Glossary Term

Alternative Payment Model

According to the Centers for Medicare & Medicaid Services (CMS), an alternative payment model (APM) is a payment arrangement that incentivizes a health care provider to deliver medical treatments that are both “high quality and cost-efficient.” APMs are used to discourage the conflicts-of-interest in traditional fee-for-service medical treatment where health care providers make more revenue providing more services to patients even if the additional services do not improve patient outcomes. CMS specifies that APMs can be utilized at the population level or for population segments defined by a clinical condition or a treatment episode. Alongside traditional APMs are Advanced Alternative Payment Models that have more extensive requirements, such as sharing in a degree of financial loss if medical expenditures exceed projections.

An APM is one of the tools in the quest to promote value-based care and reduce the expense of medical treatment and, by consequence, the insurance paying for the treatment. Examples of APMs include the Medicare Shared Savings Program and the Making Care Primary (MCP) program. CMS has stated as a strategic objective their intention to have every Medicare Part A and B beneficiary receiving care from providers with accountability for quality and cost by 2030.

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