Creating an Enabling Environment for Specialty Alternative Payment Models: A Potential Role for Philanthropy

J Clin Pathways. 2023;9(2):29-32. doi:10.25270/jcp.2023.03.03

Specialty care is a major driver of increases in health care spending in the US.¹ As a result, experts have called for more value-based care and payment models for specialty populations.² However, based on our experience conven­ing multistakeholder working groups to address specialty alternative payment models (APMs), we believe the success of a value-based transformation in spe­cialty care has been uneven, as others have observed.³

Specialty value-based APMs have progressed more intermittently than models for primary care.⁴ The Center for Medicare and Medicaid Innovation (CMMI), which has focused considerably on total cost of care models for primary care populations, has similarly grappled with how best to enable more specialty pro­viders to participate in value-based care.⁵ In the commercial sector, information on the experience of commercial insurers in these models is limited due to a lack of high-quality, published studies; furthermore, the literature that does exist highlights models for primary care over those for medical specialties, with some exceptions in oncology and surgical episode–based models.⁶ Data suggests com­mercial insurers continue to invest in various kinds of APMs, although the bulk of commercial payments remain in fee-for-service or upside-only risk models.⁷ Payers report privately that many individual specialties are too small to warrant a dedicated APM given the costs, complexities, and other challenges associated with developing and implementing such programs.

More research and transparency are needed to better understand how to op­timize and accelerate care delivery and payment innovation for specialty popu­lations, especially in the commercial-insurance space. Since 2017, our firm has conducted more than 200 individual and small-group interviews on value-based care with public and private payers, academic and community-based providers, subject matter experts, and others. These conversations were held in confidence or publicly summarized using a modified version of the Chatham House Rule, under which we do not attribute quotes to individuals or institutions, thereby encouraging candor. Drawing from this experience, we synthesize be­low several recurring challenges impeding broader develop­ment of specialty APMs and describe one potential solution: leveraging philanthropic resources to address persistent gaps. Given our extensive discussions with commercial-sector payers, our insights tend to focus on commercial specialty populations.

For several years, stakeholders have underscored the benefits of investing in value-based payment models for payers, clini­cians, and patients.^8,9 Although payers and practices continue to collaborate on specialty APMs, some emphasize privately that model development remains difficult, noting examples of pilots that failed to launch or were never expanded. Re­cent literature underscores the uncertain business case for payers and practices: stakeholders like CMMI have reported only modest outcomes to date from bundled payment and specialty APMs.¹⁰ As a complement to these findings, our in­terviews have highlighted several challenges that may create a chilling effect on model design and development.

Investment hurdles create a game of chicken

Providers and commercial payers frequently wait on each other to make the up-front investments necessary for specialty APMs. Provider groups want greater certainty that invest­ments in data, analytics, and staff will be recouped. Some con­solidate or form new alliances to combine resources, hopeful that new or innovative ways of contracting with payers will offer sufficient reward. Even larger academic medical centers report that they struggle to justify investments in value-based care–related tools, such as clinical pathways, to their C-suite. Limited confidence in return on investment is compounded by the fact that in any risk-based model, there is the possibil­ity of financial losses.

Broadly, payers and other stakeholders have adopted tac­tics to address these issues, including offering providers start-up support (eg, the Accountable Care Organization [ACO] Investment Model and the Massachusetts-based Community Care Cooperative in the accountable and primary care space) and ongoing per-member per-month payments (eg, the Oncology Care Model’s Monthly Enhanced Oncology Ser­vices payments). However, some providers have found these resources to be insufficient, and questions remain around to what extent these tactics enable long-term engagement by practices of diverse size, scale, and risk appetite, especially as supportive funds may be reduced over time.^11,12

In turn, commercial payers must demonstrate clear sav­ings to senior leadership to start or continue these types of programs, making it challenging to initiate new experiments, especially for small populations. Payers want certainty that programs will save money while enhancing quality at a scale large enough to offset the necessary internal changes re­quired for implementation. Expectations for demonstrating program impact tend to be shorter term than some payer leaders would prefer. The ongoing and start-up investments noted above also add costs for payers, making it more chal­lenging for them to achieve net savings targets quickly, espe­cially as evidence signals that practices generate more gross payment reductions later in model implementation.¹³

Third-party entities that take on risk on behalf of pro­viders are one potential solution to the above challenges. Such entities can provide the necessary risk appetite, infra­structure, and scale to manage payer contracts, thus miti­gating up-front investment and model participation risks. Examples in specialty care range from point solutions (eg, SonarMD in gastroenterology) or risk-taking across a single medical specialty (eg, New Century Health in oncology). However, not all practices want to work with third parties, raising questions about how to expand APM participation to more clinicians. Additionally, in many of these models, third parties, which are sometimes backed by private equity investors, may extract some of the value that practice partners create.

Broad-based understanding about model outcomes and alignment is lacking

There are three particularly acute critical knowledge gaps:

1. Successes and failures are not shared widely. Although some payers and providers publish data about specialty APMs, many do not. As such, some struggle to benchmark their efforts. Furthermore, some commercial payers and providers attempt to model CMMI’s programs, but the methodologies from CMMI’s efforts may not be relevant for commercial payers given the distinctions in patient populations and scale.

2. Specialty clinicians and payers struggle to define and prioritize optimal outcome measures, both from a clinical quality standpoint and a programmatic one. For example, since payers are particularly concerned about the achievability of measures in a defined time frame, some report prioritizing outcomes that are quick and easy to measure vs ones that are meaningful. Some oncology-focused literature has acknowledged the comparative ease of relying on process measures that can be readily extracted from claims vs outcome measures, which tend to have a considerable time lag, especially when relying on claims data.¹⁴

3. Alignment between ACOs and specialty models continues to challenge leaders, especially with how to appropriately assign accountability to specialists in areas with high ACO penetration. Leaders question how to reasonably negotiate and divide potential savings between primary care clinicians and specialists to the satisfaction of all parties.

