Payment Reform Terms

Bonus Payments Based on Measures of Quality and/or Efficiency Payments that reward providers for performance in quality and/or efficiency relative to predetermined benchmarks, such as meeting pre-established performance targets, demonstrating improved performance, or performing better than peers. Bonus payments can include programs that pay providers lump sum payments for achieving performance targets (quality and/or efficiency metrics). Bonus payments can also include payments tied to a provider's annual percentage increase in fee-for-service (FFS) payments based on their achievement of performance metrics. Bonus payments do NOT include Medicaid health home payments or payments made to PCMH's that have received NCQA accreditation (see "non-visit function"), or payments made under shared-savings arrangements that give providers an increased share of the savings based on performance (see "shared savings").
Bundled Payment Also known as "episode-based payment," bundled payment means a single payment to providers, health care facilities, or jointly to both for all services to provide a given procedure or treatment, or treat a given condition. Providers assume financial risk for the cost of services for a particular procedure, treatment, or condition as well as costs associated with preventable complications.
Condition-specific Capitation A per member, per month (PMPM) payment to providers for the care that patients may receive for a specific condition (or set of conditions) in a given time period, such as a month or year. The patient’s services that are not related to his/her condition are still paid on a fee-for-service basis or other method.
Episode-based Payment See definition for "Bundled Payment."
FFS-based Payment A payment model where providers receive a negotiated or payer-specified payment rate for every unit of service they deliver without regard to quality, outcomes or efficiency.
Full Capitation With Quality A per member per month (PMPM) payment to providers for the all of the care that patients may receive in a given time period, such as a month or year, with payment adjustments based on measured performance (quality, safety, and efficiency) and patient risk. Includes quality of care components with the potential for bonus payments.
Full Capitation Without Quality A per member per month (PMPM) payment to providers for the care that patients may receive in a given time period, such as a month or year. Payments may or may not be adjusted for patient risk and there are no payment adjustments based on measured performance, such as quality, safety, and efficiency.
Non-FFS-based Payment A payment model where providers receive payment that is not based on the fee-for-service (FFS) payment system and not tied to a fee schedule. Examples of non-FFS-based payment include bundled payment and full capitation.
Non-visit Function A small flat rate or per member per month (PMPM) payment to providers for outreach and care coordination/management; after-hour availability; patient communication enhancements; health IT infrastructure and use. Non-visit functions 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. Health home payments and payments for NCQA accreditation for achieving PCMH status made under the Medicaid program can be classified as non-visit functions.
Partial Capitation A per member per month (PMPM) payment to providers for ancillary services or high cost items (e.g. device, implant, or drug) for outpatient care only or related to a specific condition (inpatient and outpatient) that patients may receive in a given time period, such as a month or year. All other services the patient receives are still paid on a fee-for-service basis or other method.
Pay-for-Performance Provides incentives (typically financial) to providers to achieve improved performance by increasing the quality of care and/or reducing costs. Incentives are typically paid on top of fee-for-service payment. The financial incentive payment that is given for achieving certain performance levels is sometimes also referred to as a bonus payment. See "Bonus Payment" definition.
Payment Reform Refers to a range of health care payment models/methods that use payment to promote or leverage greater value for patients, purchasers, payers, and providers.
Quality/Quality Components A payment reform program that incentivizes, requires, or rewards some component of the provision of safe, timely, patient-centered, effective, efficient, and/or equitable health care.
Shared Risk Refers to arrangements in which providers accept some financial liability for not meeting specified financial and quality targets. Examples include: loss of bonus; baseline revenue loss; or loss for costs exceeding global or capitation payments; withholds that are retained and adjustments to fee schedules. Shared-risk programs are based on a fee-for-service payment system or could be based on full capitation.
Shared Savings Provides an upside-only financial incentive for providers or provider entities to reduce unnecessary health care spending for a defined population of patients by offering providers a percentage of any realized net savings under an established financial target and based on quality performance. "Savings" can be measured as the difference between expected and actual cost in a given measurement year. Shared-savings programs can be based on a fee-for-service payment system. Shared-savings can be applied to some or all of the services that are expected to be used by a patient population and will vary based on provider performance.