What are Alternative Payment Models?

Categories: Policy.

CMS is experimenting with a great variety of alternative payment schemes. As one researcher put it to me, “They’re throwing everything at the wall to see what sticks.”

Medicare is still struggling to find the right mix of risk and incentives for health systems, and each program has its own implications for hospices. This list is not comprehensive—find out what models are operating in your area by going to the CMS website for innovation.

Medicare Accountable Care Organizations

  • Medicare Shared Savings Program (MSSP)
  • ACO Investment Model (for rural and underserved areas)
  • Comprehensive ESRD Care Initiative 
  • Pioneer ACOs
  • Next Generation ACO Model

It’s not as important to understand the details of the individual programs as to know that with all of them, the ACO receives an incentive for the health status and costs of care for an assigned population. Note that in some parts of the country commercial- and even employer-sponsored ACOs are also key players.

Bundled Payment Initiatives (BPCI)

These experimental programs link payments for the multiple services beneficiaries receive during an episode of care. Under the initiative, hospitals and health systems receive a flat payment for all the care required by a patient for a given episode of care. Episodes covered under these initiatives vary. For hip and knee joint replacement in the Comprehensive Care for Joint Replacement bundled payment, the hospice is included in the bundle for 90 days post joint replacement. Providers participating in these initiatives must manage costs by avoiding unnecessary expenses, like avoidable readmissions or ER visits by the patients.

Maryland All-Payer Model

Maryland has a unique all-payer hospital rate system that is exempted from the usual hospital DRG payment. CMS is using it to test whether making hospitals accountable for the cost of care on a per capita basis is an effective model for advancing better care, better health and reduced costs. The state of Maryland has shifted virtually all hospital payment into global payment models, giving each hospital a fixed budget that is not tied to admissions or other volume measures. While this program affects only Maryland providers right now, this could be the wave of the future for all hospitals if it works.


See the related article, “New Strategic Opportunities for Hospice: Taking Advantage of ACOs and Alternative Payment Models.”

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