Alternative Payment Models

A Guide to Physician-Focused Payment Models describes seven different Alternative Payment Models (APMs) that can enable physicians in every specialty to redesign the way they deliver care in order to control spending and improve quality for their patients:.

  • APM #1. Payment for a High-Value Service
  • APM #2. Condition-Based Payment for Physician Services
  • APM #3. Multi-Physician Bundled Payment
  • APM #4. Physician-Facility Procedure Bundle
  • APM #5. Warrantied Payment for Physician Services
  • APM #6. Episode Payment for a Procedure
  • APM #7. Condition-Based Payment
  • The seven APMs described in the report would be able to meet the eligibility criteria for Alternative Payment Models specified in the Medicare Access and CHIP Reauthorization Act (MACRA). Under each of the APMs described in the report, physicians would take accountability for specific aspects of spending and quality they can control or influence. However, the APMs would not place physicians at financial risk for costs they cannot control, unlike a number of shared savings payment models that have been developed by payers. Moreover, each of the APMs in this report would give the participating physicians the resources and flexibility they need to redesign care so they can successfully control spending and improve quality for the types of patients and services for which they would be accountable.

    Each of the APMs described in A Guide to Physician-Focused Alternative Payment Models addresses a different set of opportunities for savings and different barriers in the current payment system. The report explains how the specific components of each APM would be structured to work successfully for both physicians and payers. The report also describes nineteen different examples of how the APMs could be applied to different types of patients, conditions, and procedures, including cancer care, cardiovascular care, chronic disease management, emergency medicine, gastroenterology, maternity care, and surgery.

    The Payment Reform Glossary

    One of the barriers to reaching consensus on significant payment reforms has been the complex and confusing array of terminology that has been used to describe different payment systems. It is difficult for stakeholders to determine whether to support a proposal if they do not understand the words and abbreviations used to describe it, and it is difficult to reach agreement when the same words are used by different people to mean different things or when words are perceived by some stakeholder to mean something different than what was actually intended.

    The Payment Reform Glossary is designed to facilitate a better understanding of payment reform concepts and to create a foundation for a common language for developing and discussing payment reform concepts so they can be supported and implemented by all stakeholders -- patients, providers, employers, health plans, and government agencies.

    Features of The Payment Reform Glossary include:

    • In addition to providing definitions, the Glossary attempts to explain many of the most important words and phrases in enough detail that patients, providers, purchasers, and policy-makers can understand the advantages and disadvantages of different payment models and the rationale for including various components of payment models that might otherwise seem to make them unnecessarily complex.
    • Because there is not just one "fee-for-service payment system" but more than a dozen different systems for different types of providers, each with their own unique structures and their own unique strengths and weaknesses, The Payment Reform Glossary provides a basic description of the major payment systems used today to pay physicians, hospitals, and other providers.
    • The Payment Reform Glossary also provides descriptions of many of the most significant payment reform models that have been proposed or implemented by public and private payers.
    • A unique feature of The Payment Reform Glossary is that explicit comparisons and contrasts among key concepts are provided in highlighted sections of the Glossary.

    Bundling Better

    Bundling Better: How Medicare Should Pay for Comprehensive Care (for Hip and Knee Surgery and Other Healthcare Needs) describes in detail how a properly designed payment system for hip and knee replacement could enable physicians, hospitals, and other providers to improve care for patients and reduce costs for the Medicare program and private payers without the need for those providers to accept excessive or inappropriate financial risk, and without requiring or encouraging greater consolidation of providers.

    The way Medicare pays for hip and knee surgery will likely be the template for the alternative payment models Medicare uses to pay for many other procedures and conditions, so it will be important to all physicians and hospitals to get it right, not just those who provide joint surgery. The payment approach described in Bundling Better could be used to support better care for a broad range of patients and health conditions, not just hip and knee problems. The payment changes described in Bundling Better would also improve the ability of Accountable Care Organizations to successfully manage the overall costs and quality for a population of patients.

