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On October 31, the Centers for Medicare & Medicaid Services (CMS) finalized the Ambulatory Specialty Model (ASM), a mandatory alternative payment model (APM) for select specialists who regularly treat heart failure or low back pain. ASM will test whether holding these specialists financially accountable under a two-sided risk model—with Medicare Part B payment adjustments of up to 9-12%, depending on the performance year (PY)—improves quality and reduces costs through more effective preventive care and chronic condition management.
ASM's scale is substantial. An estimated 8,600 physicians—from to-be-determined geographies, with specialties of general cardiology, anesthesiology, neurosurgery, orthopedic surgery, pain management, and physical medicine and rehabilitation—will be required to participate. The model will span seven years, with five PYs running 2027-2031 and five corresponding payment years running 2029-2033. Each PY, ASM participants are expected to treat roughly 600,000 heart failure and low back episodes for over 550,000 Medicare fee-for-service (FFS) beneficiaries with $2.8 billion in episode spending.
ASM's design is also substantial. Unlike other Center for Medicare and Medicaid Innovation (Innovation Center) models, ASM is a mandatory model that will measure performance on an individual clinician level, subjecting each physician who is an ASM participant to potential payment adjustments on future Medicare Part B claims. Furthermore, by leveraging the existing Merit-based Incentive Payment System (MIPS) Value Pathways, ASM serves as a ready framework for moving more specialists into APMs for high-volume, high-cost conditions or procedures.
And there's more to come. Even though ASM occupies nearly 500 pages of the pre-publication draft of the 2026 Medicare Physician Fee Schedule final rule, CMS states that it expects to publish additional details (including the list of ASM participants) and educational resources in 2026. In short, ASM is a significant undertaking that may foreshadow future value-based payment initiatives.
Overview of the Ambulatory Specialty Model
Model Design
ASM is an Innovation Center model that is designed to put specialists at the center of value-based care by holding them financially accountable for the quality and cost of heart failure and low back pain, two high-volume, high-cost chronic conditions (with aggregate annual spending under Medicare Parts A and B of $16-$21 billion). The model aims to:
- Increase collaboration between specialists and primary care providers (PCPs).
- Improve management of chronic disease and prevent additional disease through better risk assessment.
- Reduce avoidable hospitalizations and unnecessary procedures.
- Offer greater transparency in performance among participants and their peers.
- Measure outcomes that center on each patient's priorities.
- Empower specialists by aligning performance measures with factors they are better able to control.
Leveraging the MIPS Value Pathways (MVP) framework, ASM uses MVP measure sets to assess quality and cost of care. Like MIPS, ASM has four performance categories—quality, cost, improvement activities, and promoting interoperability—against which ASM participants' performance will be assessed. But ASM is more targeted. It will require ASM participants to report specific measures tailored to the chronic conditions they manage (rather than allowing physicians to choose the measures they report) and will assess their performance against their ASM participant peers (rather than assessing them against all reporting clinicians).
As with MIPS, ASM participants will continue to bill Medicare FFS during the five PYs (2027-2031), and payment adjustments for performance years (2029-2033) will be made in the second calendar year after each PY. Given the overlap with MIPS, ASM participants who satisfy the ASM eligibility criteria and data submission requirements during a PY will be exempt from MIPS.
Model Participation
A mandatory ASM participant is any physician who: (1) submits claims under the Medicare Physician Fee Schedule; (2) is identified by tax identification number (TIN) and National Provider Identifier (NPI) as being in an eligible specialty; (3) meets the episode-based cost measure (EBCM) threshold; and (4) is located in one of the designated geographic areas, which have not yet been selected but will comprise roughly one-quarter of core-based statistical areas (CBSAs) and metropolitan divisions.
The eligible specialties for ASM—general cardiology for heart failure, and anesthesiology, neurosurgery, orthopedic surgery, pain management, and physical medicine and rehabilitation for low back pain—were chosen because these specialists commonly treat these conditions in the ambulatory setting, develop long-term relationships with these patients, and co-manage these patients with PCPs. For purposes of ASM, physicians' specialties will be determined based on a plurality of their Medicare Part B claims, as assigned by the Medicare Administrative Contractor (MAC) and derived from physician-reported specialty designations in the Provider Enrollment, Chain, and Ownership System (PECOS), as with MIPS.
