An incentive for alternative payment models (APMs) that expired last year has been restored by Congress, offering an additional 3.1% on top of the positive payment adjustments made in the 2026 Medicare Physician Fee Schedule.
H.R. 7148, the Consolidated Appropriations Act of 2026, funds the federal government through Sept. 30 and includes provisions updating APM payment for qualifying participants, namely, providing the 3.1% incentive and lowering the participation threshold for the 2026 performance year.
In order to qualify, participants formerly had to receive 75% of their Medicare Part B payments through an advanced APM; the budget bill lowers that threshold to 50%.
Advanced APMs differ from other APMs by exposing clinicians to financial losses if cost or quality targets are not met. Examples include downside-risk tracks of the Medicare Shared Savings Program, the Kidney Care Choices Model, Bundled Payments for Care Improvement Advanced Model, and the Enhancing Oncology Model.
In the view of the Texas Medical Association’s Committee on Alternative Payment Models, these changes continue the federal government’s emphasis on value-based care and quality initiatives.
“You may still be paid fee-for-service, but value-based incentives are now built into every public payer program,” said Norman Chenven, MD, the committee’s chair.
However, those incentives may not meet practices’ financial needs in order to provide value-based care. Despite some increases targeted to APMs, the Medicare fee schedule does not tie payment to inflation, nor does H.R. 7148’s APM incentive.
“We’re still in a very complicated environment where the cost of care is going up and the amount of reimbursement, whether it’s commercial or governmental, is not keeping up with the inflationary impact on practices, whether it’s physician or hospital practices,” Dr. Chenven added. “For those doctors that are involved in alternative payment models, this is something of encouragement, but it’s hardly time to get out the champagne.”
Initially, under the Medicare Access and CHIP Reauthorization Access Act, qualifying APM participants received a 5% incentive. Then, from 2023 to 2025, the incentive was lowered to 3.5%. That incentive expired last year. As the Centers for Medicare & Medicaid Services does not have the authority to extend it, medicine appealed to Congress.
“Physicians participating in APMs have shown that they can reduce avoidable hospital admissions, increase preventive care, and improve chronic disease management, while maintaining high patient satisfaction. These benefits, however, do not materialize overnight,” the American Medical Association wrote in support of legislation last fall that would restore the incentive.
“They require long-term financial investments in staffing, analytics, patient engagement, and care coordination. Maintaining the APM incentive is not only a matter of fairness to participating physicians, but also a strategic investment in the kind of care Medicare beneficiaries deserve.”
Abilene internist Thomas Headstream, MD, also a Committee on Alternative Payment Models member, will join TMA’s associate vice president of innovate practice models, Kim Harmon, to update physicians on this and more APM developments at Local Medicine Matters in Abilene on Saturday, Feb. 21. “Value-Based Care: Something for Everyone... Really!” will be eligible for CME credit.