January 25, 2024

Empowering Care: The Role of Alternative Payment Model Design in Advancing Equity


Michael Au
Senior Manager, Care Transformation


Alternative Payment Models, with intentional design considerations for health equity, can uniquely contribute to addressing disparities.
Tweet Email

Alternative Payment Models (APMs), incentivizing clinicians to provide high-quality, cost-efficient care beyond traditional fee-for-service payments, hold immense potential to revolutionize health care delivery, expanding access, improving outcomes and addressing health disparities. However, to unleash their transformative power, APMs must be thoughtfully designed to prioritize health equity and mitigate unintended negative consequences. Factors such as poverty, institutional racism, education, economic opportunities, insurance coverage and the living environment significantly influence health equity. When capitated payments and performance incentives fail to account for the necessary resources to provide adequate care, practices serving populations with higher medical and social risks may face financial challenges, ultimately impacting health outcomes negatively.

Multi-Stakeholder Alignment

Multi-stakeholder collaboration is pivotal in aligning the design and implementation of a payment model that champions health equity. Through the California Advanced Primary Care Initiative, PBGH’s California Quality Collaborative (CQC) and partner Integrated Healthcare Association (IHA) bring together health care payers to collectively strengthen primary care delivery. The initiative aims to facilitate the delivery of high-performing, value-based care, reducing costs while enhancing quality and equity. CQC and IHA collaborated with health plans to develop a common hybrid primary care payment model, incorporating key recommendations from subject matter experts in payment model design and health equity intended to strengthen health equity in APM design and implementation, regardless of geography. The payment model is comprised of three key elements: direct patient care payment, population health payment and performance-based payment.

Recommendations to Advance Equity

Element 1: Direct Patient Care Payment

  • Transition from fee-for-service (FFS) to capitated payments. Health Plans and other stakeholders working to develop APMs should consider gradually transitioning from FFS to capitated payments to provide upfront funding for clinical services and key staff roles, addressing social factors influencing health and advancing equity. Incremental approaches, such as phased strategies and tracking provider preferences, can facilitate a smooth transition.
  • Incorporate risk adjustments for PMPM. Adopt risk adjustment into APM contracts, acknowledging the underlying clinical and social risk of the population. This ensures that reimbursements account for higher-risk populations, recognizing the need for additional resources to eliminate health inequities. Clear goals and method determination are essential in building an effective risk adjustment strategy.

Element 2: Population Health Management Payment

  • Incorporate a distinct population health management payment. Separating the population health management payment from patient care payments supports practice improvement, especially for historically under-resourced providers serving populations experiencing health inequities. Payments can be tied to specific activities, with requirements related to the promotion of health equity, fostering targeted interventions and support.
  • Provide technical assistance. Effective technical assistance should be offered to providers, encompassing guidance and support for culturally and linguistically appropriate quality improvement interventions. Tailored technical assistance can facilitate the integration of community-based providers, ensuring alignment with health equity goals.

Element 3: Performance-Based Payment

  • Weight quality-based payments to equitable health outcomes. Develop financial incentives that meaningfully reward the reduction of health disparities and promote equitable health outcomes. Establish improvement and attainment goals with expectations for data stratification by race and ethnicity. Incentives should align with measures required to be stratified by national and state governing bodies, fostering a focus on equity performance.

APMs, with intentional design considerations for health equity, can uniquely contribute to addressing health disparities. Direct investments and dedicated support are crucial elements, ensuring that practices serving rural or underserved areas have a viable path to success within the payment model. Multi-stakeholder alignment and ongoing collaboration are key to driving cooperative changes and improving the delivery of care. The journey toward APMs requires collective efforts and guidance from diverse stakeholders, from payers and providers to community-based organizations and those receiving care.

For a more detailed look at the recommendations, read our latest issue brief.

Related Content

A Journey of Resilience and Advocacy in a Complex Health Care Landscape

When David Ford received a life-altering colorectal cancer diagnosis in 2015, he was thrust into the complex world of navigating the health care delivery system which revealed significant disparities especially prevalent in minority communities.

Exploring Capitated Payment for Primary Care in California

Hybrid payments that include capitation offer a promising alternative to traditional fee-for-service models, focusing on quality over quantity to enhance patient outcomes and system efficiency.

From Data to Delivery: Measuring Advanced Primary Care in California

CQC and IHA executed a pilot project in California, bringing together four large health care purchasers — Covered California, California Public Employees’ Retirement System (CalPERS), eBay and San Francisco Health Services System — and 13,055 primary care practices.

Advanced Primary Care Key to Reducing Health Inequities

Robust, comprehensive primary care – a critical foundation for a more cost-effective, high-functioning health system – is equally important in helping boost health equity.