Table of Contents

About the CMS Alliance to Modernize Healthcare

Health Care Payment Learning & Action Network (LAN)

Executive Summary

Overview

Purpose of the White Paper

Definitions

Assumptions

Key Principles

Core Recommendations on Establishing and Updating the Benchmark

Recommendations on Risk Adjusting Regional and National Benchmarks

Conclusion

Appendix A: Roster

Appendix B: LAN Related Content

The following terms are defined within the white paper as it relates to population-based payment. For a full list of terms and definitions view our work product glossary – coming soon.

Full Continuum of Care

All aspects of care delivery, spanning preventive to end-of-life services in all settings.

Financial Attribution

A financial benchmark is a population-based spending level that is used to establish PBP rates for providers. Financial benchmarks may be based on a provider organization’s spending in the previous year (i.e., “historical” benchmarks), on regional or national spending levels (i.e., “regional” and “national” benchmarks), or through some mechanism (e.g., bidding). Once a method for setting benchmarks is in place, updated benchmarks must be risk-adjusted to take into account patient mix. Additionally, financial benchmarks should be adjusted to account for geographic variation in input costs (e.g., wages, rents, etc.) if variations exist across the covered region, but they should not be adjusted on account of variation in utilization of medical care.

Population-Based Payment Model

A payment model in which a provider organization is given a population-based global budget or payment and accepts accountability for managing the total cost of care, quality, and outcomes for a defined patient population across the full continuum of care. PBP models discussed in this paper correspond to payment models in Categories 3 and 4 of the LAN’s APM Framework.

Total Cost of Care (TCOC)

Financial benchmarks reflect the TCOC for a given patient population over a given period of time. For the purposes of setting the benchmark, TCOC calculations should only include services covered under the insurance plan, because it would be unreasonable for benchmarks to reflect payments for services that are not covered (e.g., dental services). Nevertheless, the Work Group strongly believes that the scope of TCOC should be as broad as possible and should “carve in” behavioral health care and pharmaceutical costs, because these are critical areas of care for patients and have a significant impact on national health expenditures and patient outcomes. The Work Group also believes that TCOC should be: 1. Measured consistently within market segments (e.g., commercial, Medicare, and Medicaid); 2. Attributed to provider organizations that take accountability; 3. Designed to allow for maximum flexibility in how provider organizations spend money, including investments in social services and other interventions that address social determinants of disease (and in fact may not have been used to set the benchmark). Finally, TCOC (as opposed to benchmarks) can be used to compare the efficiency of similar types of providers, and the Work Group believes that providers’ TCOC performance should be shared widely, in the manner described in the PBP Data Sharing White Paper.

Clinical episode payment models are different from traditional FFS health care payment models in which providers are paid separately for each service they deliver. Instead, clinical episode payment models take into consideration the quality, costs, and outcomes for a patient-centered course of care over a set period of time and across multiple settings. This course of care is known as the clinical episode. Research suggests that when payments for health care are based on the care delivered in a clinical episode, the result is increased coordination of care, enhanced quality of care, and less fragmentation in the medical system. This leads to better experience and health for patients and lower costs for payers and providers.