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Payment Reform GLOSSARY Definitions and Explanations of the Terminology Used to Describe Methods of Paying for Healthcare Services

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Payment Reform GLOSSARY Definitions and Explanations of the Terminology Used to Describe Methods of Paying for Healthcare Services The Payment Reform GLOSSARY Definitions and Explanations of the Terminology Used to Describe Methods of Paying for Healthcare Services First Edition INTRODUCTION There is growing national recognition that the The Payment Reform Glossary also provides current systems used to pay physicians, hospi­ descriptions of many of the most significant tals, and other healthcare providers fail to en­ payment reform models that have been pro­ courage the highest-quality, most affordable ap­ posed or implemented by public and private proaches to care delivery. However, there has payers. been little consensus as to how payment reforms should be structured to solve the problems in A unique feature of The Payment Reform Glos­ current payment systems without creating new sary is that explicit comparisons and contrasts and potentially worse problems in their place. among key concepts are provided in highlight­ ed sections of the Glossary. One of the barriers to reaching consensus on significant payment reforms has been the com­ The intense focus on payment reform across the plex and confusing array of terminology that has country means that concepts will be evolving rapid­ been used to describe different payment sys­ ly and new programs will be proposed and imple­ tems. It is difficult for stakeholders to determine mented almost continuously. New editions of The whether to support a proposal if they do not un­ Payment Reform Glossary will be issued regularly derstand the words and abbreviations used to to ensure that the content is as current as possi­ describe it, and it is difficult to reach agreement ble. when the same words are used by different peo­ Additions, corrections, and suggestions for ple to mean different things or when words are improvements to the content of The Payment perceived by some stakeholders to mean some­ Reform Glossary are welcome. Comments can thing different than what was actually intended. submitted to [email protected]. The Payment Reform Glossary is designed to fa­ More information is available on many of the pay­ cilitate a better understanding of payment reform ment reform concepts described in The Payment concepts and to create a foundation for a com­ Reform Glossary in the following additional reports: mon language for developing and discussing pay­ ment reform concepts so they can be supported The Building Blocks of Successful Payment and implemented by all stakeholders — patients, Reform: Designing Payment Systems That providers, employers, health plans, and govern­ Support Higher-Value Health Care ment agencies. Making the Business Case for Payment and In addition to providing definitions, the Glos­ Delivery Reform sary attempts to explain many of the most Measuring and Assigning Accountability for important words and phrases in enough de­ Healthcare Spending: Fair and Effective Ways tail that patients, providers, purchasers, and to Analyze the Drivers of Healthcare Costs and policy-makers can understand the ad­ Transition to Value-Based Payment vantages and disadvantages of different pay­ Ten Barriers to Healthcare Payment Reform ment models and the rationale for including and How to Overcome Them various components of payment models that might otherwise seem to make them unnec­ Transitioning to Accountable Care: Incremental essarily complex. Payment Reforms to Support Higher Quality, More Affordable Health Care Because there is not just one “fee-for-service payment system” but more than a dozen dif­ All of these reports can be downloaded free of ferent systems for different types of provid­ charge at www.PaymentReform.org. ers, each with their own unique structures and their own unique strengths and weak­ nesses, The Payment Reform Glossary pro­ vides a basic description of the major pay­ ment systems used today to pay physicians, hospitals, and other providers. © Center for Healthcare Quality and Payment Reform the Center for Medicare and Medicaid Innovation in 2015. It offers multiple payment options, including a capitation payment model, and it requires provid­ ers to accept virtually full performance risk and some insurance risk for the population of Medicare beneficiaries assigned to the ACO. Pioneer ACO. A Pioneer ACO is a provider organization participating in a special demonstration program with the Center for Medicare and Medicaid Innova­ tion using a shared savings payment model with A different rules than those that apply to provider organizations participating as ACOs in the Medicare Shared Savings Program. Accountable Care Organization (ACO). An Accountable Track 1 ACO. In the Medicare Shared Savings Pro­ Care Organization is a group of providers who have gram, a “Track 1 ACO” is an Accountable Care Or­ organized themselves in a way that enables them to ganization that is eligible for a shared savings pay­ take accountability