Payment ModelsHealthcare innovation isn’t just about new techniques and technologies. As the US healthcare landscape continues to evolve—and, hopefully, improve—-one of the most important areas of focus is payment models. Let’s face it: medical costs aren’t getting any lower, and the system for reimbursement could definitely use a bit (okay, a lot) of TLC. Here are three innovative payment models that have garnered substantial support among various leaders in the healthcare industry:

Accountable care organizations (ACOs)

What are they?

According to this report, ACOs—which were introduced as part of the Affordable Care Act (ACA)—are networks of healthcare providers that accept Medicare patients. You can think of an ACO as a provider-founded healthcare alliance.
In addition to receiving the traditional fee-for-service reimbursement from Medicare, ACOs are eligible to receive financial rewards if they minimize healthcare spending while simultaneously maintaining or improving quality of care. The basic idea is that by eliminating the fragmented, hodge-podge organization of providers typical of today’s medical landscape, care will become more efficient and less costly.

Who can participate?

Only certain types of providers—such as hospitals and physicians—are allowed to form, or “sponsor,” an ACO. While PTs, OTs, and SLPs can’t create ACOs, they can join them as long as they accept Medicare patients.

What does this mean for rehab therapists?

As with most new payment structures, there are pros and cons to joining an ACO. On the plus side, therapists could gain access to lots of new patients because ACOs must have a minimum of 15,000 patients, including at least 5,000 Medicare beneficiaries. Also, in addition to the potential for financial benefit in the form of incentive payments, providers benefit from the knowledge that they are actively participating in healthcare reform and helping provide better care while reducing expenditures. ACOs also give therapists a unique opportunity to highlight their relevance and value in the prevention of injury and re-injury.

On the flipside, this system represents yet another step in the move toward a pay-for-performance reimbursement model, which means participating therapists must shoulder an even greater burden when it comes to documenting patient progress and measuring outcomes. Also, it would be virtually impossible for a provider to join an ACO without first implementing an electronic records system. However, ACA legislation does not include provisions for financially assisting providers with EMR or EHR adoption.

Bundled payment models

What are they?

Traditionally, Medicare reimburses each provider separately for services furnished to treat a single illness or condition. This often leads to uncoordinated care across providers—including hospitals, post-acute care providers, physicians, and specialists—and rewards the quantity, rather than the quality, of the services provided. In short, this system is inefficient.

In a bundled payment model, however, Medicare offers a single lump sum for an entire episode of care related to a treatment or condition, and that sum is then divided among all parties who provide services during that episode of care. For example, if a patient had knee surgery, he or she would incur one single charge to cover the surgery itself, the post-op rehab, and all follow-up exams and services. As detailed in this report, financial incentives associated with the bundled payment model encourage providers “to determine which services are appropriate within an episode and to eliminate the unnecessary ones, in contrast to rewarding volume of services.” Group payment also fosters better communication and coordination among providers and helps them avoid duplicate or unnecessary services.

Who can participate?

Currently, CMS is testing different bundled payment models with a select group of organizations. Participants entering into bundled payment arrangements during the five-year test period will track expenditures and performance. If results are favorable, the initiative could expand to additional providers.

What does this mean for rehab therapists?

This system would work well in cases with clearly defined episodes of care (i.e., distinct starting and ending points). But for therapists treating chronic conditions, the reimbursement process could get a bit complicated. Payment also could be problematic for patients who need more therapy than initially predicted. Additionally, because bundled payment models reward lower costs, it could lead providers to “skimp” on services that are not absolutely crucial to a patient’s treatment, and in some cases, those services might fall into the rehab therapy category.

Furthermore, because therapy often is the final “step” in an episode of care, this payment structure might encourage therapists to discharge patients before they achieve the highest possible level of function. This system also seems to favor physical therapists working in hospital settings, which could negatively impact private practices.

However, like the ACO payment structure, the bundled payment model emphasizes the value of rehab therapists’ expertise, as they play an integral role in preventing hospital admissions and readmissions. According to this article, rehab therapy services also could become a more attractive treatment route as long as therapists demonstrate that they can achieve comparable or superior patient outcomes at lower costs compared to surgery or other options. Bundling payment also makes it easier to track treatment effectiveness and thus promote increased accountability among providers.

Patient-centered medical homes (PCMHs)

What are they?

This article defines a PCMH as “a model of primary care that is patient-centered, comprehensive, team-based, coordinated, accessible, and focused on quality and safety.” Medical homes facilitate ongoing, personal relationships among patients, providers, and care teams. The idea is that each patient has a trusted, single team—or “home”—to satisfy whatever healthcare needs he or she might encounter. The team works together to coordinate and manage care, making sure patients receive appropriate services and support, especially during critical points such as transitioning from hospital to home. Ideally, medical homes promote collaboration and communication among providers and patients, improve access to preventative services, and reward efficient, high-quality care. According to the American College of Physicians, “the most effective way to realign payment incentives to support the PCMH” involves incorporating three different components into the payment structure: a “bundled” monthly care coordination payment for medical professional work occurring outside of face-to-face patient visits; a visit-based fee-for-service component; and a performance-based component to reward the provision of efficient, high-quality services.

Who can participate?

This model is still being tested and developed, but theoretically, the same entities eligible to participate in ACOs can participate in PCMHs. The major difference between medical homes and other team-based payment structures—namely, ACOs—is that medical homes are not Medicare-specific. However, ACOs can incorporate medical homes into their structure.

What does this mean for rehab therapists?

 Because PCMHs place particular emphasis on seamless communication among providers, it is crucial that patient medical records are complete, accurate, updated, and portable. Thus, electronic medical records are pretty much required. This could present a challenge for therapy practices that have not yet transitioned away from paper documentation—although it also would be an opportunity for such practices to increase the efficiency of their business operations as well as the quality of their documentation. PCMHs also could potentially restrict patient access to providers—including therapists—of their choice. However, PCMHs present therapists with yet another opportunity to showcase their value as providers of continuing care, and the patient-centered philosophy of PCMHs is well-aligned with the ideals of rehab therapists.


So, do you think any of these models could help create a better, more efficient healthcare system? Do you currently participate in any of the above models? Share your thoughts in the comments section.


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