Understanding Value-Based Care and Alternative Payment Models

AONN+ 2020 Conference Highlights Special Feature —January 4, 2021

Aimed at providing higher-quality care without increased cost, value-based care and alternative payment models (APMs) are well-intentioned undertakings but can be nonetheless vexing for those involved. Providing a clearer picture of these concepts and what they entail, Rani Khetarpal, MBA, offered an overview for attendees.

“The good news is that we’ve learned a lot in the last decade or so,” she said.

The Oncology Care Model: A Closer Look

Originally a 5-year pilot introduced by the Centers for Medicare & Medicaid Services (CMS) in 2016 to test episode-based payment incentives and move away from the fee-for-service (FFS) model, the Oncology Care Model (OCM) sought to incentivize value-based care by enhancing communication between providers and patients; recognizing depression and distress in patients with cancer; addressing financial toxicity; and improving care coordination, symptom management, and palliative and end-of-life care. Extended through July 30, 2022, because of COVID-19, the OCM is based on 6-month episodes of care, and includes 95% of chemotherapy patients, 138 practices, and 10 commercial payers. Episodes include the total cost of care, encompassing all types of service and diagnoses.

“It’s being used as a foundation to build other APM models that look at total cost of care,” Ms Khetarpal explained, adding, “It sounds simple in theory, but it’s really not.”

Initially offering upside-only risk for participants, the OCM also provides the option for 2-sided risk.

Practices can still bill FFS payments under the OCM, but the program also includes Monthly Enhanced Oncology Services (MEOS) payments, along with the potential for performance-based payments (PBPs) if practices achieve savings and a quality score greater than 30%, Ms Khetarpal said.

Savings are determined using a benchmark episode price, which is set using a complex formula based on multiple factors. Determining quality score involves the use of 12 quality metrics that fall within 4 domains, including communication and care coordination; person- and caregiver-centered experience and outcomes; clinical quality of care; and patient safety.

Oncology Care Model Risk Choices

The advent of the OCM came with an upside-only risk model that rewarded participating practices with a PBP for the provision of quality care within the pricing target established by CMS. Practices were not penalized for exceeding this target, however. Representing the greatest risk for providers, 2-sided risk models hold practices accountable for costs above the established target, although practices qualify for larger payments under this model and avoid Merit-Based Incentive Payment System requirements, as well. Practices that had not achieved savings under the upside-only model were required to enter into 2-sided risk or drop out of the OCM in January 2020.


The OCM comes with its share of challenges for participants. “Identifying OCM beneficiaries and episodes has been a challenge,” Ms Khetarpal said, adding that the requirement of presenting patients with estimated out-of-pocket expenses represents another hurdle. “As we know, that’s a very difficult thing to do, to predict what’s going to happen.”

Reporting and data registry requirements represent a wieldy undertaking, and quality measures can be difficult to attain. The data reporting timeline represents yet another obstacle.


Resulting in a 1-year extension of the OCM, COVID-19 also brought about the exclusion of total clinical episodes from reconciliation if they included a coronavirus diagnosis. The pandemic has also impacted risk arrangements, with the option to forego upside and 2-sided risk, and MEOS payments remaining applicable. The PBP, however, does not remain applicable, including potential paybacks to CMS.

Ms Khetarpal said volume is going to be a major factor in the impact of COVID-19 on the OCM.

“I think it’s kind of wait and see,” she said. “But I think we’re going to learn a lot as we go forward.”

Successful Alternative Payment Models

The performance drivers most impactful on the success of APMs fall under 3 categories—drugs, emergency and inpatient care, and end-of-life care. Regarding drugs, using evidence-based pathways, point-of-care decision support, and accountability and adherence metrics, result in less expensive drug regimens without compromised quality, along with targeted interventions for patients. In the realm of care, real-time risk stratification, formalization of the nurse triage process, and managing “frequent fliers” in the emergency department pay off with consistent triage and targeting of high-risk individuals. At the end-of-life stage, earlier palliative and hospice care, patient education, and provider engagement offer dividends in the form of improved end-of-life transitions and advanced care planning, Ms Khetarpal explained.

A breakdown of costs reveals Medicare Part B and D drugs as the largest category of spend, comprising approximately 55% of overall expenditures. Emergency and inpatient care represent 15% to 20%, with other costs completing the picture.

Successfully transforming one’s practice into a value-based care model is a multistep process, involving data gathering and analysis, care transformation, financial adjustments, and performance analysis.

“Every cancer center is going to have a different model that aligns with them,” Ms Khetarpal said.

The Oncology Care First Model

Under development by the Center for Medicare and Medicaid Innovation, the Oncology Care First (OCF) Model is a sort of OCM 2.0, building on the former program. In lieu of FFS and MEOS, it would introduce a monthly population payment (MPP), along with dividing 2-sided risk into categories of more or less aggressive. All current quality measures and practice transformation initiatives would be maintained, with the potential addition of electronic patient-reported outcomes, for which practices would be allowed a ramp-up period to implement. Low-risk prostate, bladder, and breast cancers would be excluded. In addition, the pooling of providers will continue to be allowed under the model. Hospital outpatient departments will be able to participate if they partner with a physician group practice and more than 25% of chemotherapy is administered in the hospital outpatient department. The hospital outpatient department would also receive an MPP.

“There are a couple of very different factors between OCM and OCF,” Ms Khetarpal said. “The devil is in the details.”

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Last modified: January 20, 2021

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