According to CMS documentation, the transition to value-based payment generally involves two major shifts from traditional fee-for-service payment. 1. Accountability for both quality and efficiency. Value-based payment models link payments to providers to the results of health care quality and efficiency measures. CMS uses a variety of measures to assess health care quality and efficiency and to hold physicians and other providers accountable for the health care they deliver. Quality measures include process and outcome measures. Process measures assess the extent to which providers effectively implement clinical practices (or treatments) that have been shown to result in high-quality or efficient care. Examples of process measures are those that measure care coordination, such as the percentage of patients with major depressive disorder whose medical records show that their physician is communicating with the patients’ other physicians who are treating comorbid conditions. Outcome measures track results of health care, such as mortality, infections, and patients’ experiences of that care. Efficiency measures may vary across models. For example, models may require that a minimum savings rate be achieved, which is established using a benchmark based on fee-for-service claims as well as other information such as patient characteristics, or that cost targets are achieved for various episodes of care. 2. Focus on population health management. Value-based payment models encourage physicians to focus on the overall health and well- being of their patients. Population health management includes provider activities such as coordination of patient care with other providers; identification and provision of care management strategies for patients at greatest risk, such as those with chronic conditions; promotion of health and wellness; tracking patient experience; and using health information technology (IT) to support population health. In value-based payment models, physicians and other providers are paid and responsible for the care of a beneficiary for a long period and accountable for the quality and efficiency of the care provided. In contrast, Medicare fee-for-service payments to providers are tied only to volume, rewarding providers, for example, on the basis of the number of tests run, patients seen, or procedures performed, regardless of whether these services helped (or harmed) the patient. This shift in care delivery can require substantial investments by providers. For example, providers may need to invest in health IT to manage patients and record data necessary for quality and efficiency measurement and reporting. Providers may also need to hire additional staff to assist with population health management activities, such as care coordination. The CMS Innovation Center has developed and is testing a number of value-based payment models. The following are examples of Medicare value-based payment models in which physician practices can participate. These models are often referred to as alternative payment models. ACOs. As noted earlier, ACOs are groups of physicians—including independent physician practices—hospitals, and other health care providers who voluntarily work together to give coordinated care to the Medicare patients they serve. When an ACO succeeds in delivering high-quality care and spending health care dollars more efficiently, part of the savings generated goes to the ACO and part is kept by Medicare. ACOs participate in models with upside risk only or models with both upside and downside risk. Bundled payment models. Bundled payment models provide a “bundled” payment intended to cover the multiple services beneficiaries receive during an episode of care for certain health conditions, such as cardiac arrhythmia, hip fracture, and stroke. If providers are able to treat patients with these conditions for less than the target bundled payment amount and can meet performance accountability standards, they can share in the resulting savings with Medicare. CMS’s initiative, Bundled Payments for Care Improvement (BPCI), tests four broadly defined models of care, under which organizations enter into payment arrangements that include financial and performance accountability for episodes of care. Comprehensive primary care models. Comprehensive primary care models are designed to strengthen primary care. CMS has collaborated with commercial and state health insurance plans to form the Comprehensive Primary Care (CPC) initiative. The CPC initiative provides participating primary care physician practices two forms of financial support: (1) a monthly non-visit-based care management payment and (2) the opportunity to share in any net savings to the Medicare program. In January 2017, CMS will build upon the CPC initiative, which ends December 31, 2016, by beginning CPC Plus, a comprehensive primary care model that includes downside risk. In November 2016, CMS published a final rule with comment period to implement a Quality Payment Program under MACRA, which established a new payment framework to encourage efficiency in the provision of health care and to reward health care providers for higher-quality care instead of a higher volume of care. The Quality Payment Program is based on eligible Medicare providers’ participation in one of two payment methods: (1) MIPS or (2) an advanced alternative payment model. Under MIPS, providers will be assigned a final score based on four performance categories: quality, cost, clinical practice improvement activities, and advancing care information through the meaningful use of EHR technology. This final score may be used to adjust providers’ Medicare payments positively or negatively. CMS will begin