Direct Answer
Value-based care payment models reward providers for delivering high-quality, cost-efficient care rather than simply billing for the volume of services provided. The major CMS value-based payment programs include: Accountable Care Organizations (ACOs) under the Medicare Shared Savings Program (MSSP); Bundled Payments for Care Improvement Advanced (BPCI-A); the Merit-based Incentive Payment System (MIPS) under MACRA; and Advanced Alternative Payment Models (APMs) that qualify providers for the APM bonus and exemption from MIPS. Each model has distinct coding, documentation, and reporting requirements that determine whether the practice earns bonuses or incurs penalties.
Table of Contents
ACO and Medicare Shared Savings Program
Accountable Care Organizations (ACOs) are groups of doctors, hospitals, and other healthcare providers that voluntarily work together to coordinate care for Medicare beneficiaries. The Medicare Shared Savings Program (MSSP): CMS assigns Medicare fee-for-service beneficiaries to ACOs based on which physician they see most frequently; the ACO receives its standard fee-for-service payments for all services its providers deliver; at year-end, CMS compares the ACO's total cost of care for its assigned population against a benchmark (based on historical spending adjusted for patient risk); if the ACO spends less than the benchmark AND meets quality threshold performance, it receives a share of the savings (shared savings payment); Track options: BASIC track (includes 5 levels A–E with progressively increasing risk): early-level ACOs start in upside-only (no downside risk) and progress to risk-bearing over 5 years; ENHANCED track (formerly Track 3): full two-sided risk with higher shared savings percentage; Benchmarking and risk adjustment: ACO benchmarks are risk-adjusted using HCC risk scores — the higher the risk score of the assigned population, the higher the benchmark; accurate HCC risk coding is essential for ACOs because undercoding chronic conditions reduces the risk-adjusted benchmark, making it harder to demonstrate savings; attribution: beneficiaries are attributed to the ACO based on their plurality of primary care visits with ACO physicians; practices should understand their attribution methodology and ensure beneficiaries who receive the majority of their primary care within the ACO are correctly attributed; Quality performance requirements: ACOs must meet minimum quality thresholds on a set of quality measures (including preventive care measures, diabetes management, and patient experience) to qualify for shared savings; quality failures can result in withheld savings even when cost targets are met.
Bundled Payment Models
Bundled payment models pay a single negotiated payment for all care related to a specific episode of care (e.g., a hip replacement, a major cardiac event, a chemotherapy episode): Bundled Payments for Care Improvement Advanced (BPCI-A): CMS's current bundled payment model; episode initiators (typically hospitals or physician groups) take on financial risk for 90-day episodes following specific procedures or medical diagnoses; if the total cost of the episode is below the target price, the episode initiator earns a reconciliation payment; if above the target price, the episode initiator owes a repayment; covered episode types include lower extremity joint replacement (LEJR), major joint replacement, COPD, heart failure, and others; How bundled payments work with fee-for-service billing: providers still bill and receive standard Medicare fee-for-service payments during the episode; the reconciliation (bonus or repayment) occurs after the episode ends based on the actual total cost vs. the target price; the target price is risk-adjusted based on the patient's clinical complexity — accurately coding comorbidities at the time of the triggering event affects the risk-adjusted target; Care coordination imperative: successful performance in bundled payments requires coordinating post-acute care (SNF, home health, outpatient rehab) costs because post-acute care is often the largest variable cost driver within a bundle; practices participating in BPCI-A must actively manage SNF placement, discharge planning, and 30-day readmission reduction to succeed; Commercial bundled payments: some commercial payers offer bundled payment contracts for specific procedures (maternity bundles, joint replacement bundles, bariatric surgery bundles); these operate similarly to BPCI-A but under commercial contract terms.
