LAN APM framework categories

VBP models are also called alternative payment models (APMs). We use VBP in Oregon to emphasize the importance of value in the payment model.

The LAN is a public-private partnership launched by the U.S. Department of Health and Human Services to “advance multi-stakeholder payment reforms to enable coordinated health care that achieves better health, equity, and affordability.” The LAN classifies payment models into four categories as described in the Appendices. Category 1 is traditional FFS; Category 2 is based in FFS but links quality and value to enhanced payments or penalties; Category 3 payment models include shared savings (3A) and shared risk (3B). Category 4 includes condition-specific and/or population-based payments within capitated funding or global budget arrangements.

The HCP LAN website has many resources, including the following graphic of APM Categories.

Figure 1: LAN APM Framework

Annually, the LAN asks payers to voluntarily report their use of APMs by market (commercial, Medicare, and Medicaid). The LAN APM data collection tools are posted on their website along with APM penetration by category and by market.

It is important to note that many payment models include a combination of APM categories. For example, a payer may have an agreement with a primary care entity which includes relatively small prospective per member per month (PMPM) payments (2A foundational payments) combined with financial incentives for providers that meet certain quality benchmarks (2C pay-for-performance).

Definitions of LAN APM Categories and examples are included in the Glossary. The LAN’s goal is to accelerate the percentage of US health care payments tied to quality and value in each market segment through the adoption of two-sided risk alternative payment models.  Currently, most alternative payment models are between payers and primary care provider entities and shared savings arrangements are more common than two-sided, shared-risk arrangements in most markets.