What Payment Models are Available for Community-Based Services?

The Affordable Care Act ushered in many changes in the way health-related services are paid for and delivered. Understanding the different ways community-based services providers are reimbursed can help clarify how such services are being delivered in your state.

Fee-for-Service (FFS)

In the fee-for-service, traditional health care payment model, each covered service is paid for separately, and payment is made after the service is provided and billed to the health plan. This model gives an incentive to provide more services because payment is based on quantity or volume, rather than quality or value. Examples are the Diabetes Self-Management Training (DSMT) and the Health and Behavior Assessment and Intervention (HBAI) benefits under the Medicare FFS payment system.

Value-Based Payment Models

Unlike the traditional FFS payment model, the Value-Based Payment (VBP) model promotes quality and value of services over quantity or volume.

• Bundled Payment: This payment model reimburses health care providers based on expected costs for an episode of care, such as a hospital stay. As part of the Affordable Care Act, the Centers for Medicare & Medicaid Services Innovation Center was developed to test new payment and service delivery models to achieve better care, better health, and lower costs. The Bundled Payments for Care Improvement Initiative is testing four different bundled payment models during two phases of implementation. You can use the site map to find out if there is an innovation program in your state.
• Pay for Performance: This model offers rewards to providers who meet or exceed their performance on specific quality metrics that fall into the four categories: process (performance of health care activities), outcome (effects of care on patient), patient experience (satisfaction with care) and structure (facilities, personnel, equipment used in treatment). An example is the Patient-Centered Medical Home, in which the primary care medical home is responsible for providing patient-centered, coordinated care, including wellness, acute, and chronic care.

Shared Savings Program

Established by the Affordable Care Act, the Medicare Shared Savings Program promotes coordination and cooperation among physicians and other health care providers to improve the quality of care to patients, especially those with chronic diseases, and reduce unnecessary costs. Health care providers can participate in a Shared Savings Program by creating or participating in an Accountable Care Organization (ACO). Through this coordinated approach, the ACO is expected to reduce duplication of service and make good decisions about what care is needed when. If the ACO is successful in improving care while lowering costs, it will share in the savings that it achieves. While this model was created for Medicare, currently, there are also a number of Medicaid MCOs. An ACO is a legal entity identified by a Taxpayer Identification Number and authorized under applicable state, federal, or Tribal law.