Alternative Payment Model (APM)

Definition: An alternative payment model (APM) is a type of reimbursement model designed to incentivize coordinated, low-cost, high-value patient care and is applicable to a specific condition, care episode, type of provider, or population.¹ An APM is a deviation from the traditional fee-for-service approach, in which health care providers are paid for each individual service provided, which often maximizes quantity but can compromise the quality of patient care.² In contrast, the overarching goal of an APM is to provide quality and cost-efficient patient care. Each APM has entity-specific quality measures which must be met to be reimbursed. Though APM designs and measures can vary between entities, all entities structure reimbursement plans to hold providers and organizations accountable for meeting patient-centered goals, thereby encouraging quality over quantity in regard to care.

How it relates to ACO/PCMH and pharmacists in these settings: An APM consists of entities, or groups of health care organizations and clinicians who are accountable for achieving specific quality and cost-performance goals. ACOs and PCMHs are types of APM entities composed of physicians, hospitals, and other health care providers (e.g., pharmacists) committed to providing coordinated, high-quality, and necessary care for their patients.³

Involved organizations/oversight: The Centers for Medicare & Medicaid Services (CMS) routinely develops new approaches for APMs. CMS focuses on ensuring the overall APM design transforms clinical practices and improves clinical quality and patient experience.⁴ The Medical Group Management Association (MGMA) similarly advocates for the shift toward adopting APMs and created a tool kit to assess APM eligibility.⁵ MGMA also encourages involvement in advanced APMs, a subdivision of APMs.⁵ As more APMs are adopted, large health care organizations such as the American Medical Association, the American Physical Therapy Association, and the American College of Physicians also recognize the potential of APMs as reimbursement options, suggesting a promising future for APM utilization.^6–8

Resources

1. Centers for Medicare & Medicaid Services. Alternative payment models and the quality payment program. Baltimore, MD: CMS. Available at: https://innovation.cms.gov/innovation-models/qpp-information. Accessed August 13, 2024.
2. Fee-for-service. St. Louis Park, MN: Healthinsurance.org LLC. Available at: https://www.healthinsurance.org/about/. Accessed August 13, 2024.
3. The Society for Post-Acute and Long-Term Care Medicine. Alternative payment models. Columbia, MD: PALTmed. Available at: https://paltc.org/alternative-payment-models. Accessed August 13, 2024.
4. Centers for Medicare & Medicaid Services. Alternative Payment Model Design Toolkit. Baltimore, MD: CMS. Available at: https://aspe.hhs.gov/sites/default/files/private/pdf/234386/CMMIAPMToolkit.pdf. Accessed August 13, 2024.
5. Medical Group Management Association. APMs. Washington, DC: MGMA. Available at: https://www.mgma.com/advocacy/issues/quality-payment-programs/mips-apms/apms. Accessed August 13, 2024.
6. American Physical Therapy Association. Alternative payment models under Medicare and Medicaid. Alexandria, VA: APTA. Available at: https://www.apta.org/your-practice/payment/medicare-payment/alternative-payment-models. Accessed August 13, 2024.
7. American Medical Association. Medicare alternative payment models. Chicago, IL: AMA. Available at: https://www.ama-assn.org/practice-management/payment-delivery-models/medicare-alternative-payment-models. Accessed August 13, 2024.
8. American College of Physicians. Alternative Payment Models (APMs). Washington, DC: ACP. Available at: https://www.acponline.org/practice-resources/business-resources/payment/medicare-payment-and-regulations-resources/macra-and-the-quality-payment-program/alternative-payment-models-apms. Accessed August 13, 2024.

Contributing authors:

Heidi Lee, PharmD
Chapman University-SCAN-Providence PGY1 Managed Care Resident

Jelena Lewis, PharmD, BCACP
Assistant Professor of Pharmacy Practice
Chapman University School of Pharmacy

Last Updated 8/13/2024 by Morgan P. Stewart, PharmD, BCACP, BC-ADM