The Alternative Payment Model Landscape: Accountable Care Organizations and Bundled Payments

The health care payment landscape is rapidly changing, and physicians are already beginning to be paid differently than in the past. Earlier this month, the U.S. Department of Health and Human Services announced that it had achieved its goal of linking 30 percent of all Medicare payments to quality through alternative payment models (APMs) nearly a year ahead of its original prediction. Payment is increasingly being linked to quality and, consequently, linked to value of services provided rather than quantity or volume of services provided. This is often referred to as the "shift from volume to value."

Value and quality can be defined in many ways, but a key recurring theme of value versus volume-based payments is that population health management is a crucial factor for success. APMs can be defined as value-based payment models for Medicare patients. They are designed to encourage providers to take on financial risk for the health outcomes of an entire patient population. This approach demonstrates accountability not only for individual patients, but for an entire group of people. Furthermore, APMs tie financial risk to quality metrics that enhance information sharing, facilitate transitions of care and ultimately improve care coordination between all entities involved.

APMs can come in many forms but the most widely used are Accountable Care OrganizationsPDF (ACOs ) and bundled payments. An ACO is a group of providers coming together to provide a coordinated set of services for a patient population. Currently, there are 836 ACOs (both in the public and private sectors). The majority of public sector ACOs are Medicare ACOs owned by physician groups, while the majority of private sector ACOs are owned by both hospitals and physicians together. A bundled payment is a payment received for a set of services carried out for discrete episodes of care over a set period of time. Bundled Payment for Care Improvement PDF (BPCI) includes four models and has widespread participation with the majority of participants selecting retrospective post-acute care (BPCI Model 3) for a designated set of up to 48 clinical episodes.

Increasing Financial Risk For Providers

Financial Risk Continuum

The following resources are available to help you understand APMs:

If you have questions about value based payment or alternative payment models, such as ACOs and bundled payments, email

Keywords: Accountable Care Organizations, Episode of Care, Goals, Health Expenditures, Information Dissemination, Medicare, Ownership, Patient Care Bundles, Private Sector, Retrospective Studies, Social Responsibility, United States, United States Dept. of Health and Human Services

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