    The payment system for Comprehensive Care for Joint Replacement (CCJR) described in Bundling Better would have the following significant advantages over both the current payment system and the proposal for paying for joint replacement that was issued by the Centers for Medicare and Medicaid Services (CMS) issued in July 2015:

    • All of the care associated with hip or knee replacements would be delivered by a physician-led team of providers chosen in advance by the patient receiving surgery.
    • This CCJR Team would have the ability to deliver the most appropriate services to meet patients' needs, and the providers on the Team would not be restricted to delivering only those services for which payments are made under current Medicare payment systems.
    • The CCJR Team would receive an episode payment designed to cover the costs of all of the services their patients need related to the hip or knee surgery, including all post-acute care services and any complications experienced for a 90-day period. This payment would be established based on what providers agreed that evidence and experience indicated was necessary to support good care for patients. The amount of the payment would be known long before care was delivered and it would be stable over time, so that providers could establish and sustain high-quality patient care services.
    • CCJR Teams who treat patients with greater needs would receive larger episode payments to adequately support the larger amount of care those patients need.
    • CCJR Teams who deliver better outcomes for their patients would receive higher episode payments.
    • Payments to CCJR Teams would flow through provider-owned CCJR Management Organizations, and limits on financial risk would be established to enable physician practices and provider organizations of all sizes to participate in the program.
    • Participation in the CCJR program would be voluntary and open to interested providers in all parts of the country, so that all Medicare beneficiaries would have the opportunity to benefit from better care under the program, and also so that no beneficiary would be forced to receive care paid through the program if their physicians did not believe it would enable them to deliver improved care.
    • The CCJR program would not preclude providers or CMS from implementing other payment models if better options became available.

    Bundling Badly

    On July 9, 2015, the Centers for Medicare and Medicaid Services (CMS) proposed regulations to create what it described as an "episode payment" for hip and knee surgery. However, what sounds like a desirable patient-centered payment reform - "Comprehensive Care for Joint Replacement" or CCJR - turns out to be primarily a plan to penalize hospitals when patients receive higher-than-average amounts of post-acute care services after knee or hip surgery.

    Bundling Badly describes in detail the many problems with the proposal, including:

    • The CMS proposal does not change any of the underlying fee for service payment structures that create the current problems. Instead, it tries to impose an overall budget on the total cost of care after the care has already been delivered.
    • The CMS proposal would set the same budget for an episode of care regardless of differences in patient need, which could lead higher-need patients to be underserved or be denied access to surgery.
    • The CMS proposal would put hospitals at risk for all of the costs of post-acute care services, even though hospitals do not have direct control over those services today and would not be given any greater control under the proposal. Hospitals would also be held accountable for the management of patients' chronic conditions after discharge, regardless of whether the physicians who had been managing those conditions prior to the hospital admission were even affiliated with the hospital.
    • The CMS proposal would reduce the overall budget for services if fewer services eligible for current payments were delivered, with no consideration for the costs providers had incurred in delivering new or improved services that are not reimbursed under current payment systems.
    • Under the CMS proposal, providers who deliver better outcomes would not be rewarded for doing so unless they were able to reduce spending. Conversely, providers who deliver poor outcomes would not be penalized as long as spending remained within target levels.
    • The CMS proposal would mandate participation by providers in randomly-selected regions while precluding participation by providers in other regions, which would limit the choices of Medicare beneficiaries in every community.
    • The CMS proposal would preclude the ability to implement better approaches to payment for joint replacements in any region for a five year period.

    A Better Way to Pay for Cancer Care
    And the Right Way to Design Alternative Payment Models

    The federal government has set a goal of moving 50% of Medicare payments into "Alternative Payment Models" by the end of 2018, and Congress passed legislation in April authorizing higher payments for physicians who receive at least 25% of their revenues from Alternative Payment Models by 2019.

    Although a number of Alternative Payment Models have been developed for primary care physicians and physicians who peform hospital-based procedures, there has been little progress in creating Alternative Payment Models for the majority of specialists. Moreover, most Alternative Payment Models to date have consisted of shared savings programs or pay-for-performance systems that fail to solve the fundamental problems with fee for service payment.

    Cancer care is an area where significant payment reforms are badly needed. National spending on cancer care has doubled in the past decade and is projected to exceed $150 billion by 2020. There are many opportunities to reduce the cost of cancer treatment without harming patients, but the current payment system doesn't adequately support the highest-quality, most appropriate care for patients.

