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Accelerating APM Adoption with Rural Providers

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Key takeaways:

  • Incenting rural providers to join APMs is crucial to CMS achieving their 2030 goal.
  • CMS is up against several challenges in increasing rural provider interest in these new payment arrangements.
  • Continue reading for four actions CMS can take to accelerate APM adoption with rural providers.

For more on this topic:


The Centers for Medicare & Medicaid Services (CMS) hopes to move all Medicare and a majority of Medicaid beneficiaries into an accountable care relationship by 2030. With nearly 1 out of 4 Medicare beneficiaries living in rural areas, this goal can’t be reached unless CMS moves a sizable number of rural providers into alternative payment models (APMs).

However, rural provider interest in these new payment arrangements lags behind urban counterparts. Additionally, certain design features may discourage accountable care organizations (ACOs) participating in APMs from recruiting rural providers into their networks.

There are several actions that CMS can take to incent more rural providers to join APMs.

Adopt More Sustainable Financial Methodologies for Rural Providers

Most APM financial methodologies are unsustainable for most rural providers. Rural providers operate under tight margins, making it difficult for them to absorb the steep discounts applied under APMs, while still making the necessary investments to enhance overall care and outcomes.

These challenges are even more acute for rural providers paid under cost-based reimbursement, such as Critical Access Hospitals (CAHs) or Rural Health Clinics (RHCs). These providers are generally paid a per diem or per visit rate based on the reasonable average cost of providing care and can experience significant variations in Medicare payments from year to year. For example, since a large portion of healthcare costs are fixed, CAHs and RHCs may see higher per stay or per visit costs as they see fewer admissions or patients. This variation and unpredictability can discourage ACOs from including these types of rural providers in APMs.

To help address these payment challenges, CMS should:

  • Lower the minimum savings rate (MSR) or reduce discounts applied under the models for rural ACOs. To incentivize more rural participation and to increase the likelihood that rural ACOs will share in savings, CMS should lower the MSR for rural ACOs. For models where discounts are applied, CMS should reduce discounts for rural providers and shift its focus to improving sustainability and access.
  • Adjust benchmark to account for historical underutilization of services. Rural patients are historically underserved and may have lower historical healthcare spending. CMS should adjust benchmark to account for potential increased utilization that may result from improved access and care coordination under ACOs.
  • Modify benchmarks to address cost-based reimbursement. CMS should modify models to hold ACOs harmless for cost increases that are driven by the underlying cost-based system. One approach would be to cap per day or per visit costs for CAHs and RHCs when calculating an ACO’s expenditures during reconciliation. This could be based on a rolling historical average and would help to smooth out variation in spending from year-to-year.
Provide New Opportunities for Upfront Funding

In addition to challenges with the financial methodologies, many rural providers lack the resources required to succeed in APMs, such as data systems or care coordination staff. Shared savings – which are often reinvested to help cover these costs – can take more than a year to come in.

CMS recently proposed a new upfront funding opportunity for low-revenue ACOs that are new to the Medicare Shared Savings Program (MSSP) and inexperienced with other ACO initiatives. Under the proposal, advance investment payments (AIPs) would be recouped through any shared savings earned by the ACO.

While this is a great step forward, CMS should reconsider limiting this funding to only low-revenue ACOs. Many rural providers use single TINs for the CAH and provider groups. Based on that structure, most will be unable to qualify as low-revenue. However, these groups would still benefit from upfront investment, as was shown through the ACO Investment Model (AIM).

According to the Model Evaluation for AIM, the program led to three key takeaways, all of which are consistent with CMS/CMMI’s current goals:

  • AIM ACOs were located in areas with greater healthcare needs and less access, and many indicated that the funds were critical to their formation.
  • AIM ACOs were successful in reducing total Medicare spending and related utilization without decreasing quality.
  • Most of the AIM ACOs provider participants continued in an MSSP ACO after the AIM program ended.

CMS should also explore partially forgiving advanced payments based on an ACO’s quality performance.

Create a Glide Path to Risk

Many rural providers have limited experience in value-based care and may lack the financial reserves necessary to take on risk. CMS should develop a value-based purchasing program for CAHs that are not currently participating in APMs. This would be an opportunity for high-quality and efficient CAHs to earn a bonus based on population-based outcome measures and would put them on the path to value-based care. Second, CMS should allow rural ACOs at least two years to progress to the next risk level, with the option to progress faster.

Modify Risk Adjustment Approach

Studies have found that rural providers often have lower patient risk scores, despite evidence that rural patients often have higher rates of comorbid conditions and chronic disease. As a result, these lower risk scores are likely driven by coding practices and not a reflection of overall patient health.

To address challenges with risk adjustment, CMS should:

  • Address lack of historical coding by adjusting risk adjustment methodology. To do this, CMS should remove or set a higher risk score cap for beneficiaries aligned through rural providers. This would allow rural ACOs to more accurately capture patient risk scores. At a minimum, CMS should modify adjustments made to risk scores to ensure rural providers are not unduly disadvantaged by “normalization” factors.
  • Count diagnosis captured via telehealth for risk adjustment. For many rural patients, telehealth is a critical tool for accessing needed medical care, including primary care. CMS should allow rural providers to capture diagnoses for risk scores through telehealth visits.
  • Incorporate social determinants of health (SDOH) into risk adjustment methodology. We applaud recent CMS efforts focused on improving and standardizing data collection related to SDOH. This data will be valuable in improving risk adjustment methodologies for undeserved beneficiaries, such as those residing in rural areas.

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