The ABCs of ACO, MSSP and More: A Value-Based Care Glossary

November 8, 2022

Initially established to reduce hospitalizations and readmission rates, value-based care has evolved dramatically over the last decade. But what exactly is value-based care and what are the key pillars of the model?

While there are many pieces to the value-based care puzzle, the ultimate goal of the model is to improve quality of care and health outcomes for patients, while reducing health care costs.

Below are a few key terms to help you build a foundational understanding of the state of the value-based care model today.

Table of Contents

Government Laws, Organizations and Programs

  • ACO REACH (or Accountable Care Organization Realizing Equity, Access, and Community Health): An alternative payment model from CMS to encourage primary care physicians (PCPs) and other eligible professionals to shift away from fee-for-service (FFS) compensation to value-based payments in primary care. The ACO REACH model was released by CMS as a redesign to the Global and Professional Direct Contracting (GPDC) Model to replace and improve upon the GPDC Model’s approach to risk adjustment.
  • Affordable Care Act (ACA): A law enacted to ensure that all Americans have access to affordable health insurance. It does this by offering consumers discounts (known as tax credits) on government-sponsored health insurance plans, and by expanding the Medicaid assistance program to include more people who don’t have it in their budgets to pay for health care. 
  • The Centers for Medicare & Medicaid Services (CMS): Part of the Department of Health and Human Services (HHS), CMS oversees Medicare, Medicaid, the Children’s Health Insurance Program (CHIP), and the Health Insurance Marketplace.
  • Comprehensive Primary Care Plus (CPC+): A national advanced primary care medical home model (that is not currently active) that aimed to strengthen primary care through regionally-based multi-payer payment reform and care delivery transformation.
  • Direct Contracting: A set of voluntary payment model options aimed at reducing expenditures and preserving or enhancing quality of care for beneficiaries in Medicare FFS. The payment model options available under DC created opportunities for a broad range of organizations to participate with CMS in testing the next evolution of risk-sharing arrangements to produce value and high quality health care.  
  • Medicare Shared Savings Program (MSSP): An alternative payment model for moving CMS’ payment system away from volume and toward value and outcomes that promotes accountability for a patient population, coordinates items and services for Medicare FFS beneficiaries and encourages investment in high quality and efficient services.
  • Medicare Star Ratings: CMS publishes the Medicare Advantage (Medicare Part C) and Medicare Part D Star Ratings each year to measure the quality of health and drug services received by consumers enrolled in Medicare Advantage (MA) and Prescription Drug Plans (PDPs or Part D plans). The Star Ratings system helps Medicare consumers compare the quality of Medicare health and drug plans being offered so they are empowered to make the best health care decisions for them.
  • 340B: A federal drug pricing program that permits qualifying organizations, such as federally qualified health centers and hospitals that treat low-income and uninsured patients, to buy outpatient prescription drugs at a 25% to 50% discount. The program helps these providers stretch their financial resources to deliver more services to more financially vulnerable patients.

