Alternative payment models (APMs) are central to the efforts to reduce the growth in healthcare costs and improve outcomes for patients. Yet some stakeholders remain skeptical of their potential. This is understandable, because APMs have shown mixed results. We have identified seven characteristics of well-designed models that yield meaningful savings for payers, improve margins for high-value providers, and improve patient outcomes.
1. Density and scale
For an APM to succeed, the proportion of the provider’s book of business included in the model must be sufficiently large (high density) to motivate providers to change, justify investments, and adopt dedicated clinical-operational workflows. When the proportion is small (low density), the incentive to change is weak. Worse, the provider’s economics may be adversely affected if changes spill over to fee-forservice (FFS) patients…