    A Better Way to Pay for Cancer Care describes a new Alternative Payment Model for cancer care that is designed to fix many of the problems with the current payment system. Patient-Centered Oncology Payment (PCOP) would be a win-win-win for patients, payers, and oncology practices by providing significantly higher payments to oncology practices to support improved services for patients, while producing net savings in total cancer spending for payers by eliminating unnecessary or undesirable services for patients.

    Additional information about Patient-Centered Oncology Payment and ways to improve cancer payment is available at

    The Building Blocks of
    Successful Payment Reform
    Designing Payment Systems That Support Higher-Value Health Care

    There is growing national recognition that most pay-for-performance and "value-based purchasing" systems fail to adequately solve the serious problems with the fee-for-service payment system and that fundamentally different ways of paying for health care are needed in order to improve quality and control costs. The U.S. Department of Health and Human Services has announced a goal of moving 50% of Medicare payments into "alternative payment models" by 2018, and legislation repealing the flawed Sustainable Growth Rate formula includes provisions encouraging physicians to participate in "alternative payment models."

    However, the devil is in the details: How do you actually design an "alternative payment model" that supports better care for patients and lower spending for payers without putting physician practices and hospitals out of business or exposing them to inappropriate financial risk?

    The Building Blocks of Successful Payment Reform: Designing Payment Systems That Support Higher-Value Health Care, shows how alternative payment models can be designed in ways that benefit patients, payers, and providers. The report, prepared with support from the Robert Wood Johnson Foundation as part of the Network for Regional Healthcare Improvement's Payment Reform Series, describes how to design payment reforms that simultaneously achieve four important goals:

    • Sufficient flexibility in care delivery so that healthcare providers can deliver high quality, affordable services that are matched to the unique needs of individual patients;
    • Appropriate accountability for spending to assure purchasers that healthcare will be more affordable than under the current payment system;
    • Appropriate accountability for quality to assure both patients and purchasers that the quality of care will be maintained or improved; and
    • Adequacy of payment to cover the costs of delivering high-quality, efficient care to the types of patients that providers see.

    The report explains the four essential building blocks that must be included in an alternative payment model to successfully achieve these goals. It also describes multiple options for creating each of those building blocks so that payment models can be customized to the needs and capabilities of different payers and providers, and it shows how to enable providers and payers to transition to more accountable payment models over time.

    The Building Blocks of Successful Payment Reform complements another report from CHQPR, Making the Business Case for Payment and Delivery Reform, that provides a step-by-step guide to help businesses, physicians, hospitals, and other purchasers and providers carry out the financial analyses needed to design the kinds of payment systems described in the Building Blocks report.

    An Executive Summary of the Building Blocks report is also available.

    Making the Business Case
    for Payment and Delivery Reform

    In order to support improvements in both healthcare delivery and payment systems, individuals and organizations that purchase healthcare services need a clear business case showing that the proposed change in care will achieve sufficient benefits to justify whatever change in payment healthcare providers need to support the change in care. Healthcare providers also need a clear business case showing that they will be able to successfully deliver high-quality care in a financially sustainable way.

    Making the Business Case for Payment and Delivery Reform describes a ten-step process to develop such a business case, and provides a detailed example for how to apply the process to an initiative to improve management of chronic disease patients. The report also describes the types of data that are needed to carry out all of the steps in a good business case analysis.

    Measuring and Assigning Accountability
    for Healthcare Spending

    The federal government, commercial health plans, and other organizations are increasingly using measures of healthcare spending for the purposes of rewarding or penalizing physicians, hospitals, and other healthcare providers, defining provider networks, and encouraging patients to use particular providers. Measuring and Assigning Accountability for Healthcare Spending describes six fundamental problems with the current attribution and risk adjustment systems that are being used in these measures and explains how these problems could seriously harm both patients and healthcare providers.

    For example, the report shows how the spending measures currently being used in "value-based purchasing" programs can:

    • Inappropriately assign accountability to physicians and hospitals for services they did not deliver and cannot control, while at the same time failing to hold healthcare providers accountable for most of the services they do deliver;
    • Financially penalize physicians and hospitals who care for patients with complex problems and who deliver evidence-based services to their patients;
    • Fail to provide physicians, hospitals, and other providers the kind of actionable information they need to identify opportunities to control healthcare spending without harming patients; and
    • Provide patients with misleading information about which providers deliver lower-cost, higher quality care.

