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


Definition: “Pay-for-performance (P4P) is an umbrella term for initiatives aimed at improving the quality, efficiency, and overall value of health care.”1 It is a term involving payment models that tie reimbursement to metric-driven outcomes, practice guidelines, and patient satisfaction in order to improve the overall quality and value of health care. There are numerous quality metrics that can be utilized, with the majority spanning across 4 domains: patient/caregiver experience, care coordination/patient safety, preventive health, and at-risk populations. The metrics used are publically reported, creating transparency and further incentivizing organizations to protect and strengthen their reputations. Both the Centers for Medicare and Medicaid Services (CMS) and commercial payers have created P4P models in order to play a role in the national strategy to transition health care to value-based medicine.

How it relates to ACO/PCMH: In 2012, CMS developed the Medicare Shared Savings Program (MSSP), enabling both physicians and hospitals to set up an Accountable Care Organization (ACO). ACOs and Patient Centered Medical Homes (PCMHs) strive to improve the quality and coordination of care for patients in the health care system. Payment for patient care services in these models have shifted to performance-based payment and away from the traditional fee-for-service model. Providers are now held accountable for providing quality health care while also reducing the unnecessary utilization of resources.

Pharmacists have an important role to play in these models and can help to prevent high-cost episodes of care by preventing disease progression and optimizing medication regimens. In collaboration with other care providers, pharmacists deliver patient care services that contribute to continuation and optimization of patient care plans, including evidence-based medication regimens, appropriate self-care, and patient education. Pharmacists providing care can impact program-identified quality metrics tied to payment for performance. Their services can be facilitated via voluntary collaborative practice agreements with prescribers who can permit them to initiate, modify, and discontinue medications as well as order laboratory tests according to the terms of the agreement and per their state scope of practice. The value generated by pharmacists is often linked to better outcomes for patients.

Pharmacists can indirectly impact patient care as well. They are well-trained to assist in the creation of protocols and programs implemented at their organization with a focus on optimizing adherence to evidence-based guidelines within the ACO population (often referred to as “population health management”).

While P4P in health care can ultimately encourage best clinical practices, it does face some challenges and concerns. This includes the potential negative impact on socioeconomically disadvantaged populations who struggle to afford medications, encounter access barriers to health care providers, and whose social determinants of health may impact their overall health and health outcomes.2 Because these patients may take longer to meet certain metrics or even not reach them at all, it is thought that providers working in P4P models may be disincentivized to treat these patients. This could potentially worsen health disparities and is a significant factor to consider when developing a successful P4P model.

Involved organizations/oversight: CMS, commercial health plans


  1. James J. Pay-for-performance incentives. Robert Wood Johnson Foundation.
  2. NEJM Catalyst. What is pay for performance in healthcare? NEJM Catalyst.

Contributing Authors:

Emily Horn, PharmD
PGY-1 Resident
Indiana University Health Bloomington Hospital

Miranda Conard, PharmD, BCACP, BC-ADM
Clinical Pharmacist
IU Health Southern Indiana Physicians

Last Updated 9/1/2021

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