Upcoming ASM Payment Model Changes Impact Healthcare Lenders

As specialty care providers prepare for fundamental payment and reporting changes brought by the new Centers for Medicare & Medicaid Services (CMS) Ambulatory Specialty Model (ASM), lenders in the healthcare industry should also take note.

The ASM is a mandatory five-year, two-sided risk payment model starting on January 1, 2027, and focusing on the proactive management of chronic conditions. The program will run for five performance years (2027 to 2031), followed by two additional years for data submission, payment reconciliation and application of performance-based payment adjustments, concluding in 2033. Payment adjustments will be applied two years after each performance year, aligning with the timing structure used under the CMS Merit-based Incentive Payment System (MIPS).

Consistent with the Center for Medicare and Medicaid Innovation (CMMI) statutory mandate, CMS will retain a portion of redistributed funds to ensure net Medicare savings. Payment adjustments are calculated using a performance ranking approach within condition-specific cohorts, meaning clinicians are compared against peers treating the same condition.

ASM is the first CMMI model to rely heavily on MIPS framework components. CMMI has indicated that these specialty-focused measures and payment methodologies have not yet been fully validated in real-world settings, and ASM is intended to serve as that testing ground before any broader expansion. Near-term expansion to additional specialties is not expected, though CMS has signaled that would be the eventual direction.

The ASM represents one of the clearest signals yet that CMS is moving beyond voluntary, entity-level demonstrations toward mandatory, clinician-level accountability. The model's seven-year duration reflects CMMI's growing preference for longer-term demonstrations intended to drive sustained practice transformation, rather than short-term experimentation.

CMS just released the preliminary participant list for ASM, which includes specialists treating heart failure and low back pain in certain geographic areas of the country. The final participant list is expected in summer 2026. The model differentiates specialists based on condition (heart failure versus low back pain). The heart failure cohort applies to cardiologists, while the low back pain cohort may include specialties such as anesthesiology, pain management, interventional pain management, neurology, orthopedic surgery, and physical medicine and rehabilitation.

What Healthcare Lenders Need to Know

For lenders, the ASM introduces a new layer of financial variability tied directly to clinician performance. Practices with established care pathways, strong electronic health records integration and effective care coordination infrastructure may demonstrate greater revenue stability and operational resilience under the model. By contrast, practices without these capabilities may face greater reimbursement volatility as financial accountability shifts more directly to the clinician level.

This shift increases the importance of operational readiness and data infrastructure as indicators of credit risk. Practices that can demonstrate episode-level analytics, strong referral management, telehealth integration where appropriate and compensation structures aligned with condition-based performance metrics may be better positioned to manage downside risk and sustain predictable cash flow.

Here are some specific impacts lenders should consider:

• Significant Revenue Risk (Downside Exposure). Unlike voluntary models, the ASM is mandatory for selected specialists, with payment adjustments ranging from minus 9 percent up to minus 12 percent by 2033 based on cost and quality performance. This exposes practices – and their lenders – to financial risk if they cannot manage costs and quality effectively.
  
  

  The impact is particularly acute for asset-based lenders relying heavily on Medicare accounts receivable as collateral. Negative adjustments under the model will function like a recoupment, with CMS reducing reimbursements for future unrelated fee-for-service claims. It will be important for such lenders to track performance and potential liabilities and account for them in the borrowing base, through reserves or otherwise. On the other hand, borrowers entitled to positive payment adjustments may push lenders to include adjustments that have been earned in the borrowing base (i.e., allowing providers to borrow against such amounts).

• Portability of Accountability. Performance is measured at the individual clinician level under a clinician's Tax Identifier Number/National Provider Identifier (NPI), rather than at the group or hospital level. As a result, if a clinician changes employers or practice settings during the model period, both performance accountability and any resulting positive or negative payment adjustments will follow the clinician. This makes revenue more volatile for individual practices and requires lenders to consider the capabilities of individual physicians and their specific, targeted patient population. The portability of accountability reflects CMS' growing emphasis on clinician-level identity and responsibility, rather than the organizational structures. As a result, large health systems are not able to fully shield employed physicians from performance-based risk. At the same time, independent specialists may experience greater volatility without the operational and financial infrastructure of larger organizations.
  
  

  Importantly, the ownership of the underlying fee-for-service receivable doesn't change (and, ultimately, it will have been paid long before the bonus/penalty payment occurs).

• Increased Need for Operational Capital. To succeed, practices must invest in new infrastructure, including certified electronic health record technology for data sharing, care coordination and potentially remote patient monitoring. Lenders may see increased demand for loans (and the related debt baskets) aimed at technology adoption and operational, process-based changes.
• Impact on Practice Valuation. The model includes a 15 percent reduction in potential bonuses, which CMS retains to guarantee savings, while negative adjustments for underperformers are higher. This, combined with the risk of reduced reimbursements, could lower the valuation of certain specialty practices (specifically, cardiology and orthopedic/pain management) if they are not prepared for this transition.
• Shift from Volume to Value-Based Payments. As CMS continues expanding mandatory, specialty-focused payment models, ASM signals a broader trajectory in Medicare payment reform – one that shifts reimbursement from fee for service to performance-based reimbursement and embeds accountability directly within specialty practices rather than solely at the organizational level. For lenders, this evolution underscores the need to assess not only a provider's current revenue base, but also its capacity to operate successfully within value-based payment structures that increasingly shape Medicare reimbursement.
• Program Overlap. Given the overlap with MIPS, ASM participants who satisfy the ASM eligibility criteria and data submission requirements during a PY would be exempt from MIPS. Practices participating in MSSP ACOs or other CMMI models may continue doing so and should expect to reconcile attribution, data exchange responsibilities and care management accountability across overlapping programs. CMS will monitor for unintended overlap or duplicative payments.

In summary, the ASM impacts lenders because it introduces substantial, mandatory and two-sided financial risk into high-spend specialties, transforming revenue predictability and requiring a new, more rigorous value-based approach to assessing the creditworthiness of specialized medical practices. Though the rollout currently affects a relatively narrow segment, it is part of a broader shift at CMS. If successful, ASM could serve as a template for expanding condition-specific accountability models across additional specialties and chronic conditions in future years.

For more about this and other payment models, visit Holland & Knight's CMS Payment Model Navigator.