Two New Federal Initiatives Could Help Change the Way We Pay Physicians

Congress is considering bipartisan proposals to reform Medicare physician payment and strengthen participation in accountable care models, which seek to reward better outcomes rather than greater service volume. But more than a decade of experience has shown that changing financial incentives is not enough. Providers also need the workforce, technology, leadership, care management tools, and infrastructure to respond to them.

The Center for Medicare and Medicaid Innovation (CMMI) has long understood this challenge. It pairs new financial incentives with technical assistance, learning collaboratives, data support, and other resources. But still, implementation is difficult. The models must remain standard enough so that outcomes can be evaluated across participants but must also allow for the necessary flexibility to adapt reforms to local markets.

Against that backdrop, two new federal initiatives offer different approaches to advancing payment reform: the Achieving Healthcare Efficiency through Accountable Design (AHEAD) Model and the Rural Health Transformation Program (RHTP). AHEAD, a comprehensive state-led payment model being tested by CMMI, directly implements new payment methodologies and accountability structures. RHTP, a temporary program established by Congress to strengthen rural health care, provides states with resources to support infrastructure and delivery system changes needed to develop and sustain new payment approaches. These two initiatives were developed separately and for different purposes, but both allow states to translate federal policy into payment and delivery system change. They differ substantially in how the reforms are structured, financed, and implemented.

AHEAD establishes a common federal framework for statewide payment reform and accountability. At the same time, states must align Medicaid and commercial payers, develop governance structures, engage stakeholders, and adapt implementation to their local markets. In doing so, the model allows CMMI to test a shared approach to payment reform while recognizing that there are important differences across health care markets.

RHTP takes a different approach. Rather than establishing a specific payment model, it gives states substantial resources and flexibility to strengthen the capabilities that can support payment reform, subject to category-specific funding limits. In each budget period, provider payments are capped at 15 percent of a state’s award, while certain infrastructure, technology, and administrative investments are subject to separate caps. Within these parameters, states can invest in workforce, health information technology, care management, technical assistance, governance, and payment model development. To ensure a longer-term commitment to goals, the Centers for Medicare and Medicaid Services (CMS) has established phased funding, annual performance reviews, and program targets focused on sustainable rural health transformation. States are using this funding and flexibility to pursue several distinct pathways to payment reform.

State RHTP plans reflect different starting points and ambitions, positioning the program as a flexible bridge to more advanced payment reform. Some states are preparing providers to enter existing accountable care models, while others are expanding or strengthening established reforms, and still others are developing new payment approaches.

Looking Ahead

Together, AHEAD and RHTP highlight the importance of building provider capacity to translate new financial incentives into changes in care delivery, which is a part of payment reform that often receives less attention than payment methodology itself. Payment models can create incentives for greater accountability, but providers also need the workforce, technology, care management capabilities, governance structures, and operational ability to respond to them.

AHEAD and RHTP approach that challenge from different directions. AHEAD begins with a common federal payment and accountability framework and gives states flexibility in how they implement it. RHTP gives states broader discretion to use federal resources to strengthen rural delivery systems, including by preparing providers for financial accountability, supporting existing reforms, or developing new approaches. The initiatives also intersect: Georgia is using RHTP resources to prepare rural providers for future participation in AHEAD, while Maryland is pairing RHTP investments with its existing AHEAD strategy.

These experiences may provide useful perspective as Congress considers physician payment reform and as CMS continues to refine its Innovation Center portfolio. For much of the past decade, payment reform debates have focused primarily on how to design better incentives and payment methodologies. AHEAD and RHTP create an opportunity to better understand the conditions needed for payment reform to succeed. Their concurrent implementation may offer important lessons about the respective roles of federal policy, state leadership, and targeted investment in moving providers from readiness to meaningful participation in more accountable models of care.