said in response to that question:

“The ACOs that we have are shared savings programs, so they would fall into the value-based program side. You could say we’re in touch with 900,000 lives, and 440,000 are in ACOs — so we’re approaching 50% in a value-based arrangement. But if you were to ask me the revenue for the system, it’s north of 95% fee-for-service.”

Denominators matter

Of course, these data are different by design because LAN surveys payers, not providers. 

LAN acknowledged limitations in its methodology, which attempts to measure the amount of financial incentives to providers. 

“According to health plans, this information is difficult to collect, as incentive payments are often made in the year following the reporting period,” the group noted in the report. “Some health plans also indicated challenges with breaking out incentive amounts from any base payment, particularly if they offer multiple forms of incentives to a provider.”

Nevertheless, payers remain optimistic about APMs: 97% agreed that APM adoption will result in better quality of care; 95% agreed that APM adoption will result in improved care coordination; and 88% agreed that APM adoption will result in more affordable care.

What else you need to know

HHS and legislators are looking into Ascension and Google’s “Project Nightingale,” a collaboration that entails the use of Google’s artificial intelligence and machine learning capabilities in conjunction with Ascension’s database of patient records — which represents tens of millions of patients — to help providers deliver better care. Although the project has been underway for about a year, a report by the Wall Street Journal earlier this month caught the attention of federal officials; the report revealed that patients had not been informed that their data would be shared with Google.

While Ascension and Google contend that they are complying with HIPAA and other industry regulations, HHS’ Office for Civil Rights initiated an inquiry to ensure that necessary privacy protections “were fully implemented.” In addition, House Energy and Commerce Committee members have requested briefings from both businesses by Dec. 6. Meanwhile, Dr. David Feinberg, the former CEO of Geisinger who now heads Google Health, sought in a blog post to more fully explain the purpose of the collaboration and assure patients that the privacy of their data was a top priority.  
UPMC Health Plan and Biogen signed a value-based agreement for Tecfidera (dimethyl fumarate) and Avonex (interferon beta-1a). Both are specialty drugs used to treat relapsing forms of multiple sclerosis (MS). Under the contract, Biogen will reimburse UPMC Health Plan for the drugs based on “patient-reported measures of disability progression in a real-world population,” UPMC said in a press release, noting that this arrangement is the first of its kind, as previous value-based contracts for MS drugs have been based on “surrogate clinical indicators derived from claims and electronic health record data.” The agreement was shaped in part by findings from a recent study by UPMC’s Center for Value-Based Pharmacy Initiatives, which found that patients, providers, caregivers, and others unanimously ranked “worsening physical disability” among the most meaningful MS outcomes.  
The Blue Cross Blue Shield Association (BCBSA) will launch a national high-performance network (HPN) in January 2021, Crain’s Chicago Business reported. The network, which will cover more than 185 million people in 55 markets throughout the country, will consist of health care providers who routinely delivery high-quality care at lower prices. The Blue HPN is in response to demands by large national and regional employers for more consistent pricing and quality measurements across their markets, the association noted. 
Notable FDA approvals
Novartis received approval for Adakveo (crizanlizumab-tmca), a targeted treatment that reduces the frequency of sickle cell disease-related pain episodes known as vaso-occlusive crises, or VOCs. Sickle cell disease, a genetic condition that affects how red blood cells are shaped and how they carry oxygen, is associated with chronic inflammation and can lead to life-threatening complications. Adakveo was approved two months ahead of the FDA’s priority review action date; it is indicated for patients age 16 or older. With a price tag of $2,357 per vial, monthly infusions of Adakveo could cost nearly $9,500 — but because it can lead to lower overall health care costs by reducing patients’ hospital stays, analysts expect that payers will be receptive to covering the drug. Novartis said in a news release that Adakveo would be available “in the coming months.” If it sells as anticipated, the drug could generate annual revenue that exceeds $1 billion. 
Alnylam’s Givlaari (givosiran) is the first drug to gain FDA approval to reduce acute hepatic porphyria (AHP) attacks, which can lead to severe pain and paralysis, respiratory failure, seizures, and changes in mental status, according to the FDA. Chronic kidney disease and liver disease are among the potential long-term complications of AHP, which Alnylam described in a press statement as “a family of ultra-rare, genetic diseases.” The approval was granted months before the priority review deadline and makes Givlaari Alnylam’s second FDA-approved RNA interference drug. According to FiercePharma, analysts have expressed concern over Givlaari’s safety profile in clinical testing, stating that the “more than double [serious adverse events] exhibited in the treatment arm compared to placebo could be signs of a safety signal.” The injectable treatment has a list price of $39,000 per vial, for an average annual cost of $575,000 per patient, although Alnylam said mandatory discounts would lower the price to approximately $442,000.   
Pfizer’s Abrilada (adalimumab-afzb), a biosimilar to AbbVie’s Humira, was approved last Monday, but don’t expect it to be available anytime soon. In its announcement of the approval, Pfizer said it is working to make Abrilada available in the U.S. “as soon as feasible based on the terms of our agreement with AbbVie” — which means that Abrilada most likely won’t launch until 2023. Abrilada is indicated for certain patients with rheumatoid arthritis, Crohn’s disease, ulcerative colitis, plaque psoriasis, and other inflammatory diseases.  


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