for the overall quality of care and ment if savings are achieved, but the ACO is not the total cost to payers of all or most of the liable to make payments to CMS if spending in­ healthcare services needed by a group of patients creases (i.e., Track 1 is an “upside only” shared over a period of time. In the Affordable Care Act, Con­ savings model). gress authorized the use of different methods of pay­ ing for services to Medicare beneficiaries if the pro­ Track 2 ACO. In the Medicare Shared Savings Pro­ viders are part of an Accountable Care Organization gram, a “Track 2 ACO” is an Accountable Care Or­ that meets specific eligibility criteria established in ganization that is eligible for a shared savings pay­ the statute and in regulations promulgated by the ment if savings are achieved, but the ACO is also Centers for Medicare and Medicaid Services (CMS). liable to make payments to CMS if spending in­ However, the term Accountable Care Organization is creases (i.e., Track 2 is a “shared risk” payment also used to describe provider organizations that may model). not meet all of the standards established in the Medi­ care Shared Savings program but are measuring and Track 3 ACO. In the Medicare Shared Savings Pro­ managing the cost and quality of services for their gram, a “Track 3 ACO” is an Accountable Care Or­ patients. ganization that is eligible for a shared savings pay­ ment if savings are achieved and is liable to make An Accountable Care Organization is not a payment payments to CMS if spending increases, but the model, it is an organizational structure designed to ACO receives a greater share of savings and is lia­ deliver care in a different way. Although CMS is pay­ ble for larger payments to CMS than a Track 2 ACO. ing providers that meet its ACOs standards using a shared savings payment model, the Affordable Care Act authorized the use of other payment models for ACO vs. HMO vs. PPO. There are a number of important ACOs in the Medicare program, including partial capi­ similarities and differences between ACOs, HMOs tation. A number of providers who have defined (Health Maintenance Organizations), and PPOs themselves as an Accountable Care Organization are (Preferred Provider Organizations): participating in payment contracts with commercial An ACO is generally based on a self-defined network health insurance plans, Medicaid programs, etc. that of providers, whereas in most HMOs and PPOs, the use payment models different from the payment network is defined by a health plan. model used in the Medicare Shared Savings Program. In the Medicare Shared Savings Program and most Moreover, providers do not need to form an ACO in commercial ACOs that are part of PPO health plans, order to participate in a shared savings payment an ACO cannot limit a patient’s ability to use providers model, since many payers, including CMS, are using that are not part of the ACO, whereas the primary shared savings payment models to pay individual care providers in an HMO typically have the ability to physician practices and hospitals that are not part of limit which services a patient can receive and from an Accountable Care Organization. which providers they can receive approved services. While CMS has defined an Accountable Care Organi­ In the Medicare Shared Savings Program, a Medicare zation as a group of providers that includes primary beneficiary remains able to use any Medicare provid­ care physicians and that takes accountability for the er, and in most commercial ACO programs, a commer­ costs of all services associated with the patients at­ cially-insured patient can continue to use any provider tributed to those primary care physicians, the term in the network of providers that is under contract to Accountable Care Organization is also used to de­ the payer. scribe a group of specialists who take accountability In an ACO that is paid through shared saving pro­ for all of the costs related to a particular health condi­ grams, there is no change to the underlying fee-for­ tion, such as cancer. service payment structure for the providers in the Next Generation ACO. The Next Generation ACO Pro­ ACO. In contrast, in many HMOs, a provider group gram is a demonstration program announced by receives a capitation payment that it can use to pay its physicians and other providers in different ways. THE PAYMENT REFORM GLOSSARY Accountable Payment Model. An Accountable Payment cardiovascular and orthopedic procedures. Model is a generic term describing a payment model in which an accountable provider takes responsibility Adjudication. Adjudication is the process through which a for achieving specific performance levels on quality payer determines that a claim from a provider for deliv­ and cost measures and receives a payment designed ery of healthcare services should be paid and the al­ to support the services and activities needed to lowed amount for the claim. See also Allowed Amount. achieve those performance levels. See Payment Mod­ el and Accountable Provider. Adjusted Clinical Groups (ACGs). Adjusted Clinical Groups (ACG) is a risk adjustment system developed Accountable Provider.
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