Alternative Payment Model Promises More Penalty Than Pay

Under the system, patients seek care and choose a provider, as always. Claims are submitted normally, and payers pay them. For each “episode of care”—from 90 days before the procedure to 30 days afterward—a principal accountable provider (PAP) is assigned. That physician is essentially the quarterback and is most influential in controlling costs.

At the end of the performance period, which covers one year, each PAP’s average cost per episode is calculated and compared to the average of the whole system. If their costs lie within a range—the top end is the “acceptable” line and the bottom is the “commendable” line—then there is no change to their reimbursements. But if their average falls above the range, they have to pay back half of the difference, with no limit on that amount. If their average cost falls below that range, they receive half of that amount back as a reward, as long as certain quality metrics are met, and there is a floor for this amount.

For a more accurate average, there are provisions to acknowledge cases that are extra challenging: Down syndrome cases or cases in which the tonsillectomy is performed on the same day as a uvulopalatopharyngoplasty (UPPP), for example, aren’t factored into the average.

It’s a model that could have implications beyond Arkansas; a similar system has been considered for use in other states and by Medicare, Dr. Manning said.

Dr. Manning emphasized that he was not necessarily a supporter of the system, although he participated in panels that helped to develop it, in order to try to “minimize harm” to patients and physicians.

Still, there have been difficulties. “If you have pediatricians who order a lot of sleep studies, those are included in your episode, irrespective of you ordering it,” Dr. Manning said.

And otolaryngologists may be penalized for using pathology services even when it is mandatory under their hospital’s bylaws. Also, Dr. Manning said, even though physicians were told there would be no “floating” floors or ceilings to the acceptable range of costs, that hasn’t been the case.

“After two years, that’s changed. The acceptable level that I showed you, above which you have a penalty, that’s been lowered,” he said. “Even with the resetting of those levels, the exclusion criteria, the basic quality metrics, and [the] overall functionality and validity of the program have not been reassessed by the workgroup, and the academy has not been engaged, not in a formal fashion.”