How to Make APMs Work

Submitted by hci3-usr on Friday, April 22, 2016 - 04:17

Newtown, CT – April 22, 2016

As medical specialty societies, hospitals and health systems go about busily defining episodes of care to power bundled payments, let’s make sure they succeed – Way before the HITECH Act and its trillion dollar subsidization of electronic medical records, several voluntary industry efforts had been launched to facilitate the exchange of data between EMRs. One camp militated for the creation of a common data structure that all EMRs would adhere to. As such, vendors would compete on the usability of their application, and countless other features, but not on the ability to lock data in. Of course, most rejected that notion because it would make it far too easy to switch EMRs. They won and patients lost. We’re at a similar junction in the history of alternative payment models and the decisions that episode designers will make in the next months and years will determine the fate of the adoption curve. As we’ve written about extensively, the single biggest barrier to widespread adoption of bundled payments has been the lack of operational infrastructure within health plans. However, that problem is being solved with the introduction of new applications that are built to help sort medical claims into episodes, accumulate costs as they are incurred, and reconcile those costs against negotiated budgets. Of course, to work, these “engines” must consume episode definitions, and just as importantly, those who design episodes must structure them in a common way so that they can be consumed. And therein lies the key to success.

What this means to you – From New York’s Memorial Sloan Kettering to Irvine’s Hoag Orthopedic Institute, and from the American Gastroenterological Association to the American College of Surgeons, there are a lot of experts working on alternative payment models that will get physicians out of the claws of the Merit-based Incentive Payment System. For most of these specialists, bundled payments are the logical choice because they’re not about to take on global capitation or other flavors of total costs of care. And so they’re defining episodes for use in bundled payments. Some are looking at branding and marketing these definitions. The somewhat delusional hope is that national and regional health plans will simply flock to adopt these definitions and implement them. The question episode designers should ask themselves is “how in the world will payers adopt these definitions and turn them into an operational construct for payment?” And another pertinent question is to wonder what payers can do with a bunch of episodes defined in different ways and using different underlying metadata structures. For those who aren’t as neck deep into the nitty gritty of how to make APMs work, metadata refers to the structured data that contains the information about the episode. For example, the set of diagnosis or procedure codes that, when present on a medical claim, could trigger the episode. If all episode designers present the information in a different structure, then it becomes pretty hard for payers (and others) to develop applications that can consume those definitions and do something with them. So heed this warning and the lesson learned from EMRs. If we don’t use a common metadata structure when defining episodes, we will gradually increase the barriers to adoption instead of reducing them. And all the work and effort deployed today across the country will be for naught.


Francois Sig


Francois de Brantes
Executive Director