Starting in November 2023 and running through March 2024, state governments were able to apply for the first round of funding for the AHEAD model from the federal Centers for Medicare and Medicaid Services (CMS). This payment model is a global payment program to improve care quality and reduce health care costs.
AHEAD, which stands for States Advancing All-Payer Health Equity Approaches and Development (AHEAD) Model, is a total cost of care (TCOC) payment method designed to improve the total health of a state population and lower costs, CMS explained. Also, the AHEAD model is designed to improve population health, advance health equity and reduce disparities in health outcomes, CMS said. Using a TCOC approach, a state would assume responsibility for managing health care quality and costs across all payers, including Medicare, Medicaid, and private coverage, the agency added.
The primary participants in the model will be hospitals and primary care practices. Participating hospitals will get a fixed amount of funding for the year under a global budget designed to encourage hospitals to eliminate avoidable hospitalizations and improve care coordination among hospitals, primary care providers, and specialists, CMS explained.
Participating health systems would get an assigned global budget to finance all medical services for a specified patient population, explained health policy experts who wrote, “Looking AHEAD to State Global Budgets for Health Care,” in the New England Journal of Medicine. CMS will pay participating hospitals based on historical revenue and their patients’ medical needs, the policy experts explained.
If the payments exceed the costs of care, hospitals can keep the excess revenue, but if hospital costs exceed payments, hospitals would absorb those costs, they wrote. “The rationale for this model is that fixed budgets—which are independent of the volume and type of services provided—create incentives to reduce unnecessary utilization and to shift investment away from high-intensity services and toward primary and preventive care,” the policy experts added.
The program builds on the experiences of states that have used global budgets, particularly Maryland but also Vermont and Pennsylvania, the policy experts explained. Spending on hospital care in Maryland slowed after the state officials required global budgets in 2014, they wrote. The AHEAD program aims to improve primary care by encouraging investment in preventive services to reduce avoidable and costly hospitalizations, the experts added.