MIPS Quality Reporting
The Merit-based Incentive Payment System (MIPS) is the CMS payment adjustment program under MACRA that applies to most Medicare Part B clinicians. MIPS adjusts providers' Medicare Part B payments upward or downward based on their composite MIPS score: MIPS performance categories: Quality (30% of MIPS score): report on 6 quality measures from the MIPS measure set; measures are selected based on specialty — each specialty has applicable measures; one of the six must be a high-priority measure (outcome measure, appropriate use, or patient safety); Promoting Interoperability (25% of MIPS score): use of certified EHR technology for e-prescribing, health information exchange, patient access through a portal, and public health reporting; Improvement Activities (15% of MIPS score): attest to completion of improvement activities (medium or high-weighted); examples include care coordination, telehealth expansion, beneficiary engagement, and chronic disease management; Cost (30% of MIPS score): CMS calculates cost based on Medicare claims — no submission required; cost measures include Total Per Capita Cost (TPCC) and Medicare Spending Per Beneficiary (MSPB); MIPS payment adjustments: positive adjustment (for scoring above the performance threshold); neutral (for scores at the performance threshold); negative adjustment (for scoring below threshold — currently -9% maximum negative adjustment); exceptional performance bonus (for scores in the exceptional performance threshold); MIPS reporting options: individual reporting; group reporting (all eligible clinicians in the practice group reported together); virtual group reporting; APM entity reporting (for clinicians in MIPS APMs); MIPS exclusions: clinicians under the low-volume threshold (under $90,000 Medicare Part B charges AND under 200 Part B patients AND under 200 covered professional services) are exempt from MIPS.
Advanced APMs and Qualifying APM Participation
Advanced Alternative Payment Models (APMs) offer a pathway for clinicians who take on substantial financial risk in CMS-approved payment models to receive a 5% APM Incentive Payment and exemption from MIPS: Advanced APM requirements: to qualify as an Advanced APM, a payment model must require the use of certified EHR technology; the model must base payments on quality measures comparable to MIPS; participants must bear more than nominal financial risk (or be medical home models meeting specific criteria); Qualifying APM Participant (QP) thresholds: to receive the QP bonus and MIPS exemption, a clinician must: receive a threshold percentage of Medicare payments through Advanced APMs, OR see a threshold percentage of Medicare patients through Advanced APMs; QP thresholds increase over time under the MACRA framework; APM bonus: 5% of estimated aggregate Medicare Part B payments for the year, paid separately from the standard Medicare fee-for-service payments; CMS-approved Advanced APMs: Medicare Shared Savings Program Enhanced Track (MSSP ENHANCED); BPCI-A with downside risk for episode initiators; Comprehensive Primary Care Plus (CPC+) Model; Oncology Care Model two-sided risk track; Primary Care First; Others designated by CMS Innovation Center (CMMI) as Advanced APMs; MIPS APMs (a middle category): some payment models are MIPS APMs — participants in these models report quality measures through the APM entity rather than individually under MIPS, but do not qualify for the APM bonus if they don't meet QP thresholds; Revenue cycle implications: practices in Advanced APMs must still submit accurate Medicare fee-for-service claims (because the reconciliation is against fee-for-service benchmarks); the HCC risk adjustment accuracy of the attributed population affects ACO benchmarks; and quality measure documentation affects both MIPS and ACO performance bonuses.
Coding and Documentation for VBC
In value-based care models, accurate coding and documentation affect performance and revenue in ways that don't exist in pure fee-for-service: HCC coding accuracy: in ACO shared savings and Medicare Advantage risk adjustment, the patient population's HCC risk score directly affects the benchmark against which spending is measured; undercoded populations have lower-than-appropriate benchmarks — every dollar of spending is compared against a benchmark that doesn't reflect the true complexity of the patients; accurate HCC coding raises the benchmark to reflect actual patient complexity, making it more achievable to generate shared savings; Annual wellness visits and chronic care management: AWV (G0438/G0439) and CCM (99490/99491/99487/99489) codes are billable services that also generate quality measure documentation; practices in ACOs should maximize AWV and CCM utilization because these encounters: generate fee-for-service revenue; improve care coordination (which reduces costs within the bundle or population); generate documentation of chronic conditions for HCC coding; satisfy quality measures; Transition of care management: TCM codes (99495, 99496) are separately billable services for post-hospital discharge care within 14 or 7 days of discharge; in ACO and bundled payment models, effective TCM reduces readmissions — which are a major driver of excess costs vs. benchmark; Quality measure documentation: each MIPS quality measure requires specific data elements in the clinical documentation; coders and providers must understand that quality measure credit is based on coding — performing the preventive service without capturing the specific CPT/diagnosis code that satisfies the measure means no credit for that measure.
