Alternative Payment Model (APM): Health care payment methods that use financial incentives to promote or leverage greater value – including higher quality care at lower costs – for patients, purchasers, payers, and providers. Increasingly, APMs are focusing on other measures of value such as advancing health equity. See also, value-based payment models and the LAN APM Framework.
Assignment: Assignment is a prospective process in which a payer matches a health plan member with a primary care provider based on specific criteria such as zip code, availability, age or other considerations. Some payers encourage member selection of a PCP prior to using the assignment process and members have the option to change their assigned PCP. Outreach to patients may be conducted as part of the health plan enrollment process, particularly if an assigned PCP is tied to the health plan benefit structure. Some payers share rosters with providers that combine member selections and health plan assignments since both are prospective and do not rely on claims history of prior visits. Primary care clinics are often encouraged by payers to contact patients on the roster to establish a relationship so patients may choose a provider or team (empanelment).
Attribution: Attribution related to VBP models is the statistical or administrative methodology and process of assigning members to providers for the purposes of calculating health care costs and quality of care measures for that population. Analyzing claims or encounter-based data is a retrospective process in which a payer uses a member’s prior claims experience or encounter data to infer a patient-provider health care relationship. Each payer’s attribution algorithms have a defined look-back period, a claims code set, criteria for eligible providers, and rules regarding most recent visits and plurality of visits in cases where a patient saw multiple PCPs during the lookback period. The strategy and frequency of running attribution may vary by payer. Although all attribution methods are inherently retrospective (relying on prior visits to infer a patient-provider relationship) the application of attributed or assigned populations can be used either retrospectively or prospectively.
Capitation: Capitation is when one or more providers receives a lump sum payment at the beginning of a set period of time for a specific set of services of an attributed or assigned population.
Clinician: A doctor or other health care professional qualified in the clinical practice of medicine, psychiatry or psychology and having direct contact with, and responsibility for, patients.
Condition-specific bundled/episode payments: A single payment to providers and/or health care facilities for all services related to a specific condition (such as diabetes). The payment considers the quality, costs, and outcomes for a patient-centered course of care over a defined time period and across care settings. Providers assume financial risk for the cost of services for a particular condition, as well as costs associated with preventable complications. [APM Framework Category 4A]
Condition-specific population-based payments: A per member per month (PMPM) payment to providers for inpatient and outpatient care that a patient population may receive for a particular condition in a given time period, such as a month or year, including inpatient care and facility fees. [APM Framework Category 4A]
Episode-Based Payments: A fixed dollar budget target (or payment amount) that covers a set of services for a defined period of time. A payer may pay providers on a FFS basis with retrospective reconciliation to the episode/bundled payment budget at the conclusion of the performance period.
There are generally two types of episode-based payments:
- acute care episodes or events, which include services related to a condition or procedure (such as joint replacement, colonoscopy, pregnancy & delivery), and
- chronic condition episodes, which include services for a fixed amount of time related to a chronic condition (such as one year’s worth of care for a diabetic member).
Fee-for-Service: Providers receive a negotiated or payer-specified payment rate for every unit of service they deliver without regard to quality, outcomes or efficiency. [APM Framework Category 1]
Foundational Spending: Includes but is not limited to payments to improve care delivery such as outreach and care coordination/management; after-hour availability; patient communication enhancements; health IT infrastructure use. May come in the form of care/case management fees, medical home payments, infrastructure payments, meaningful use payments and/or per-episode fees for specialists. [APM Framework Category 2A]
Full or Percent of Premium Population-based Payments: A fixed dollar payment to providers for all the care that a patient population may receive in a given time period, such as a month or year, (such as inpatient, outpatient, specialists, out-of-network, etc.) with payment adjustments based on measured performance and patient risk. [APM Framework Category 4B]
Gate: Performance benchmark(s) that a provider must meet or exceed for the provider to receive a specific incentive payment. For example, a shared savings arrangement in which a provider entity cannot access savings unless the provider meets pre-determined performance benchmarks on select HEDIS measures.
Health benefit or health plan: An insurance policy or contract under which health services for covered individuals are provided or the expenses of such services are paid by an insurer. A payer may have different health plan contracts or agreements for different groups, such as commercial insurance, Medicare Advantage, Medicare and Medicaid.
HEDIS: Healthcare Effectiveness Data and Information Set is a tool used by more than 90 percent of U.S. health plans to measure performance on important dimensions of care and service.
