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 strictly in the legacy fee-for-service environment may not be possible long term for all organizations. Many are migrating portions of their services to value-based payment models, where organizations assume risk for the outcomes of a population, including through Alternative Payment Models (APMs) established by the Center for Medicare and Medicaid Innovation (CMMI), 1115 Medicaid waivers, and payer-specific programs.

Value-based payment models can be aligned based the level of financial risk assumed by providers, and the types and scope of services included in the model. Risk within these models range from “upside only” risk that includes bonus payments (where organizations do not face penalties), to “full risk” for managing health for a covered population through a flat rate or capitated budget (where organizations can reallocate any cost savings but must cover any shortfalls internally).

Below are resources on value-based payment models by type of risk:

 

Pay for Reporting

Shared Savings & Shared Risk

Bundled & Episode-Based Payments Models

Accountable Care Organizations

Capitated & Global Budget Models

 

Additionally, models can be aligned by clinical area. Below are resources on value-based payment models by type of care:

Key Resources

Health Care Payment Learning and Action Network (HCP LAN) Alternative Payment Model (APM) Framework — Established in 2016, this framework classifies APMs based on level of financial risk attributed to quality.

HCP LAN Accountable Care Curve — In 2022, the HCP LAN created an accountable care curve to support organizations in their transition to accountable care.

MACRA Payment Models Comment Letter — In a letter submitted to the House Energy and Commerce Subcommittee on Oversight and Investigations for a hearing on challenges implementing value-based and alternative payment models under the Medicare Access and CHIP Reauthorization Act of 2015, AHA encouraged certain statutory and regulatory policies to advance and flexibly implement these models.

MACRA RFI Response — Responding to House members asking how Congress could improve physician payment under the Medicare Access and CHIP Reauthorization Act of 2015, the AHA encouraged statutory and regulatory efforts to advance and flexibly implement value-based and alternative payment models.

Value in Health Act Support Letter — Letter in support of Value in Health Act, which would extend 5% advanced APM incentive payments, remove revenue thresholds, improve APM financial benchmarks, establish a voluntary higher risk track in MSSP and would grant CMS the authority to adjust qualifying APM thresholds.

Value in Health Act Introduction — A bipartisan group of senators introduced AHA-supported legislation that would extend the 5% Medicare payment incentives for advanced Alternative Payment Models under the Medicare Access and CHIP Reauthorization Act.

Other Related Resources

Realizing Success as a Payvider — Hackensack Meridian Health Drives Value-Based Programs
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Aligning Health Equity and Value-based Programs

Advanced Strategies for Optimizing Value-based Care

Value-based Payment to Support Health Equity