Payment and Delivery System Reform in Medicare: A Primer on Medical Homes, Accountable Care Organizations, and Bundled Payments

Nov 17, 2016 by Susan Baseman, Cristina Boccuti, Marilyn Moon, Shannon Griffin, and Tania Dutta

Kaiser Family Foundation 

The Affordable Care Act (ACA) established several initiatives to identify new payment approaches for health care that could lead to slower spending growth and improvements in the quality of care.  Many of these new delivery system reforms are currently being implemented and tested in traditional Medicare.  This Primer describes the framework and concepts of three broad alternative payment models—medical homes, ACOs, and bundled payments—and reviews their goals, financial incentives, size (number of participating providers and beneficiaries affected), and potential beneficiary implications.  It also summarizes early results with respect to Medicare savings and quality.


Delivery system reform in Medicare focuses on shifting a portion of traditional Medicare payments from fee-for-service (FFS) (which reimburses based on the number of services provided) to payment systems that incorporate some link to the “value” of care as determined by selected metrics, such as patient outcomes and Medicare spending.  The Department of Health and Human Services has announced a goal to have 90 percent of traditional Medicare payments linked to quality or value by 2018.1  The agency also reports that it has met its goal of having 30 percent of Medicare payments tied specifically to alternative payment models (such as Accountable Care Organizations (ACOs), bundled payments, and medical homes) by the end of 2016, and expects to reach 50 percent by the end of 2018.2  Additionally, recent legislation to reform Medicare payments for physician services, the Medicare Access and CHIP Reauthorization Act (MACRA), includes bonus payments for physicians and other health professionals who participate in qualifying alternative payment models.3

To establish a central place for designing, launching, and testing new payment models, the ACA created the Center for Medicare and Medicaid Innovation (CMMI), also referred to as the “Innovation Center,” housed within CMS.  The ACA granted CMMI wide authority to design and test new models that aim to either lower spending without reducing the quality of care, or improve the quality of care without increasing spending.4  The intent of designing and launching multiple new models is that the cream of all of these approaches will rise to the top, providing direction as to what works and what does not—so best practices can be quickly disseminated across the country.  In fact, the ACA gives CMMI unprecedented authority to expand models across the U.S. when they are found to be successful.

(executive summary to article continues at Kaiser Family Foundation webpage URL link below):

Tags: Medicare Payment and Delivery System Reform, Kaiser Family Foundation, CMS

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