GAO: Fewer providers in rural, underserved areas join advanced alternative payment models

Fewer providers in rural and underserved areas participated in advanced alternative payment models (APMs) compared to other providers over a two-year period, with the high cost a major barrier, a federal watchdog found.

The Government Accountability Office (GAO) released a report Wednesday covering the percentage of rural areas and places that have a small number of practitioners from 2017 to 2019. The report comes as the Biden administration is making a new effort to increase participation among such providers.

The report found 11.9% of providers in rural and underserved areas took part in advanced APMs in 2019, compared with 14.8% of providers not in such areas.

But the number of rural and underserved area providers participating in such models did increase compared to 2017, when 4.9% of them took part. However, 7% of providers that are not located in such areas participated that year.

GAO reached out to 15 stakeholder organizations to determine the reasons providers in such areas are so reluctant to shift to value-based care.

The top challenge was not having enough money to transition to the payment model. The challenges related to taking on more downside risk, where providers must repay Medicare for not meeting certain spending or quality targets, include a lack of capital and upfront costs.

“These upfront costs associated with APM participation may include hiring additional staff, developing new care management strategies and performing analysis to estimate the provider’s likely performance in an APM before joining one,” the report said.

Such providers often also operate on thin margins and may already be averse to taking on financial risk due to limited reserves.

“One stakeholder said that small practices are less able than large hospitals to absorb a potential reduction in revenue,” the report said.

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Such providers may have a small Medicare patient population, and it may be too hard to predict whether they can achieve key spending and quality benchmarks that determine whether providers get any share of savings.

The providers could also have a hard time controlling costs even if they want to. A key aim of APMs is to control costs across an entire episode of care, but rural and underserved providers may have to refer patients to a specialist that isn’t in their network, which “can result in costs beyond their control,” the report said.

Providers in larger, urban systems can control costs because they offer more services in one location.

Rural and underserved practitioners also would need to contract with outside firms to analyze Medicare data to assess their performance in an APM. However, providers in rural or underserved areas may lack the “capability or time to conduct the financial modeling that would allow them to predict how they may perform in an APM before committing to joining one,” the report said.

In addition, such providers have limited options of APMs to choose from due to geographic or participant restrictions.

For example, a popular APM is to become an accountable care organization (ACO). But the Medicare Shared Savings Program, which oversees ACOs, requires a minimum of 5,000 Medicare fee-for-service beneficiaries to participate, a challenging benchmark for those in rural areas to meet.

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The Centers for Medicare & Medicaid Services has made some decisions to try to get more rural and underserved providers involved in value-based care, including offering models with upfront funding to providers and technical assistance.

The agency also released a strategic plan last month that called for payment models to be more streamlined and equitable over the next decade. The Center for Medicare and Medicaid Innovation will work to ensure model parameters are more transparent and benchmarks are developed that spur more participation.

The strategic plan also floated offering upfront funds to smaller providers to help get them involved and defray some of the challenges to value-based care.