Health Equity: When all people can reach their full health potential and well-being and are not disadvantaged by their race, ethnicity, language, disability, geography, gender, gender identity, sexual orientation, social class, intersections among these communities or identities or other socially determined circumstances.
Health-related Services: Services that are offered as a supplement to covered benefits to improve care delivery and overall member and community health and well-being.
Health-related Social Needs: Refers to the social and economic needs that individuals experience that affect their ability to maintain their health and well-being. They include things such as housing instability, housing quality, food insecurity, employment, personal safety, lack of transportation and affordable utilities.
Incurred but not reported (IBNR): A financial accounting of all services that have been performed but have not yet been invoiced or recorded. A payer’s estimates of costs for covered medical services provided to members for which a claim has not yet been filed or adjudicated.
Integrated finance and delivery system payments: Payments in which the delivery system is integrated with the finance system and delivers comprehensive care. These integrated arrangements consist of either insurance companies that own provider networks, or delivery systems that offer their own health plans, or payer and provider organizations that share a common governance structure, or payer and provider organizations that are engaged in mutually exclusive relationships. [APM Framework Category 4C]
Ladder: Provider incentives that vary in a step-wise fashion (either up or down) based on performance against multiple levels of established performance benchmarks. Ladders in VBP models can be set to establish percentages of supplemental payments distributed (Category 2A), pay-for-performance incentives distributed (Category 2C), portion of shared savings distributed (Category 3A), or portion of shared risk a provider must bear (Category 3B). For example, a provider entity that performs higher on select HEDIS measures could be eligible for a great portion of shared savings or at risk for a smaller portion of shared losses.
LAN APM Framework: The Health Care Payment Learning Action Network (LAN) Alternative Payment Model (APM) Framework articulated in the APM Framework White Paper-refreshed.
LAN APM Category 2A (Foundational Payments): Providers receive supplemental PMPM payments for foundational payments and fee-for-service payments or enhancements for traditionally non-reimbursed services (such as care management and care coordination codes). For example, a $2 PMPM care coordination payment to PCP practices that have achieved and maintained PCPCH recognition.
LAN APM Category 2B (Pay for Reporting): Providers may earn a financial bonus for reporting on pre-established quality or performance targets under pay for reporting arrangement. The financial bonus is in addition to the providers’ traditional fee-for-service payments. Unlike a 2C arrangement, in 2B, a provider is rewarded for submitting complete, timely, and accurate performance data, regardless of the providers’ level of performance on the identified data.
LAN APM Category 2C (Pay for Performance): Providers may earn a financial bonus for meeting pre-established quality or performance targets. For example, a payer may pay a bonus to primary care practices for performance that meets the 75th percentile on select HEDIS performance measures. In some cases, payers might have tiered rewards where providers earn bonuses for significant improvement over their own performance in the prior year, and/or different bonus levels for meeting the 75th vs. the 90th HEDIS percentile.
LAN APM Category 3 (Shared Savings (3A), Shared Risk (3B)): A population-based payment (PBP) model where providers’ share payments (3A) and/or share losses (3B) with the payer based on a pre-determined total cost of care (TCOC) target for medical expenditures related to attributed or assigned members. For example, a payer may pay providers FFS and the providers are retrospectively eligible for Shared Savings or Shared Risk based on a TCOC target for attributed members. Certain very high-cost populations and/or services may be excluded from the TCOC calculations depending on the agreement between the payer and the provider.
LAN APM Category 4 (Prospective Capitation): For full or partial capitation, providers receive fixed dollar, prospective payments for each attributed or assigned member. This payment may be for most services needed (full capitation) or for a partial set of services (partial capitation). Quality may be factored into this model as a pre-requisite, a withhold on the capitated amount, or as an adjustment for future rates.
Member Month: A count that records one member month for each month a specific individual member is insured/enrolled in the payer’s health plan during the specified period. Member month is calculated by taking the number of individuals in a health plan and multiplying that sum by the number of months that member is insured/enrolled in the health plan during the specified period (such as calendar year 2023). One individual who is insured/enrolled in the same health plan for one year creates twelve-member months (1 person x 12 months).
Patient-Centered Primary Care Home Program (PCPCH): Oregon’s version of the “medical home,” is a model of primary care organization and delivery that is patient-centered, comprehensive, team-based, coordinated, accessible and focused on quality and safety.