    Measuring and Assigning Accountability for Healthcare Spending also describes how these problems can be solved. The report presents a detailed methodology for assigning accountability to healthcare providers for the services they actually can control or influence and for identifying which aspects of those services might be changed in order to achieve the same or better outcomes for patients at lower cost. In addition, methods are described for comparing services and spending for patients with similar needs. The report shows how these improved methodologies can use existing data to produce more valid, reliable, comprehensive, and actionable measures than those commonly used today. The report also describes how more actionable measures of spending can help payers and providers move more quickly to true payment reforms such as bundled payments, warranties, condition-based payments, and global payments.

    A 7-page Executive Summary of the report is also available. It summarizes the six fundamental problems with current approaches and the improved method of measuring spending, and gives a detailed example of how the improved methodology would provide more actionable infomation for a hypothetical patient.

    The Antidote to Provider Market Power
    is Healthcare Payment Reform

    There is growing national concern that consolidations of healthcare providers are leading to higher prices for healthcare services. However, most policy prescriptions for how to address this fail to recognize three key points:

    • Consolidation of healthcare providers isn't necessary for better healthcare delivery
    • The healthcare payment system is the biggest barrier to better healthcare delivery
    • The price and utilization of healthcare are closely linked

    The Best Antidote to Provider Market Power is to Change the Healthcare Payment System describes how current payment systems don't pay hospitals and doctors for what we really want them to do, how most current payment reforms make the problem worse, not better, and how true payment reform can enable healthcare providers to deliver higher quality care at lower costs and allow consumer choice to drive prices lower without the need for narrow networks or price regulation.

    Overcoming the Barriers to
    Payment Reform

    There is widespread agreement that significant changes are needed in the way healthcare providers are paid if the nation is going to successfully control the rapid growth in healthcare costs and improve the quality of care for patients. However, progress has been slow in implementing payment reforms because there are many significant barriers to changing payment systems that have been in place for decades.

    Fortunately, although the barriers to payment reform can seem daunting, they can be overcome.
    Ten Barriers to Healthcare Payment Reform and How to Overcome Them describes many of the biggest barriers that physicians, hospitals, health plans, employers, and policy-makers are facing in implementing payment reforms, along with strategies for solving them. For example, the report describes:

    • How "shared savings" payment models can actually be a barrier to significant changes in care delivery because they make no real changes to the fee-for service system, and how only true payment reforms, such as episode-of-care payments, condition-specific comprehensive care payments, and global payments can allow win-win-win approaches for providers, payers, and patients.
    • The ways that payment systems can be structured to give providers accountability for the types of services and costs they can control, but protect them from risks associated with costs they cannot control.
    • How payment reforms and Accountable Care Organizations are unlikely to be successful unless physician compensation systems are also changed to reward value instead of volume.
    • Why lack of access to data on utilization and costs can prevent healthcare providers from offering to deliver care in ways that will save money for employers, Medicaid, Medicare, and health plans, and ways that better data and analysis can be made available to support successful payment reform.
    • The ways that health plan benefit designs as well as payment systems need to be changed so that patients have the ability and incentive to work with physicians and other healthcare providers to improve quality and reduce costs.
    • The need for more comprehensive, outcome-based measures of quality to accompany payment systems that are designed to control costs.
    • The importance of having all payers using common approaches to payment reform, and the specific strategies that can be used to encourage and facilitate alignment of payment systems in a community.
    • The unique challenges hospitals will face as part of efforts to reduce costs, and the kinds of actions both hospitals and payers can take to address those challenges.
    • How regulatory, accreditation, and payment policies favor large provider organizations in ways that can lead to higher costs, and the policy changes that are needed to foster more effective competition among providers.
    • The need for community mechanisms to ensure there is coordinated action in all of these areas, and the important role that Regional Health Improvement Collaboratives can play in supporting implementation of needed payment and delivery reforms.

    Transitioning to Accountable Care

    Although a variety of payment reforms have been proposed to address the problems with the current fee for service system, many of these reforms are seen as either doing too little to address the problems caused by current payment systems or as changing payment too radically for most healthcare providers to easily implement.

