On Jan. 26, the U.S. Department of Health and Human Services (HHS) announced an initiative to base more Medicare provider payments on the quality of care provided. The agency set specific goals for the use of alternative payment models in the next three years. “Today’s announcement is about improving the quality of care we receive when we are sick, while at the same time spending our health care dollars more wisely,” said HHS Secretary Sylvia Mathews Burwell in a press release.
Traditionally, Medicare payments have been on a fee-for-service basis, under which providers receive a payment for each individual health care service provided. Critics argue that the fee-for-service model encourages high-volume care rather than high-value or coordinated care. In contrast to fee-for-service, alternative payment models such as accountable care organizations (ACOs), primary care medical homes, or bundled payments for episodes of care aim to tie provider payments to the quality of care and encourage providers to be cost-efficient. They also increase the risk to the providers.
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