Learn The Lingo

Learn the Lingo: Key Terms for Navigating the Value Based Care World

With the shift toward value-based payment models, pharmacists are seizing new opportunities to improve patient care in medical homes, accountable care organizations, and other innovative care models. This resource includes acronyms and terminology commonly used when practicing in or discussing innovative practice models. Each term includes a short description and references so you can further your practice in a value based care world. This is the first of multiple volumes that will be published by the Medical Home/ACO SIG.

Annette Jones
/ Categories: Learn the Lingo

Alternative Payment Model (APM)

Definition: 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.

How it relates to ACO/PCMH: An APM consists of entities, or groups of health care organizations and clinicians who are accountable for achieving specific quality and cost performance goals. Accountable Care Organizations (ACOs) and Patient-Centered Medical Homes (PCMHs) are types of APM entities composed of physicians, hospitals, and other health care providers committed to providing coordinated, high-quality, and necessary care for their patients.3

Involved organizations/oversight: The Centers for Medicare & Medicaid Services (CMS) routinely develops new approaches for APMs. CMS focuses on ensuring the overall APM design transforms clinical practices and improves clinical quality and patient experience.4 The Medical Group Management Association (MGMA) similarly advocates for the shift toward adopting APMs and created a tool kit to assess APM eligibility.5 MGMA also encourages involvement in advanced alternative payment models, a subdivision of APMs.5 As more APMs are adopted, large health care organizations such as American Medical Association (AMA), American Physical Therapy Association (APTA), and American College of Physicians (ACP) also recognize the potential of APMs as reimbursement options, suggesting a promising future for alternative payment model utilization.6,7,8


  1. CMS. Alternative payment models and the quality payment program.
  2. Fee-for-service.
  3. The Society for Post-Acute and Long-Term Care Medicine. Alternative payment models. The Society for Post-Acute and Long-Term Care Medicine.
  4. CMS. Alternative Payment Model Design Toolkit.
  5. Medical Group Management Association. APMs. MGMA: Medical Group Management Association.
  6. American Physical Therapy Association. Alternative payment models under Medicare and Medicaid. APTA: American Physical Therapy Association.
  7. American Medical Association. Medicare alternative payment models. AMA.
  8. American College of Physicians. Alternative Payment Models (APMs). ACP: American College of Physicians.


Contributing authors:

Heidi Lee, PharmD
Chapman University-SCAN-Providence PGY1 Managed Care Resident

Jelena Lewis, PharmD, BCACP
Assistant Professor of Pharmacy Practice
Chapman University School of Pharmacy

Last Updated 8/29/2022

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