5.5 Value-Based and Alternative Payment Models

The Shift from Volume to Value

Traditional fee-for-service pays for the quantity of services. Value-based payment ties reimbursement to quality and cost outcomes. The Medicare Access and CHIP Reauthorization Act (MACRA) of 2015 repealed the old Sustainable Growth Rate formula and created the Quality Payment Program (QPP), which gives eligible clinicians two paths: MIPS or an Advanced Alternative Payment Model (APM).

The Merit-based Incentive Payment System

MIPS consolidated three legacy programs — PQRS, the Value Modifier, and Meaningful Use — into a single score. A clinician earns a composite score from four weighted performance categories:

The composite score produces a positive, neutral, or negative payment adjustment applied to the clinician's Medicare Part B claims roughly two years later (the adjustment is budget-neutral and can reach plus or minus 9%). Because the Cost category is computed from submitted claims, accurate billing directly affects a clinician's MIPS score — a core reason CPBs must understand the program. CMS is also phasing in MIPS Value Pathways (MVPs), specialty-specific reporting bundles meant to replace open-ended measure selection.

Advanced Alternative Payment Models

Advanced APMs require participants to bear meaningful financial (downside) risk and use certified EHR technology. Clinicians who meet participation thresholds become Qualifying APM Participants (QPs), are generally excluded from MIPS reporting, and qualify for the higher APM conversion factor ($33.5675 for CY 2026 versus $33.4009). Advanced APMs reward groups that improve outcomes while controlling total cost of care.

Accountable Care Organizations

An Accountable Care Organization (ACO) is a group of providers jointly accountable for the cost and quality of care for an assigned patient population:

• Medicare Shared Savings Program (MSSP) — the largest ACO program; ACOs holding spending below a benchmark while meeting quality standards share in the savings, and some tracks share in losses.
• ACO REACH (Realizing Equity, Access, and Community Health) — a model emphasizing health equity and care for underserved populations with higher financial risk.

Bundled Payments

Bundled payment pays a single, predefined amount for an entire episode of care — for example, all services from a hip replacement through recovery. BPCI Advanced (Bundled Payments for Care Improvement Advanced) sets a target price for a clinical episode; if actual costs come in below the target with adequate quality, the participant keeps the difference, and if costs exceed it, the participant repays Medicare.

Intersection with the Readmissions Program

Value-based programs overlap with the Hospital Readmissions Reduction Program (HRRP) from Section 5.2. A hospital in a bundled-payment or ACO arrangement is doubly motivated to prevent readmissions: an avoidable readmission both adds cost inside the episode or benchmark and exposes the hospital to a separate HRRP payment reduction. For billers, readmission and post-discharge claims must be coded and submitted precisely, because they feed both episode cost and the quality penalties.

Why This Matters at the Claim Level

Unlike a clean fee-for-service line, value-based adjustments arrive as percentage tweaks long after the date of service, often as a separate remittance code. A biller who does not recognize a MIPS adjustment may misread it as a partial denial. Reconciling these adjustments — and keeping the underlying claims accurate so the Cost and Quality categories score well — is squarely within the CPB role.

Comparing the Value-Based Vehicles

A Worked Value-Based Scenario

An orthopedic group joins BPCI Advanced for the major-joint-replacement episode with a target price of $28,000 spanning surgery through 90 days post-discharge. The actual episode costs $25,500 with quality metrics met, so the group keeps the $2,500 difference. The same patient is readmitted on day 25 for a surgical-site infection costing $6,000 inside the episode window; now total cost is $31,500, exceeding the target, and the group must repay Medicare the overage. Layer on the hospital's separate HRRP exposure for that readmission and the financial incentive to prevent avoidable readmissions becomes obvious.

This dual-jeopardy logic — episode overage plus quality penalty — is a recurring CPB exam theme that ties Section 5.5 directly back to Section 5.2.

What the Biller Owns

Clean, accurate, timely claims feed every one of these models: they define attributed Cost in MIPS, the spending measured against an ACO benchmark, and the episode total in a bundle. A pattern of late or miscoded claims can drag a clinician's score and trigger a negative adjustment two years out — long after the original error, and hard to trace back. That delayed feedback loop is exactly why CPBs are expected to understand value-based payment even though they never compute a MIPS score themselves.