Data gaps continue to inhibit the space

Payers want greater access to clinical data to create granular benchmarks and targets in APMs, but such data is not readily captured in claims and typically resides in providers’ internal systems, often in an unstructured format. On the other hand, providers participating in APMs are eager for real-time in­formation from payers to inform opportunities for improve­ment. The lack of optimal, seamlessly available data for payers and clinicians for building and implementing APMs means that more investment in improved data platforms, exchanges, or intermediaries is critical. Some large public-payer pro­grams, like in orthopedics, now use clinical registry–calcu­lated measures in conjunction with claims-based measures for the purposes of quality measurement, but commercial payers have privately reported struggling to easily replicate such approaches.¹⁵

The above investment, knowledge, and data gaps are not an exhaustive list of challenges facing specialty APMs today; however, they are striking in their persistence—we heard them 6 years ago, and we still hear them today.

The above trends signal a failure by the market to enable the kind of robust, long-term investments required to expand APMs to more specialties, especially for populations covered by commercial insurers. Payers and specialty practices note their appetite to continue to invest in this space; however, some of the aforementioned gaps complicate their business case, suggesting the need for more research, consensus-based standards, and tools to inform and support investments.

A diverse array of stakeholders may be able to help over­come these challenges, but these solutions are likely to re­quire further research, collaboration, technical knowledge, and support. In our perspective, grant-based funding from private philanthropic institutions—which in and of them­selves can take a variety of organizational shapes and struc­tures—is one overlooked resource that may better address these gaps. Institutions like the Patrick and Catherine Wel­don Donaghue Medical Research Foundation are already active on similar topics, while organizations like Arnold Ventures, the Robert Wood Johnson Foundation, and the Peterson Center on Healthcare address related US health care affordability issues.

In addition, profit-seeking forms of capital like private equity continue to invest in third-party solutions, many of which have an important role to play in specialty value-based care; however, given broad-based concerns about the extent of for-profit investment in health care, more inde­pendent, nonprofit, philanthropic resources that prioritize public health impact may have a complementary and mean­ingful role to play in cultivating transformative specialty payment models.¹⁶

The following are some specific examples of unmet needs in specialty APMs and value-based care that might benefit from grant-based support:

• Aligning stakeholders on optimal quality measurement and implementation—namely, in deepening consensus on core measures that could be deemed “fundamental” for APMs for specific specialties; there is relevant existing activity in this area, but payers and clinicians perceive that there is room for improvement on streamlining and prioritizing core measures and addressing implementation challenges linked to data silos.¹⁷
• Creating large-scale data pools that blend claims and clinical data to shed light on variation in cost and quality—eg, the community cancer initiative by the Hutchinson Institute for Cancer Outcomes Research. Such efforts would help establish baseline cost and quality that could help specialty communities with benchmarking, possibly on a regional or state-level basis. Large-scale data sets could also aid in identifying correlations across Medicare and commercial populations that might inform a better understanding of national quality and cost trends and decrease uncertainties for stakeholders looking to experiment in this space.
• Conducting more research on how value-based models can better align with or integrate into similar efforts by primary care or ACOs, especially exploring how secondary capitation might be structured in a way that sufficiently benefits both primary care practitioners and specialists. Recent research from the Duke-Margolis Center for Health Policy is a start.¹⁸
• Developing learning platforms whereby third-party institutions could share and aggregate outcomes data from specialty APMs on a confidential basis; in other words, a repository where commercial payers could provide information on cost savings and quality in an anonymous fashion so the community could assess successes and failures at scale, recognizing that there are a myriad of cost-, regional-, and contract-related distinctions that may make it challenging to compare “apples to apples.”
• Providing financial support to subsidize the up-front investment that practices need to undertake in data, analytics and tools (eg, clinical pathways), and human resources. Grant-based support could be targeted to help small, independent practices pilot and monitor the success of relevant tools and their implementation.
• Providing technical assistance or support—possibly through medical specialty societies—for small, community-based specialists to design APMs and develop them collaboratively with payers. Some practices report relying significantly on “sweat equity” in the past to design and advance APMs in their specialty.

Some stakeholders may question the fact that philan­thropic resources might indirectly support commercial payers’ or large-scale practices’ experiments in this area. In the examples above, third-party nonprofits, small specialty practices, and academic practitioners and researchers would directly benefit, but the results of their efforts would help advance learning across all stakeholders via precompetitive tools, research, and consensus-shaping activities.

Sustainability for the US health care system depends on col­lective outcomes from experiments in value-based care. Ide­ally, payers and practices should be prepared to make sub­stantial, long-term investments across a variety of specialties to realize this vision. In our perspective, this is unlikely to happen without a more supportive foundation on which these stakeholders can build. Grant-making institutions may be well-suited to help close investment, data, and knowledge gaps, and create a more enabling environment for value-based care across diverse specialties.

Authors: Elizabeth Shaughnessy, MA; Lindee Goh, PhD; Joel Ang, DPM, MS

Affiliations: Tapestry Networks, Waltham, MA

Address correspondence to: 

Elizabeth Shaughnessy, MA
303 Wyman St STE 300
Tapestry Networks
Waltham, MA
Phone: (978) 790-6703
Email: eshaughnessy@tapestrynetworks.com

Disclosures: The authors are consultants for Peterson Center on Healthcare; Arena Pharmaceuticals, now part of Pfizer; and Takeda.