WhiCh PaymenT model
is righT for you?
Type What it is Pros Cons Tips
Pay-for- Uses a base fee-for-ser- • One of the more • Payers typically set the • Insist that insurers
performance vice payment structure and common models in use standards. share all measures
pays out what amounts to today. • The definition of suc- used to evaluate
a bonus if quality and/or • Least financially risky cess quality profile and
cost measures are met. for physicians com- necessary for payments performance.
pared can vary. • Insist that measures
with other models used are nationally
Capitation Pays a fee each month on • Monthly payments to • Of all of the models • Steer clear of this
a per-member basis. PCPs for case manage- listed here, this one model if you don’t have
ment in medical homes requires practices to be experience managing
can be in addition as efficient as possible risk. Consider pay-for-
to fee-for-service and with their resources. performance or shared
pay-for-performance savings instead.
• If your patients are
relatively healthy and
visit the office infre-
quently, you can do well.
Bundled Provides one bulk payment • If your practice is • You take a risk on • Find out how the payer
payments to cover the cost of highly your ability to perform will pay, when you can
services delivered by more integrated with a big services at the rates expect payment, how
than one provider for a infrastructure, you’ll be being paid. episodes of care are
single episode of care for better suited to accom- defined, the duration of
a specific period modate this model than the bundle, and how the
of time. will other types basic bundled payment
of practices. is calculated.
Shared Pays a practice when • Expected to be very • This model is relatively • Understand how the
savings patient care is managed at common as account- new, so it hasn’t been payer calculates quality
a cost that’s less than the able care organizations thoroughly analyzed. and cost benchmarks
budgeted amount for grow in popularity. • Under some arrange- by which performance
doing so. The practice is • Under some arrange- ments, physicians will be judged. Ask
paid a percentage of the ments, practices share share risks as well as how the payer will set
difference between the in savings but not risks savings. cost budgets from year
actual and budgeted costs. if costs exceed the • Efficient practices to year. Find out how
budget. may reach a point of shared savings and
• Recognizes efforts to diminishing returns at risks will be appor-
lower costs. which shared savings tioned among partici-
decrease. pating providers.
Withholds/ Places a portion of the • If all of your practice’s • Many practices didn’t • As with any model, read
risk pools contractual reimbursement physicians do well, you see money returned to the proposed contract
rate in a risk pool. Pay- will move out of the them under this model and have a consultant
ments are made from the risk pool. when it was prevalent or attorney review it as
pool only if in the 1990s. well. Analyze the payer,
pre-established goals are • The American Academy and try to negotiate
met. of Family Physicians the best possible terms
maintains that doctors for you.
instead should be paid
a premium for providing
Copyright Medical Economics, June 10, 2012. For more information on payment models, visit