assessing providers’ performance in three of the four performance categories in 2017. Cost will not be measured in the first year. The first year that payments will be adjusted is 2019 (based on the 2017 performance year). Under the final rule, an alternative payment model will qualify as an advanced alternative payment model if it has downside risk, among other requirements. Providers with sufficient participation in advanced alternative payment models are excluded from MIPS and qualify to receive incentive payments beginning in 2019 (based on performance in 2017). Providers who participate in alternative payment models that do not include downside risk, such as some ACO models, will be included in MIPS. The final rule refers to these models as MIPS “alternative payment models.” To coincide with the final rule, CMS also issued a fact sheet with information on the supports available to providers participating in the Quality Payment Program. In the final rule, CMS stated that protection of small, independent practices was an important thematic objective and that in performance year 2017 many small practices will be excluded from the new MIPS requirements due to the low-volume threshold. CMS also stated that while it is not implementing “virtual groups” for 2017—which would allow small practices to be assessed as a group across the four MIPS performance categories—the agency looks forward to stakeholder engagement on how to structure and implement virtual groups in future years of the program. Further, CMS is reducing the number of clinical practice improvement activities that small and rural practices will have to conduct to receive full credit in this performance category in performance year 2017. CMS also announced in April 2016 that it intends to solicit and award multiple contracts to qualified contractors for MACRA quality improvement direct technical assistance. Direct technical assistance through this program will target providers in small group practices of 15 or fewer, and especially those in historically under resourced areas, such as rural areas. CMS indicated that the purpose of the contracts is to provide a flexible and agile approach to customized direct technical assistance and support services to ensure success for providers who either participate in MIPS or want to transition to an alternative payment model, thereby easing the transition to a payment system based on performance and patient outcomes. In addition, CMS has been testing models aimed at helping small and rural providers participate in value-based payment models. For example, in 2016, CMS began the ACO Investment Model, which provides advanced up-front and monthly payments to providers so they can make important investments in their care coordination infrastructure. According to information on CMS’s website, the ACO Investment Model was developed in response to stakeholder concerns and available research suggesting that some providers lack access to the capital to invest in infrastructure that is necessary to successfully implement population care management. According to literature we reviewed and the 38 stakeholders we interviewed, small and rural physician practices face many challenges associated with deciding whether to participate, when to begin participating, or whether to continue participating in value-based payment models. We identified 14 challenges that can be classified into five key topic areas: (1) financial resources and risk management, (2) health IT and data, (3) population health management care delivery, (4) quality and efficiency performance measurement and reporting, and (5) effects of model participation and managing compliance with requirements. (See table 1.) These 14 challenges are discussed in detail in the sections that follow. Small and rural practices need financial resources to make initial investments, such as those to make EHR systems interoperable, and need financial reserves or reinsurance to participate in models that have downside risk. Recouping investments may take years because the models must have a year of performance data, which then must be analyzed to determine any shared savings payment. Limited ability to take on financial risk because of having fewer financial resources/reserves compared with larger providers. Some stakeholders told us that small and rural practices have few financial resources and financial reserves. This limits their ability to take on the downside risk associated with some value-based payment models. In some value-based payment models, providers are financially responsible if their actual spending for treating Medicare beneficiaries exceeds the payment amount they receive from Medicare. In other models, a provider’s spending is compared to its historical spending, and if spending is higher than the historical benchmark, the provider has to repay a portion of the exceeded spending to Medicare. As a result, in order to participate, practices need either to have financial reserves to cover instances such as patients with unexpectedly costly medical events or to purchase reinsurance to cover such expenditures, according to some stakeholders we interviewed. Some stakeholders suggested that for reinsurance to help small and rural practices, it must be affordable, and the types of reinsurance currently available are costly. High costs of initial and ongoing investments needed for participation. Some stakeholders reported that significant investments are needed for participation in value-based payment models. Initial investments can cost practices thousands if not millions of dollars, and it can be difficult for small practices to pay for this out of their own pockets, according to some stakeholders.