What are alternative payment models?
Alternative payment models (APM) are a payment approach that helps define value and gives added incentive payments for providing high-quality and cost-efficient care.
Examples include accountable care organizations (ACOs), bundled payment programs, and pay-for-performance agreements. Each type of APM gives providers a different type of financial risk or opportunity based on performance. APMS can apply to a specific clinical condition, care episode, or population.
One example is the Oncology Care Model (OCM), a payment and care delivery model that consists of a two-part payment system: a per-beneficiary payment and a performance-based payment for providers. Another is the Comprehensive Care for Joint Replacement Model, a CMS-developed model that allows providers to share in savings if they keep costs below the target price while maintaining quality standards.
Key types of APMs
- Accountable Care Organizations (ACOs): Groups of providers jointly responsible for the quality and cost of care for a population.
- Bundled Payments: A single, fixed payment covers all services related to a treatment or condition over a defined period.
- Patient-Centered Medical Homes (PCMHs): Care delivery models focused on coordinated, comprehensive primary care.
- Pay-for-Performance (P4P): Providers receive bonuses or penalties based on meeting specific quality or efficiency metrics.
- Capitation: Providers receive a set amount per patient regardless of services provided.
Why Alternative Payment Models Matter
- Encourage better patient outcomes and care coordination.
- Reduce unnecessary tests and procedures.
- Align financial incentives with value, not volume.
- Support population health management and cost containment.