The EBCM threshold will be satisfied if, during any calendar year two years prior to an ASM PY, the physician treated at least 20 episodes of heart failure or low back pain for Medicare FFS beneficiaries. ASM will use MVP EBCMs for heart failure and low back pain to determine eligible treatment episodes. Although a physician who meets the ASM eligibility criteria for any ASM PY will be considered an ASM participant for the duration of the model (and, as a result, be included in the cohort against which individual performance will be assessed), physicians who do not meet all ASM eligibility criteria for a given ASM PY (e.g., failing short of the 20-episode volume threshold) would not be able to meet the minimum data submission requirements, which would result in no payment adjustment under ASM (and no exemption from MIPS).
CMS expects to publish a preliminary list of 2027 ASM participants (based on 2024 data) in early 2026 and the final list of 2027 ASM participants (based on 2025 data) in July 2026. CMS will reassess physicians for ASM participation for each PY.
Performance Measures
ASM will use MVP measures, claims data, and self-reported data to measure performance across four areas to determine an ASM participant's final score:
- Quality of Care. Quality will be assessed across three domains—excess utilization, evidence-based care and outcomes, and patient-reported outcomes and experience—using claims data and MIPS measures. Heart failure quality measures, for example, include MVP measures for controlling high blood pressure and functional status assessments. Those for low back pain include MVP measures for use of high-risk medication and functional status change. CMS will also use claims-based data to measure admission rates for unplanned cardiovascular-related admissions for patients with heart failure and a claims-based measure for patients with low back pain.
- Cost of Care. Cost and efficiency of care will be assessed through the MVP heart failure and low back pain EBCMs. These EBCMs are risk-adjusted and specialty-adjusted measures based on Medicare Parts A, B, and D data that are used to evaluate a clinician's cost to Medicare to manage and treat heart failure (and they exclude services that are clinically unrelated to the targeted condition of the measure).
- Improvement Activities. Care improvement activities will be assessed by whether ASM participants engage in care coordination activities with PCPs, including satisfying requirements to have collaborative care arrangements with PCPs (as described immediately below), engaging in preventive care screenings in partnership with PCPs, supporting lifestyle changes and health-related social needs (HRSN) screenings in partnership with PCPs, and bi-directionally exchanging data with PCPs. Improvement activities will be reported through an attestation process.
Collaborative care arrangements must include at least three of the following five collaborative elements: (1) data sharing (e.g., ensuring updates, test results, treatment plans, and follow-up recommendations are communicated timely and bi-directionally); (2) co-management (e.g., processes and practices through which both the specialist and PCP actively participate in managing the patient's care with clearly defined roles and responsibilities, such as shared decision-making and treatment planning); (3) transitions in care planning (e.g., processes and protocols for seamlessly transitioning a patient's care between the specialist and PCP or different care settings); (4) closed-loop communication (e.g., structured and coordinated processes for referrals between the specialist and PCP); and (5) care coordination integration (e.g., establishment of workflows between the specialist and PCP and outcome measures to assess performance).
- Promoting Interoperability. Promoting interoperability will be assessed based on ASM participants' meaningful use of certified electronic health record technology (CEHRT), reporting on certain objectives and measures specified (e.g., e-prescribing, querying of prescription drug monitoring programs, providing patients access to their health information), and engaging in activities related to supporting providers with the performance of CEHRT. Promoting interoperability will be reported through an attestation process.
CMS will calculate for each ASM participant a score of 0-100. The performance categories for quality and cost will each be weighted at 50%, and then CMS would make only neutral or negative scoring adjustments for the improvement activities category (0, -10, or -20) and promoting interoperability category (0 to -10). CMS's scoring design reflects its belief that performance on the categories for quality and cost is key to achieving ASM's goals (and that performance on improvement activities and promoting interoperability should only factor into the score if the ASM participant fails to satisfy requirements for the category).
To level the playing field, CMS will make positive scoring adjustments for complex patients (0 to +10 adjustment) using two risk indicators (i.e., Hierarchical Condition Category (HCC) risk scores and the proportion of patients with dual eligible status) and for small practices (i.e., those with 15 or fewer clinicians) (+10 adjustment) and solo practitioners (+15 adjustment), subject to a final score cap of 100.
