Current and Emerging Payment Models

Health care is currently in the middle of a transition from a system of payment based on the volume of services provided (fee-for-service) to payment based on the value of those services (value-based care and alternative payment models).

The COVID-19 pandemic was an inflection point for the U.S. health care delivery system. While factors like rising inflation and staffing shortages have put unprecedented strain on hospitals and health systems, the post-pandemic environment represents an opportunity to stabilize and improve health care financing, where warranted, and further transition toward value-based care.

CMS, including through CMMI, is continuing to advocate for continued growth and expansion of value based and alternative payment models. In a strategic plan refresh published in November 2022, CMS set a target of aligning 100% of Medicare fee-for-service beneficiaries with an accountable care relationship by 2030.

Thus, hospitals and health systems must exist in both the fee-for-service and value-based worlds. Organizations need to continue to optimize services under the traditional fee-for-service structures such as Medicare's inpatient and outpatient prospective payment systems. However, they also must begin to determine how and when they will take financial accountability for the quality and costs of an entire episode of care or attributed population.

Medicare

Medicare coverage is tied to eligibility for Social Security or Railroad Retirement benefits. In 2015, there were almost 56 million people enrolled nationwide. The program includes: Hospital Insurance - Also known as "Part A," Medicare hospital insurance helps cover inpatient care in ...

Inpatient Prospective Payment System (IPPS)

What Is the Inpatient Prospective Payment System (IPPS)?One in every five Medicare beneficiaries is hospitalized one or more times each year. Of the approximately $300 billion dollars spent on the Medicare program each year, almost $100 billion is spent on inpatient services.More than t...

Outpatient PPS

The Centers for Medicare & Medicaid Services (CMS) July 10 released its calendar year (CY) 2025 outpatient prospective payment system (OPPS) and ambulatory surgical center (ASC) proposed rule. The rule would increase OPPS rates by a net 2.6% in CY 2025 compared to CY 2024....

MACRA & Other Physician Payment

The Centers for Medicare and Medicaid Services (CMS) uses the Medicare Physician Fee Schedule (PFS) to determine how to reimburse physicians for their services. Under the PFS, Medicare considers various elements including the work the physician put in, the expenses incurred in provid...

Inpatient Rehabilitation Facility PPS

This web page provides information and resources related to inpatient rehabilitation hospitals and units, with a focus on Medicare payment and related implementation issues. Visitors to this site may also be interested in learning more about the resources and services of the AHA Consti...

Home Health PPS

AT A GLANCEOn June 26, the Centers for Medicare & Medicaid Services (CMS) issued its calendar year (CY) 2025 proposed rule for the home health (HH) prospective payment system (PPS). Comments are due Aug. 26, and a final rule is expected around Nov. 1. New policies would generally be...

The 340B Drug Pricing Program

340B Drug Pricing Program at a Glance For more than 30 years, the 340B Drug Pricing Program has provided financial help to hospitals serving vulnerable communities to manage rising prescription drug costs. Section 340B of the Public Health Service Act requires pharmaceutical manuf...

IPPS Hospital-Acquired Condition Reduction Program

The Hospital-Acquired Condition Reduction Program ties performance on patient safety issues such as infections, bed sores and post-operative blood clots to payment. Under the program, the Centers for Medicare & Medicaid Services penalizes the lowest performing 25% of all hospitals e...

IPPS Hospital Readmission Reduction Program

Through the Hospital Readmission Reduction Program, the Centers for Medicare & Medicaid Services penalizes hospitals for “excess” readmissions when compared to “expected” levels of readmissions. Since the program began on Oct. 1, 2012, hospitals have experienced nearly $2.5 billion ...

IPPS Hospital Value-Based Purchasing

The Hospital Value-Based Purchasing Program seeks to improve patient safety and experience by basing Medicare payments on the quality of care provided, rather than on the quantity of services performed. Hospital VBP affects payment for inpatient stays in more than 3,000 hospitals across...

Skilled Nursing Facility PPS

At A GlanceThe Centers for Medicare & Medicaid Services (CMS) July 31 issued its fiscal year (FY) 2025 final rule for the skilled nursing facility (SNF) prospective payment system (PPS). This rule updates SNF payments and modifies CMS’ nursing home enforcement authority an...

Navigating Value-based Payment

Traditionally, Medicare has paid for services based on volume through fee for service structures. Given the significant financial pressures facing hospitals and health systems – from inflation, staffing shortages, supply chain disruptions, and aging patient populations – operating stric...

Program Integrity

In recent years, the Centers for Medicare & Medicaid Services has drastically increased the number of program integrity auditors that review hospital claims to identify improper payments. These audit contractors include recovery audit contractors (RACs) and Medicare administrative c...

Psychiatric PPS

Medicare pays for these services through the IPF prospective payment system, which uses pre-determined rates based primarily on the patient’s condition (age, diagnosis, comorbidities) and length of stay, and the location of the IPF. Medicare also provides additional payment for IPFs tha...

Federal Capital Financing

This site names each program, its focus, the types of financing available, and eligibility requirements. Links to each program's website and other capital financing information resources are provided for more information.Preliminary Background on Federal Capital ProgramsProgramDepartmen...