As the healthcare reimbursement arena slowly but gradually shifts from fee-for-service towards value-based care, alternative payment models continue to gain market share and proportion of overall provider reimbursement. These models came as a cost-containment vehicle to enable success of the Affordable Care Act, whose primary goal was value creation for patients. Value based care rewards providers for providing high quality rather than high quantity care to patients  

Below is an overview of different types of payment models and how they work: 

1. Accountable Care Organizations  

Accountable Care Organizations (ACOs) are provider-led organizations largely based on primary care  that come together to take responsibility for the quality of care and total medical cost of a patient population, and in return earn the potential to share in the savings achieved. ACOs sign agreements with CMS or private payers in which they commit to certain thresholds of quality, cost, and patient experience (The Triple Aim). 

Practitioners who participate in ACOs collaborate with other practitioners in the group to drive success in population health initiatives through provision of patient-centered care, care coordination resources and activities, and risk-based patient segmentation and engagement. Through team-based care and improved coordination, ACOs aim to reduce variations in care and cost resulting in less duplication and errors and an overall improvement in the quality of care provided to each patient. The success of an ACO depends on its ability to effectively incentivize hospitals, physicians, post-acute care facilities, and other providers to form partnerships and promote better coordination of care delivery. It also depends on achieving transformation in patient behavior and utilization of healthcare resources.

2. Bundled Payments 

Bundled payments are single payments made for all services rendered to a patient during a specific episode of care. An ‘episode of care’ is a defined timeframe during which a patient receives care for a specific condition or health need. In a bundled payment model, providers are reimbursed for the totality of services using a set price, usually based on historical costs.  Providers who exceed the pre-determined price take responsibility for the overages, and vice versa for savings achieved at a cost lower than the target price. The goal of bundled payments is to encourage providers to remove care variation and standardize care protocols and decisions across patients in the same episode.  

This value-based care model encourages providers to improve care coordination and efficiency and shows significant promise in improving healthcare quality and outcomes at a lower cost. Bundled payments are used in programs such as the CMS's Comprehensive Care for Joint Replacement (CJR) and Bundled Payments for Care Improvement (BPCI). Monitoring for quality is a critical component for this model to ensure lack of compromise. 

3. Patient Centered Medical Homes 

A Patient-Centered Medical Home (PCMH) is a value-based care model in which a primary care physician coordinates a centralized care setting for patients to meet their various needs. Patients can benefit from a more personal approach through one-on-one relationships with their care providers, and treatment is determined based on medical and environmental factors. 

In brief, the PCMH model consists of five main characteristics: 

  • Comprehensive care 
  • A patient-centric perspective 
  • Care coordination across all elements of the broader healthcare system 
  • Accessibility to healthcare services 
  • A focus on the quality of care and patient safety 

The PCMH model has been linked to better chronic disease management, higher patient and provider satisfaction, cost savings, higher quality of care, and more preventive care.  Implementing a PCMH framework is a lengthy investment, which can be a significant barrier to implementation, along with potential challenges regarding the financial risks and accountabilities of PCMHs. 

4. Capitation 

A capitation payment model pays healthcare providers a set amount per patient served per unit of time. A health insurance company or health maintenance organization (HMO) makes payments to a physician, clinic, or hospital that are calculated in advance (prospective capitation) and remain fixed for the duration of the contract, regardless of the number of services delivered. Payment amounts are determined based on a study of retrospective payments. 

Capitation is on the riskier end of the value-based care spectrum, requiring the provider to bear 100% of the risk. This model charges a flat fee per patient and allows providers to keep any savings. However, this implies that providers must bear the risk of losses. 

5. Shared Risk 

Shared risk models, also known as downside or 2-sided risk models are payment agreements in which providers share in both the savings and losses. 

For upside only or shared savings plans, providers are reimbursed based on the quality of healthcare provided and their spending goals. When these targets are met, the provider will share the savings with the payers. No penalties occur if spending exceeds the target. 

Shared risk plans offer the possibility of gaining greater financial reward, tempered by the prospect of more significant financial loss. To be successful in 2-sided risk models, providers must understand the true cost of care at the unit level and use data and an engaged team of physicians to drive care decisions. Organizations that have leveraged experience in the other payment models to establish a risk-ready infrastructure are more likely to be successful in 2-sided risk models.  

How HRS Can Help You Navigate the Value-Based Care Landscape 

Telehealth and Remote Patient Monitoring (RPM) presents a great solution and intervention to drive successful engagement of patients in a value-based care program. To optimize the success of your value-based care programs, you will need to find a telehealth and remote patient monitoring solution that aligns well with your organization's vision and objectives.  

At HRS, we provide several telehealth and remote patient monitoring solutions that focus on optimizing value-based care objectives, such as improving quality of care, improving patient experience, and lowering cost of care through reducing hospital readmissions and potentially avoidable ED visits. Get in touch with us today to learn more about our commitment to enabling your success in value-based care. 


Learn more about the role of RPM in value-based care by talking to a digital health specialist today! 

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