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Payment Reform

A number of new payment reform models have been implemented in recent years in both the public and private sector, and some are alternatives to fee-for-service payments. Unlike earlier capitation payment models, many of the new payment systems focus on and reward improved patient health and performance on specific quality measures. The RAND Corporation catalogued nearly 100 implemented and proposed payment reform programs, classifying each of these programs into one of 11 payment reform models (PRMs), and identifying the performance measurement needs associated with each model. The RAND report is available by clicking here

Some of the new payment models are:

Global Payments or Alternative Quality Contracts (MA)

The global payment model is an alternative to fee-for-service payment. Incentive payments are made for high-quality, lower cost care to a defined population. Payment covers all services provided to a defined population during a contracted time period.

Hospital or Physician Pay for Performance (P4P)

Also known as “P4P” or value-based purchasing, providers under this arrangement are rewarded for meeting pre-established targets for delivery of healthcare services. This is a fundamental change from fee for service payment. Physicians, hospitals, medical groups, and other healthcare providers are rewarded for meeting certain performance measures for quality and efficiency. Disincentives, such as eliminating payments for negative consequences of care (medical errors) or increased costs, have also been proposed. Rising health care costs have brought pay for performance models to forefront of health policy discussions.

The Medicare Shared Savings Program and Advance Payment Model

Both the Medicare Shared Savings Program and Advance Payment model create incentives for healthcare providers to work together to treat an individual patient across care settings including doctors' offices, hospitals and long-term care facilities. Providers must meet quality standards, including patient outcomes and care coordination among the provider team, and may share in the savings they achieve for the Medicare program. The higher the quality of care delivered, the more shared savings providers may keep.

The Advance Payment model will provide additional support to physician-owned and rural providers participating in the Medicare Shared Savings Program who also would benefit from additional start-up resources to build the necessary infrastructure, such as new staff or information technology systems. The advance payments would be recovered from any future shared savings achieved by the ACO.

CMS Hospital Value-Based Purchasing Program

The HVBP Program, which was required by the Affordable Care Act of 2010, will tie a portion of a hospital’s payment for inpatient stays under the Inpatient Prospective Payment System in fiscal year (FY) 2014 to its performance score on a set of quality measures. CMS issued a final rule establishing this program in April of this year.

The CMS Innovation Center offers a menu of alternative options, including:

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