FAQ
What is the difference between MIPS and Advanced APMs, and should a practice pursue APM status?
MIPS and Advanced APMs represent two distinct pathways under MACRA for Medicare Part B clinicians. They differ in financial structure, risk, potential reward, and administrative burden. MIPS pathway: payment adjustments based on a composite performance score (Quality, Promoting Interoperability, Improvement Activities, Cost); maximum upside is positive payment adjustment plus exceptional performance bonus (typically 1–10% depending on score and funding); maximum downside is -9% payment reduction for low scores; MIPS participation is the default for most clinicians who don't qualify for APM exemption; MIPS requires active data reporting for Quality, PI, and Improvement Activities categories; no requirement to bear downside financial risk (cost performance is calculated by CMS, not accepted contractually by the practice); Advanced APM pathway: clinicians in qualifying payment models who meet the QP threshold receive a flat 5% APM Incentive Payment on their estimated aggregate Medicare Part B payments; APM participants are exempt from MIPS requirements and adjustments; APMs require accepting downside financial risk (for most models) — the practice is on the hook for repayments if costs exceed the target; Should a practice pursue APM status? Factors that favor pursuing APM status: the practice has strong care coordination capabilities and can manage population health effectively; the practice has sufficient data analytics capabilities to monitor cost and quality performance; the practice is already in an ACO or other model with a positive track record; the 5% APM bonus exceeds the expected MIPS positive adjustment and the expected downside risk cost; Factors that argue for staying in MIPS: the practice does not have population health management infrastructure; the practice has a high-risk, high-cost patient population where cost management is difficult; the practice cannot bear downside financial risk; the practice's existing MIPS performance is strong and generates consistent positive adjustments without the risk of ACO/bundle repayments.
How does the two-midnight rule affect ACO cost performance, and what can practices do to manage it?
The two-midnight rule — CMS's criteria for appropriate inpatient admission vs. observation — is relevant to ACO cost performance because inpatient admissions generate significantly higher total episode costs than observation stays. In the context of ACO shared savings, every dollar spent on inpatient care for an assigned beneficiary counts against the ACO's total cost of care. The mechanism: a patient with a condition that requires 18–36 hours of monitoring can be managed as either inpatient (generating a DRG payment of $8,000–$15,000 for many medical conditions) or as an observation stay (generating OPPS outpatient facility charges of $2,000–$5,000 for the same time period); the ACO bears the cost of both — but the cost variance is substantial; for conditions where observation is clinically appropriate under the two-midnight rule, keeping patients in observation instead of incorrectly admitting them as inpatient can generate meaningful ACO cost savings; What ACO-participating practices can do: admission review protocols: establish a real-time clinical utilization review process that evaluates whether each potential inpatient admission meets the two-midnight criterion; Hospitalist engagement: hospitalists in ACO-participating hospitals should understand the two-midnight rule and its ACO cost implications; Care transitions from observation: patients discharged from observation status do not qualify for the SNF benefit (because observation stays do not count toward the 3-day inpatient requirement); ACO care managers must ensure observation patients who need post-acute support are directed to covered options (home health, outpatient PT) rather than SNF; the risk: documentation and clinical decisions must be based on clinical appropriateness, not cost management — admission decisions driven primarily by ACO cost concerns rather than clinical judgment create compliance risk; the two-midnight rule is a clinical criterion, not a financial one.
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Valiant Lifecare provides revenue cycle management that optimizes performance under both fee-for-service and value-based care models — accurate HCC coding for ACO risk adjustment, MIPS quality measure documentation, bundled payment episode cost management, and care coordination coding for CCM and TCM billing.
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