ACOs are groups of health care providers and hospitals who partner together to provide high-quality, coordinated care and decrease overall health care costs for a defined population, with the goal of sharing these cost savings.¹ The first Medicare ACOs were approved as part of the Affordable Care Act in 2009. In April 2015, Congress signed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) into law, which shifted payment from a primarily fee-for-service (FFS) model toward a value-based payment model.² One of MACRA’s model tracks are APMs, including ACOs.

An alternative payment model (APM) is a type of reimbursement model designed to incentivize low-cost, high-value patient care and is applicable to a specific condition, care episode, or population.¹ An APM is a deviation from the traditional fee-for-service approach, in which health care providers are paid for each individual service provided, which often maximizes quantity but can compromise the quality of patient care.² In contrast, the overarching goal of an APM is to provide quality and cost-efficient patient care. Each APM has entity-specific quality measures which must be met to be reimbursed. Though APM designs and measures can vary between entities, all entities structure reimbursement plans to hold providers and organizations accountable for meeting patient-centered goals, thereby encouraging quality over quantity of care.

Bundled payment is an alternative reimbursement model that is designed to help move from the traditional fee-for-service (FFS) payment to value-based care. With bundled payments, all providers and/or health care facilities associated with a patient undergoing a specific episode of care, or “clinical episode,” are paid a single fixed amount or “target price.” All providers and health care facilities share in the financial risks and outcomes associated with the episode of care.

According to the American College of Physicians,“ capitation is a fixed amount of money per patient per unit of time paid in advance to the physician [or health care provider] for the delivery of health care services.”¹ The amount of money actually paid depends on the range of services provided, how many patients are involved, and the duration of time in which the services are provided.¹ The capitation rate is often set at PMPM (per member, per month) or PMPY (per member, per year). The rates used in capitation are determined using the local costs and average utilization of services; as a result, rates can differ from one part of the country to the other. Before a capitation agreement is made, a list of specific services that must be provided to patients is included in the contract.

Case management is defined as the assessment, planning, and care coordination of services to meet a patient’s individual health care needs. Case managers often advocate for patients’ safety and positive health outcomes through appropriate care coordination and communication.¹ Meanwhile, care coordination refers to the organization and planning of patient care activities and sharing of information between two or more participants who are involved with the patient’s care in order to achieve better health outcomes and provide safer care.² Both of these terms go hand in hand to ensure patients’ unique health care needs are met and to achieve better health outcomes. If a patient's care is well-coordinated, this can avoid ER visits and hospital readmissions, decrease medical errors, and decrease health care costs.³