    There is clearly a need for "middle-ground" options - payment reforms that provide greater flexibility and accountability for the costs and quality of care than typical pay-for-performance, shared savings, and medical home programs, but which avoid forcing providers, particularly small physician practices, to take on more financial risk than they can manage or to take accountability for services they cannot effectively control (as traditional capitation systems or full episode-of-care payment systems can require).

    Transitioning to Accountable Care: Incremental Payment Reforms to Support Higher Quality, More Affordable Health Care describes a range of transitional payment reforms that can enable primary care practices, specialists, and hospitals to deliver significant improvements in cost and quality for payers and patients as they build the capacity to transition to more comprehensive payment reforms. The report also discusses a series of important issues in the design of any new payment system, including pricing, establishing appropriate limits on risk, and ensuring quality. It also discusses the importance of alignment among multiple payers and ways to achieve that, including ways that the Medicare program can best support payment reform efforts.

    (You may need to have Adobe Acrobat Reader 8.0 or higher to download the full report. If you have difficulty downloading the report, please email us at:

    CHQPR Testimony to the House Energy and Commerce Committee

    House Energy and Commerce Committee

    On February 14, 2013, Harold Miller, President and CEO of CHQPR, gave invited testimony at a hearing of the Subcommittee on Health of the House Energy and Commerce Committee of the U.S. Congress. Key points in the testimony include:

    • The Sustainable Growth Rate formula should be repealed.
    • Fundamental changes in the fee-for-service system are necessary in order to control the growth of Medicare spending and to improve the way care is delivered to Medicare beneficiaries. Congress will have limited success in controlling Medicare spending and providing truly high-quality care to Medicare beneficiaries if it merely uses quality-based pay-for-performance or shared savings programs built on top of the dysfunctional fee-for-service system. Fortunately, there are better ways of paying physicians that can enable them to make more significant improvements in patient care and achieve greater savings for Medicare.
    • Accountable payment models need to be designed and implemented as quickly as possible in ways that will work for every specialty and every part of the country. To do this, Congress should establish a new, bottom-up approach to payment reform, whereby physicians, provider organizations, medical specialty societies, and regional multi-stakeholder collaboratives are invited to develop payment models that will work well for individual physician specialties in the realities of their own communities.
    • New payment models should be able to be proposed to CMS at any time, with no limit on how many different proposals can be approved as long as they will improve care and reduce costs. Proposals must be reviewed quickly and CMS should have the obligation to approve a proposal if it is specifically designed to improve patient care and save Medicare money.
    • There should be frequent opportunities for physicians to apply to participate in already-approved payment models. Every physician should be permitted to participate in an accountable payment model whenever they are ready to do so. If a physician is participating in such a model, they shouldn't be subject to threats of SGR-type payment reductions.
    • Physicians need to be given access to Medicare claims data so they can determine where the opportunities for saving are, how care will need to be redesigned to achieve those savings, and how payment will need to change to support better care at a lower cost.
    • Once a physician is participating in an accountable payment model, they should have the ability to continue participating as long as they wish to do so if the data show that the quality of care is high and Medicare spending is being controlled.
    • Funding should be made available to medical specialty societies and multi-stakeholder Regional Health Improvement Collaboratives to provide technical assistance to physicians.
    • To help new payment models be as successful as possible, Congress should ask Medicare beneficiaries to designate which physician(s) they want to be in charge of care for each of their conditions, so that there is no need to use complicated, inaccurate statistical attribution methodologies to determine which physicians are accountable for which patients.

    The Cost of Having a Baby

    Private businesses and federal and state governments could save billions of dollars if the quality of maternity care were improved, based on data in The Cost of Having a Baby, a new report developed jointly by Childbirth Connection, the Center for Healthcare Quality and Payment Reform, and Catalyst for Payment Reform. The report shows that the high proportion of babies delivered by Cesarean section costs commercial insurance plans and state/federal Medicaid programs thousands of dollars more per birth than vaginal births and the differences in costs is growing over time. The report also shows there is significant variation in costs within and aross states for each type of birth, indicating that there are additional opportunities for savings.

    Maternal and newborn care together represent the largest single category of hospital expenditures for most commercial health plans and state Medicaid programs, so reducing maternity care costs provides a major opportunity to reduce insurance premiums for employers and to make Medicaid coverage more affordable for taxpayers. There are many examples of physicians, midwives, hospitals, and birth centers around the country that are reducing maternity care costs in ways that improve quality and outcomes for both mothers and babies, a win-win for both payers and patients.