Pay-for-Performance (P4P): The use of incentives (usually financial) to providers to achieve improved performance by increasing the quality of care and/or reducing costs. Incentives are typically paid on top of a base payment, such as fee-for-service or population-based payment. In some cases, if providers do not meet quality of care targets, their base payment is adjusted downward the subsequent year. [APM Framework Categories 2C].
Payer: Any health insurance company, nonprofit hospital and medical service corporation, managed care organization, coordinated care organization, and, to the extent permitted under federal law, any administrator of a health benefit plan offered by a public or a private entity.
Per member, per month (PMPM): The amount of money received by a provider entity in certain VBP models on a monthly basis for each attributed individual, often referred to as capitation. For example, providers may receive prospective PMPM payments from a payer as part of foundational payments (Category 2A) or as part of capitation payments under Category 4 VBP models.
Population-based Payment (PBP): Payment methodology between a payer and a provider entity that involves defining a budget/target on a per-capita basis for a defined population of patients for whom the provider assumes partial or full clinical and financial responsibility. PBP models can be condition-specific such as maternity bundled payments but can also be for a broader population of patients [APM Framework Category 3 and 4].
Primary Care Payment Reform Collaborative (PCPRC): Established in Oregon in 2015 with Senate Bill 231, is charged with developing and sharing best practices in technical assistance and methods of reimbursement that direct greater health care resources and investments toward supporting and facilitating health care innovation and care improvement in primary care.
Primary Care First: A voluntary alternative five-year payment model developed by Centers for Medicare and Medicaid Services (CMS) based on the principles underlying the Comprehensive Primary Care Plus (CPC+) model design. Primary Care First prioritizes the clinician-patient relationship and focuses on enhancing care for patients with complex chronic needs with financial incentives for improved health outcomes.
Provider Entity: A legal entity that contracts with payers to provide health care to patients. Provide entities may include an individual physician(s) and/or other health care professional(s), a hospital or health system, a provider-sponsored organization, or any other kind of health care facility or organization responsible for direct care delivery to patients.
REALD data: Demographic data on member’s race, ethnicity, language and disability status.
Self-finance:
Shared Risk: A risk arrangement that allows providers to share in a portion of any realized net savings they generate in a given time period compared to a set target for spending, but also puts them at financial risk for any overspending. Shared risk provides both an upside and downside financial incentive for providers or provider entities to reduce unnecessary spending for a defined population of patients or an episode of care, and to meet quality targets. [APM Framework 3B]
Shared Savings: A risk arrangement that allows providers to share in a portion of any realized net savings they generate in a given time period compared to a set target for spending [APM Framework 3A]. Frequently developed using a FFS “chassis,” prospectively defined budgets, and retrospective reconciliation to the budget target.
SOGI data: Demographic data on member’s sexual orientation and gender identity.
Stop–loss: In a VBP arrangement, a stop-loss provision sets a pre-determined cost threshold for a patient whereby any medical costs over the threshold are removed from the practice’s Total Cost of Care (TCOC) calculations and liabilities. Stop-loss provisions within VBP arrangements limit provider financial losses beyond a specified, allowable amount, which can be defined at the individual patient level or at the aggregate patient panel level for a defined period. For example, if a payer offers a provider entity a VBP arrangement with a $50,000 individual stop loss limit, and one patient has an emergency event, their medical bills could exceed the $50,000 threshold. The stop-loss provision would exclude medical expenditures over the $50,000 individual threshold from the provider’s liability under the VBP model. In some cases, payers may offer stop-loss insurance where the provider entity effectively pays a modest monthly fee to the insurer to protect itself against the uncertainty of large liabilities for medical expenditures related to downside risk in advanced VBP models.
Total Cost of Care (TCOC): Total spending on services from which shared savings and shared risk rates are based. TCOC benchmarks approximate the costs and resources used to treat identified populations for a defined set of health care services, such as all professional, pharmacy, hospital, ancillary care and administrative payments. TCOC does not always include all services, as some plans may carve out high-cost services or rarely used services to protect providers from costs they may not be able to control.
Value-based payment (VBP) model: payment arrangement with provider entities that explicitly reward the provider entities’ performance on defined value objectives in the model. VBP models are designed to support providers in delivering whole-person care and holds them accountable for improving quality, costs, patient experience, and — increasingly — equity. VBP models are often categorized based on the LAN APM Framework.