Medicare Value-Based Payments (also Called Alternative Payment Models) to Hospitals Fall Into 3 Main Categories:

1 - Pay for Performance (P4P): There are 3 Sub-Types of Pay-for-Performance

--Value-Based Purchasing: Fee-for-Service with $1.5B at Stake in Quality Bonuses to be Paid-out by Penalizing those Hospitals with Poor Quality. Budget Neutral for Medicare.

--Readmission Reduction: Fee-for-Service with 3% Penalty for Readmissions for 6 Conditions, Only Downside for Hospitals, No Upside. Medicare Saves.

--Hospital-Acquired Conditions (e.g. Catheter-Associated Urinary Tract Infection): Fee-for-Service with 1% Penalty, Only Downside for Hospitals, No Upside. Medicare Saves.

2 - Bundled Payments: Fixed Payment for 32 Different Episodes of Care, Voluntary Program

--Fixed $ Amount for Hospital + Doctor + Post-Acute Care

--Program is Shrinking: Participating Hospitals from 830 to 715

3 - Shared Savings: Accountable Care Organizations (ACO) - Fixed Payment for a Population of Patients for a Certain Period of Time (aka 'Capitation'), Voluntary

--517 ACOs Currently Care for 11.2 Million Medicare Beneficiaries

-- 28% of Total Traditional Medicare Population, BUT 56% of Hospitals Plan on Ending Their ACO

Related Video: How HEDIS Quality Scores Work

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