Payment Types and Models

  • Alternative Payment Model (APM): A payment approach that gives added incentive payments to provide high-quality and cost-efficient care. APMs can apply to a specific clinical condition, a care episode, or a population.
  • Capitation: Refers to when a group of payers or providers receive prospective, lump-sum payments to cover the entirety of a population’s costs and are at full risk for losses.
  • Fee-for-service (FFS): A method of health insurance payment in which a doctor or other health care provider is paid a fee for each particular service rendered, essentially rewarding medical providers for the volume and quantity of services provided, regardless of the outcome. 
  • Merit-Based Incentive Program System (MIPS): One of two payment tracks created under the Medicare Access and CHIP Reauthorization Act (MACRA), which moves Medicare Part B providers to a performance-based payment system.
  • One-sided Risk (or Upside Financial Risk): An arrangement where providers share in the savings and not the risk of loss. When the total cost of care is lower than projected budgeted costs, providers receive a defined percentage of the difference between actual costs and budgeted costs (shared savings). However, if the actual total cost of care exceeds the projected budgeted cost, providers are not responsible for the difference.
  • Shared Risk (or Downside Financial Risk): An arrangement where providers share in the savings and potential losses. When the total cost of care is greater than the projected budgeted costs, providers are responsible for a defined percentage of the excess costs. Typically, providers assume downside financial risk for an opportunity for greater financial rewards (e.g., a higher defined percentage of shared savings).
  • Shared Savings: A reimbursement methodology that evaluates providers on quality and cost of care. Shared savings contracts often include quality targets that must be achieved to be eligible for shared savings. When the actual total cost of care is lower than the projected budgeted cost of care, shared savings are achieved.
  • Value-based care: Also called value-based health care, value-based care is the concept that health care providers should be paid for keeping people healthy rather than the volume of services delivered. The goal is to help patients maintain their highest possible level of wellness, rather than waiting until patients get sick to provide care, which is often more complex and expensive.
  • Value-based payment: Similar to value-based care, value-based payment or value-based reimbursement models pay health care providers based on the achievement of quality goals and, in some cases, cost savings rather than volume of services delivered. 

Care Models and Organizations

  • Accountable Care Organization (ACO): A group of primary care physicians, hospitals and/or other health care providers, who embrace accountability of total costs and quality for an attributed population of patients.
  • Independent Physician Association (IPA): A business entity that allows groups of small physician practices to act as a unified whole when making large purchases, advocating for policy changes, or negotiating certain types of reimbursements.
  • Managed Care Organization (MCO): Entities that serve Medicare or Medicaid beneficiaries on a risk basis through a network of employed or affiliated providers. An MCO generally can be made up of Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and/or Point-of-Service plans.

Elements of Care

  • Annual Wellness Visit (AWV): For Medicare beneficiaries, a yearly appointment with a primary care provider to create or update a personalized prevention plan. This is not the same as an annual physical exam and generally does not include examining the patient physically.
  • Chronic Care Management (CCM): Care coordination services done outside of the regular office visit for patients with two or more chronic conditions expected to last at least 12 months or until the death of the patient, and that place the patient at significant risk of death, acute exacerbation/decompensation, or functional decline.
  • Electronic Health Records (EHR): An electronic version of a patient’s medical history, that is maintained by the provider over time, and may include all of the key administrative clinical data relevant to that person’s care under a particular provider, including demographics, progress notes, problems, medications, vital signs, past medical history, immunizations, laboratory data and radiology reports.
  • Population Health: The focus on health outcomes of a group, rather than at the individual-level. When conceptualized there are typically three components: health outcomes, patterns of health determinants, and interventions and policies. 
  • Telehealth (or Telemedicine): The use of electronic information and telecommunication technologies (such as audio or video) to support long-distance clinical health care, patient and professional health-related education, health administration, and public health. There are federal and state regulations and policies that address how providers conduct telehealth services.
  • Patient-centered medical home (PCMH): Provides coordinated care, allowing for more appropriate utilization of resources resulting in improved care and outcomes while decreasing costs. The ACO agrees to be accountable for the overall care, quality and cost of the patients enrolled.
  • Transitional care management (TCM): Services to address the hand-off period between the inpatient and community setting. After a hospitalization or other inpatient facility stay (e.g., in a skilled nursing facility), patients may be dealing with a medical crisis, new diagnosis, or change in medication therapy.
  • Quadruple Aim: An initiative focused on enhancing the patient experience, improving population health, reducing costs, and improving the work life of health care providers.
  • Quality measures: Tools that help us measure or quantify healthcare processes, outcomes, patient perceptions, and organizational structure and/or systems that are associated with the ability to provide high-quality health care and/or that relate to one or more quality goals for health care. These goals include: effective, safe, efficient, patient-centered, equitable, and timely care. 

Delve deeper into how value-based care works and how to succeed in value-based care arrangements.