    However, a major barrier to changes in care delivery is the current healthcare payment system. Changes in payment systems are needed to support maternity care based on achieving good outcomes for mothers and babies, rather than the specific procedures and services delivered. For example, the condition-specific payments described in CHQPR's report Transitioning to Accountable Care, would provide the kind of flexibility and accountability maternity care providers need to redesign care. More information on payment reform and delivery redesign opportunities in maternity care are available from CHQPR's Maternity Care webpage.

    Using Partial Capitation to Support Accountable Care Organizations in Medicare

    The federal Patient Protection and Affordable Care Act created a new Medicare payment program to support Accountable Care Organizations (ACOs). Although the program is titled the "Shared Savings Program," and most discussions have focused on using "shared savings" to pay ACOs, the Act allows CMS to use payment models other than shared savings to support ACOs. One of these payment models is "partial capitation." The law states that under partial capitation payment, an ACO would be at financial risk for some, but not all, of the items and services Medicare covers.

    Could "partial capitation" be better for patients, physicians, hospitals, and Medicare than the shared savings model? The answer is yes -- read CHQPR's concept paper Using Partial Capitation as an Alternative to Shared Savings to Support Accountable Care Organizations in Medicare to find out how.

    How to Create Accountable Care Organizations

    In light of the high and rapidly growing cost of healthcare in the U.S., there has been growing interest both in the federal government and in states and regions across the country in finding ways to encourage health care providers to take greater accountability for the overall cost as well as the quality of healthcare delivered to patients. A healthcare provider or group of providers that accepts accountability for the total cost of care received by a population of patients has been termed an "Accountable Care Organization."

    Although there has been growing support for creating such Accountable Care Organizations (ACOs), there has been relatively little exploration of how an ACO would actually achieve the goals envisioned for it, what it would look like organizationally, or how it would come into existence. How to Create Accountable Care Organizations attempts to fill this gap.

    The report addresses key issues such as:

    • what an Accountable Care Organization should be accountable for, and the likely strategies it would use in order to be successful;
    • the types of healthcare providers that can and should be included in an Accountable Care Organization, which organizational structures would support success in managing the desired accountability, and which organizational characteristics might present barriers to success;
    • the changes in healthcare payment systems which would need to be made in order to encourage and support the creation and operation of Accountable Care Organizations;
    • what governments and communities can and should do beyond payment reforms to create an environment that encourages the formation and successful operation of Accountable Care Organizations; and
    • transitional approaches that can help healthcare providers begin accepting greater accountability on a path toward becoming Accountable Care Organizations.

    Download the Executive Summary.

    Download the full report.

    (You may need to have Adobe Acrobat Reader 8.0 or higher to download the full report. If you have difficulty downloading the report, please email us at:

    Paths to Payment Reform

    Across the country, there is growing recognition that dramatic changes in healthcare payment systems are needed in order to solve the persistent problems in quality that plague healthcare delivery and to reduce unaffordable costs. Paths to Payment Reform, a new series of policy briefs from the Center for Healthcare Quality and Payment Reform, is designed to explain some of the specific issues which need to be addressed in creating new payment systems and ways to transition to them from current payment structures. The first five briefs are described below.

    Is Shared Savings the Way to Reform Payment?

    There is growing interest in using "shared savings" as an approach to healthcare payment reform. Medicare has used it as the key element of its Physician Group Practice Demonstration, and it has been proposed as the key mechanism for encouraging the creation of "accountable care organizations."

    Unfortunately, there are some fundamental weaknessess in the shared savings approach that make it far less desirable as a payment reform than it might first appear: it doesn't really fix the underlying problems in the payment system; it gives providers risk without resources; it rewards high spenders rather than high performers; it may or may not keep a provider from suffering financial losses; and it's not sustainable as a payment reform.

    This policy brief explains the weaknesses in more detail, and describes the right way to share savings as part of an effort to reform healthcare payment systems. Download the Policy Brief.

    Which Healthcare Payment System is Best?

