The Centers for Medicare and Medicaid Services will offer as many as eight states up to $12 million each to implement a new payment model designed to improve population health, the agency announced Tuesday.
The Advancing All-Payer Health Equity Approaches and Development Model is the latest iteration of the CMS Innovation Center’s global budgeting program, offering hospitals a fixed payment amount per year to work with primary care providers to improve chronic disease and behavioral health management, boost care coordination and connect patients with social service programs that address housing, transportation and other needs. Participating states will be accountable for quality and population health outcomes and reducing avoidable healthcare spending, CMS said.
“In our current healthcare system, fragmented care contributes to persistent, widening health disparities in underserved populations,” CMS Administrator Chiquita Brooks-LaSure said in a news release. “The AHEAD Model is a critical step toward addressing disparities in both healthcare and health equity while improving overall population health.”
States will have 90 days to apply once the first application period opens this fall, and CMS will start evaluating their programs in January 2026. The second application window will open next spring. The model will conclude for all participants in December 2034.
The AHEAD program payments would fund care for traditional Medicare and Medicaid beneficiaries, while other payers are encouraged to use a similar payment model for specific patient populations, the agency said in the news release.
States have rolled out various forms of global budgeting programs over the past decade, seeking to limit unnecessary healthcare spending, buoy low-volume rural hospitals and incentivize preventive care to keep patients out of the hospital. Capitated, upfront payment models have had mixed success, sometimes limited by the number of participating hospitals, which are often wary of taking on downside risk where they would be on the hook for any unexpected costs if patients are readmitted to the hospital, for instance.
Maryland added a global budget provision to its long-standing hospital all-payer payment system in 2014, in which the state sets the fixed payment amount based on hospitals’ historical net revenue and updates the rate to reflect inflation, changes in patient populations and services provided. The model helped cut hospital spending by more than 6.6% from 2019 to 2021, leading to a $781 million reduction in total spending over that period, according to a December 2022 report from consultancy Mathematica.
Vermont shaped its 2017 voluntary all-payer accountable care organization model after Maryland’s global budgeting program. Vermont’s accountable care organization covers Medicare, Medicaid and commercial payers, requiring those who participate to pay similar rates for all services.
The Center for Medicare and Medicaid Innovation launched a pilot program in 2019 for rural Pennsylvania hospitals, in which Medicare and Medicaid as well as some commercial insurers paid hospitals a fixed amount to cover all inpatient and hospital-based outpatient services. The program resulted in lower cost of care per beneficiary compared with the national average, 80% of participating hospitals improving avoidable utilizations and 83% reducing the frequency of hospital-acquired infections, according to an analysis of 2019-2021 data from the state of Pennsylvania.
In 2021, CMMI rolled out a similar program called the Community Health Access and Rural Transformation model across several states. But the agency ended the program in February 2022 as adoption lagged in rural areas. Researchers estimated the model saved Medicare about $381.5 million over three years, but noted that most participants exited the program when the time came to assume downside financial risk.
Under the AHEAD model, each state will have a Medicare total cost of care growth target determined by CMS. The all-payer cost growth benchmark, which will be set by states, will encourage states to align payer efforts, the agency said in a news release.