Financial Risk
ASM participants will be subject to two-sided financial risk based on their performance, as measured by their final score. The risk levels for payment adjustments will start at the same level as MIPS, with PYs 2027 and 2028 being at 9%. But later years of the model will have greater risk levels, with PY 2029 at 10%, PY 2030 at 11%, and PY 2031 at 12%. And, like MIPS, an ASM payment year will occur two calendar years following the PY that determines the ASM participant's payment adjustment factor. For example, PY 2027 will result in payment adjustments for 2029.
To determine each ASM participant's payment adjustment, CMS will first calculate an incentive pool by taking the sum of all Medicare Part B payments made to ASM participants in the cohort during the PY, multiplying it by the applicable risk level (9-12%, depending on the PY) and then applying an 85% redistribution percentage (which results in the Medicare program retaining 15%, ensuring financial savings under the model). CMS will then calculate the ASM participant's payment adjustment factor, which is the percentage by which the ASM participant's Part B payments will be increased or decreased for the payment year.
With this methodology, CMS will not prospectively withhold any portion of Medicare FFS payments during PYs to fund the payment adjustments. Instead, the negative payment adjustments effectively fund the positive payment adjustments during the corresponding payment year.
Model Flexibilities
To give ASM participants greater flexibility in negotiating collaborative care arrangements with PCPs and incentivizing patients to actively participate in the management of their chronic condition, CMS will apply the Anti-Kickback Statute safe harbor for CMS-sponsored model arrangements and patient incentives to protect certain collaborative care arrangements and patient incentives furnished under the model. Also, as with many Innovation Center models, CMS will waive certain telehealth restrictions to encourage greater flexibility with the use of telehealth services by ASM participants.
Takeaways
ASM could fundamentally shift how ASM participants manage—and get paid for managing—chronic conditions for Medicare FFS beneficiaries. Although ASM borrows from MIPS in substantial respects, ASM is a more targeted program with greater payment adjustments in later PYs.
To perform well, ASM participants may choose to enter into arrangements with other providers. Although CMS is making available for certain ASM arrangements the Anti-Kickback Statute's safe harbor for CMS-sponsored models, ASM participants will also need to satisfy an exception to the federal physician self-referral prohibition (commonly known as the Stark Law) for compensation arrangements with entities to which they refer designated health services (DHS) or with physicians from whom they receive DHS referrals. To protect these arrangements, ASM participants may need to create a value-based enterprise (VBE) and structure their arrangements as value-based arrangements, similar to what we discussed here with the Transforming Episode Accountability Model (TEAM), another Innovation Center model.
A cardiologist, for instance, may want to pool a portion of her upward payment adjustments and use those funds to pay a PCP for screening patients, co-managing patients, implementing care protocols, or engaging in other value-based activities that constitute improvement activities under ASM or that otherwise further value-based purposes (e.g., coordinating and managing patients with or at risk of having these chronic conditions, improving the quality of care for these patients, or approximately reducing costs to or growth in expenditures of payors for these patients). If the PCP refers designated health services to the specialist and the compensation arrangement is one that, by definition, takes into account the PCP's referrals for designated health services to the specialist (as would be the case if the PCP receives a percentage of the cardiologist's payment adjustments, including those on designated health services furnished by the cardiologist and referred by the PCP), the arrangement would be unable to satisfy the traditional exceptions (e.g., those for personal service arrangements and fair market value compensation) and therefore would need to satisfy an exception for value-based arrangements. To protect this arrangement, the parties could create a VBE and act as VBE participants under a value-based arrangement that compensates one or both parties for engaging in value-based activities that further the VBE's value-based purposes.
Although some ASM participants might build out the infrastructure they believe necessary to perform well in ASM, others may not have the resources or appetite to put themselves in the best position to perform well. These specialists could be driven toward consolidation, whether with a health system or a large physician group. On the flip side, some specialists may conclude that they would be best served by acquiring the primary care resources necessary to effectively co-manage patients. In these respects, ASM could influence transaction activity.
ASM, in using the MVP measures, is positioned to add new specialists and high-cost, high-volume conditions and procedures. This architecture, coupled with CMS's goal of creating additional MVPs for 80% of eligible clinicians, gives the Innovation Center a roadmap expanding ASM and creating additional APMs.
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