Supporting Fair APM Payments: AMA Backs Accounting for Social Determinants of Health
By Joey Berlin Texas Medicine January 2020


Alternative payment models (APMs) are considered a key part of the future of value-based care. But for them to be successful, the American Medical Association says, APMs need to be fair, which means adjusting for the circumstances that make physicians’ cost and care challenges unique.

At its Interim Meeting in November, the AMA House of Delegates adopted policy that mandates AMA support the use of risk adjustment in APMs offered by Medicare and commercial insurers. That includes adjusting for socioeconomic factors that can impact a patient’s health, such as food insecurity and lack of transportation.

In its report to the House of Delegates, AMA’s Council on Medical Services said today’s risk adjustment isn’t comprehensive enough. (See “An Unfair Game,” page 18.)

“Most risk adjustment systems only predict about 20-30% of the variation in services and spending across patients and are designed to predict spending on a large insured patient population, not adjust for differences in patient needs,” the report said. “For example risk adjustment that significantly weighs factors such as age and gender communicates a limited picture of the patient.”

And most existing systems don’t account for social determinants of health when “the link between non-medical factors and poor health outcomes is well documented,” the council wrote. Such flaws inappropriately penalize physicians who care for challenging patients, making it harder for physicians to sustain their practices and access to care, the report said.

Tyler anesthesiologist Asa Lockhart, MD, a member of the council, uses two contrasting patient archetypes to illustrate the council’s focus on social determinants:

“The patient who lives in an affluent area of town and has no restrictive access problems from the standpoint of travel, versus the patient who lives under a bridge where there’s no bus service, who does not have a telephone, does not have the money for copays. [They may have] the same diagnosis, but two very different reasonable expectations of compliance, as well as just being able to access [care] in the first place. We’re trying to bring that awareness,” he said.

The council’s report outlines several risk adjustment strategies insurers should consider, including risk stratification – which involves grouping patients by similar complexity and care needs – and outlier payments – which insurers pay to physicians for encounters with “exceptionally costly” patients. 

“Basically, we want to make sure we’re capturing as many of the factors as we can so that the risk model is valid,” Dr. Lockhart said.

Following adoption of the final report, AMA policy now supports:

• Risk stratification systems with “fair and accurate payments based on patient characteristics, including socioeconomic factors, and [based on] the treatment that would be expected to result in the need for more services or increase the risk of complications;”

  • Risk adjustment that uses fair and accurate payments for external price changes that are out of physicians’ control;
  • Exclusions for “services that the physician does not deliver, order, or otherwise have the ability to influence;” and
  • Mechanisms that account for “changes in science and practice as to not discourage or punish early adopters of effective therapy.”


The council report also said improving risk adjustment models would produce “positive spillover effects in other areas of payment policy” besides APMs, specifically citing Medicare’s Merit-Based Incentive Payment System (MIPS), which adjusts fee-for-service payments based on performance in four categories.

The Texas Medical Association has repeatedly asked Medicare for better risk adjustment in MIPS.

 Tex Med. 2020;116(1):26
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Last Updated On

January 02, 2020

Originally Published On

December 20, 2019

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