    There is broad agreement that significant reforms are needed to the Fee-for-Service Payment systems that are commonly used today. The two major healthcare payment systems being discussed as alternatives are Episode Payments and Comprehensive Care Payment (also called condition-adjusted capitation or risk-adjusted global fees).

    However, trying to weigh the pros & cons and pick the "best" payment method is a flawed approach - Episode Payments are better for certain kinds of conditions and patients, and Comprehensive Care Payments are better for others. The choice depends on the nature of the cost/quality problems to be solved.

    This policy brief outlines two key dimensions of healthcare cost problems, and shows how they are addressed by the two different payment systems. Examples of the kinds of healthcare conditions appropriate for each type of payment system are also defined, including situations in which both can be used jointly. Download the Policy Brief.

    Transitioning to Comprehensive Care Payment

    One option for improving healthcare quality and controlling costs is to use some form of population-based payment instead of Fee-for-Service payments. There are a variety of different names for this - "Comprehensive Care Payment," "Condition-Adjusted Capitation," or "Risk-Adjusted Global Fee" - but the core element is paying a single price for all of the healthcare services needed by a group of people for a fixed period of time.

    However, since Comprehensive Care Payment represents a dramatic change in the way most healthcare providers are paid, it is unclear how many providers could manage under such a payment system. Also, there are concerns about whether Comprehensive Care Payment can work successfully without causing financial difficulties for providers and resistance from patients.

    This policy brief outlines six ways that Comprehensive Care Payments need to be structured in order to avoid the problems that traditional capitation payment systems caused. It also defines several potential levels of Partial Comprehensive Care Payments that could help smaller physician practices to transition into this type of payment system. Download the Policy Brief.

    Using Medical Homes to Reduce Readmissions

    Many people are convinced that the only way to significantly reduce healthcare costs is by some type of rationing, i.e., limiting the kinds of services that Medicare or health insurance will pay for. But there are ways to significantly reduce healthcare spending without taking away anything that consumers want.

    A perfect example is hospital readmissions. Research studies and quality-reporting initiatives around the country show that 15-25% of people who are discharged from the hospital will be readmitted to the hospital within 30 days or less, and that many of these readmissions are preventable.

    A number of proposals have surfaced for reducing preventable readmissions by reducing or eliminating payments to hospitals when these readmissions occur. The problem with this approach is that it assumes that if a readmission is preventable, it is preventable by the hospital, and that is not always the case.

    As outlined in this policy brief, the Patient-Centered Medical Home can help to prevent many readmissions, if it is paid in the right way and focuses on reducing readmissions. Download the Policy Brief.

    Transitioning to
    Episode-Based Payment

    There is growing interest in using episode payments instead of fee-for-service payments as way of improving healthcare quality and controlling costs. An "episode payment" is a single price for all of the services needed by a patient for an entire episode of care (e.g., all of the inpatient and outpatient care they need after having a heart attack). An episode payment system reduces the incentive to overuse unnecessary services within the episode, and gives healthcare providers the flexibility to decide what services should be delivered, rather than being constrained by fee codes and amounts.

    The devil is in the details, however: What exactly would be included in an episode payment? And how can healthcare payers and providers transition from the current fee-for-service system to an episode payment structure?

    This policy brief describes how to define an episode payment and how to transition to episode payment. Download the Policy Brief.

    Setting Payment Levels

    Most discussions about healthcare payment reform focus on different methods of paying providers - fee-for-service payments, episode payments, capitation payments, etc. Different payment methods have advantages and disadvantages, but choosing the payment method is only half of the challenge in reforming payment systems. The other half is choosing the right amount of payment. Even if the payment method provides the right incentives, if the payment level is too low (i.e., below the minimum cost of providing care), providers will be unable to provide quality care, and if the payment level is too high, there is no incentive for efficiency.

    So how should payment levels (i.e., prices) be set? This policy brief describes the three different methods for setting prices, and some of the advantages and disadvantages of each. Download the Policy Brief.

    More policy briefs will be issued in the near future. Comments on the briefs, and suggestions for additional topics, are welcome -- send comments and suggestions to

    Follow CHQPR

    What's New

    ©2008-2015 Center for Healthcare Quality and Payment Reform. All rights reserved.
    320 Ft. Duquesne Blvd., Suite 20-J - Pittsburgh, PA 15222 - (412) 803-3650 -