Current & 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 Center for Medicare & Medicaid Services has set a goal of increasingly tying Medicare payment to value. For example, CMS estimated that, as of January 1, 2016, nearly a third of Medicare payments were attributed to alternative payment models. Thus, for now, hospitals and health systems must exist in both the fee-for-service and value-based worlds. Specifically, they need to continue to serve and operate under the traditional, siloed payment systems, such as Medicare's inpatient and outpatient prospective payment systems.

However, they also must begin to determine how they will take financial accountability for the quality and costs of an entire episode of care or attributed population, such as under the Comprehensive Care for Joint Replacement bundled payment or Accountable Care Organization programs.


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 PPS

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 three-quarters of the nation's inpatient acute...

Outpatient PPS

Outpatient care has become increasingly important, as technological innovations and patient preferences drive changes in care delivery. Medicare beneficiaries receive a wide range of services in hospital outpatient departments, from injections to complex procedures that require anes...

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...

Long-Term Care Hospital PPS

Long-term care hospitals (LTCHs) furnish extended medical and rehabilitative care to individuals with clinically complex problems, such as multiple acute or chronic conditions, that need hospital-level care for relatively extended periods. To qualify as an LTCH for Medicare payment, ...

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...

Skilled Nursing Facility PPS

Skilled nursing facilities are a vital part of the care continuum focusing on patients requiring nursing and therapy services following a three-day or longer stay in a general acute-care hospital. The Medicare program pays for SNF services through a prospective payment system, with p...

Home Health PPS

The Balanced Budget Act of 1997, as amended by the Omnibus Consolidated and Emergency Supplemental Appropriations Act (OCESAA) of 1999, called for the development and implementation of a prospective payment system (PPS) for Medicare home health services. The BBA put in place the inte...

The 340B Drug Savings Program

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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...

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 ...

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...

Bundled Payment

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Accountable Care Organizations

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Patient-Centered Medical Homes

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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 Programs P...

Related Resources

Issue Brief
AHA Center for Health Innovation Market Scan
Seemingly everyone agrees that consumers should have a stronger voice in value-driven health care and how benefit plans are designed. What hasn't been clear,…
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Thursday, November 20
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Thursday, November 20
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Webinar held Thursday, November 29 Video Recording:
AHA Center for Health Innovation Market Scan