Advanced Alternative Payment ModelsEdit

Advanced Alternative Payment Models are a subset of the health care system’s move away from pure fee-for-service toward arrangements that reward actual outcomes and efficient care. They sit inside the broader push for value-based care and are designed to align incentives among providers, payers, and patients. In practice, Advanced APMs require participants to take on some financial risk for the care they deliver and to share data-driven results that drive improvements in quality and cost control. The idea is to discourage unnecessary tests and procedures, promote care coordination, and give patients better value for dollars spent. For context, these models operate within the Medicare program and interact with the policies and governance set by Medicare and Centers for Medicare & Medicaid Services, as part of the policy framework created by MACRA.

As a policy approach, Advanced APMs sit at the intersection of market competition, professional autonomy, and data-driven administration. They contrast with traditional fee-for-service by emphasizing accountability for cost and outcomes rather than volume of services. The shift reflects a belief that competition among providers and payer networks, when paired with sensible risk-sharing and transparent quality measures, can produce better health results without resorting to top-down command economies. The models commonly cited within this space include programs that combine bundled payments, episode-based payments, and population-based risk-sharing, all designed to keep patients healthier while bending the cost curve. See how these ideas relate to value-based care and to bundled payments in practice. In addition to the public programs, many private plans adopt similar design principles, aligning incentives across broader segments of the health system and encouraging better information flow between physicians and hospitals.

Overview and scope

What defines an Advanced APM: a payment arrangement that links reimbursement to measurable outcomes and requires providers to take on some risk of financial losses, rather than paying under a straight per-service rate. These features are designed to encourage efficient care delivery, reduce unnecessary care, and promote care coordination across episodes or populations. See Advanced APM for details.
Who participates: physicians, hospitals, and other health care organizations that team together to manage episodes of care or entire care pathways. These models often involve long-term relationships with payers and investment in data systems for tracking quality and cost metrics.
How they relate to other payment reforms: Advanced APMs are part of the broader trend toward value-based care and are distinct from pure fee-for-service arrangements. They share the goal of improved outcomes at lower cost, but use different governance, risk-sharing, and measurement structures. For examples, look at Comprehensive Care for Joint Replacement and Bundled Payments for Care Improvement Advanced alongside ongoing efforts like the Medicare Shared Savings Program in its more advanced tracks.

Design features and variants

Risk sharing and upside/downside risk: Providers are compensated based on how well they perform against predefined cost and quality targets, with shared savings when they beat targets and potential losses when they miss them. This is the core idea that differentiates Advanced APMs from traditional FFS.
Episode-based and population-based payment structures: Some models reimburse a defined episode of care (for example, a hip or knee replacement and its associated care) across all providers involved, while others cover broader populations with a capitation-style approach and quality checks.
Quality measurement and accountability: Performance is judged against credible, clinically meaningful measures. Measures emphasize patient outcomes, safety, and care coordination, with an emphasis on prevention and efficient use of resources.
Data and interoperability: Success depends on robust data systems, interoperability, and the ability to share timely performance information among providers and payers. This includes patient outcome data, cost data, and process metrics.
Notable models and examples: Leading instances include Comprehensive Care for Joint Replacement (an episode-based model for joint replacement care) and Bundled Payments for Care Improvement Advanced (advanced bundled payments covering multiple conditions and settings). Other prominent paths include Next Generation APM and tracks within the Medicare Shared Savings Program that meet Advanced APM criteria, along with newer initiatives like Primary Care First that aim to align primary care payment with value.

Economic rationale and policy goals

Containing waste and unnecessary care: By holding providers financially responsible for overall outcomes and total costs, these models incentivize avoiding low-value tests and procedures, reducing duplicative services, and focusing on high-value strategies.
Aligning incentives across the care continuum: Hospitals, physicians, and post-acute care providers are encouraged to work together to design care pathways that improve outcomes while controlling spend. This is especially relevant for complex conditions where coordination matters, such as orthopedic or cardiac care pathways.
Empowering patients with better value: When care is coordinated and outcomes are tracked meaningfully, patients can expect clearer pathways, fewer unnecessary interventions, and more transparent pricing signals across the care journey.
Interaction with private markets: Although these models operate within publicly funded programs, private payers increasingly adopt similar approaches, extending the discipline of value-based care beyond Medicare and creating a broader market environment for accountable care.

Implementation and case studies

Comprehensive Care for Joint Replacement (CJR): Aimed at total hip and knee replacement episodes, CJR holds hospitals financially accountable for the entire episode, including post-acute care and readmission costs. The model has prompted hospitals to invest in pre-surgical optimization and post-discharge care coordination to reduce complications and rework. See Comprehensive Care for Joint Replacement for details.
Bundled Payments for Care Improvement Advanced (BPCI-A): This program extends bundled payment concepts to multiple conditions and settings, with a focus on cost efficiency across the care continuum for each episode. Providers must manage a bundled amount and share savings or losses based on performance. See Bundled Payments for Care Improvement Advanced.
Next Generation APM (NGAP): Aimed at experimenting with more unified risk-sharing and population-based payment designs, NGAP explored new ways to reward care teams for high-quality, cost-effective care across episodes and populations. See Next Generation APM.
Primary Care First: A newer model emphasizing primary care payment reform, prospective payment for primary care organizations, and performance-based incentives to reduce avoidable hospital use while maintaining access. See Primary Care First.
Medicare Shared Savings Program (MSSP) tracks with higher risk or quality thresholds: While MSSP began as a broader shared savings program, certain tracks meet criteria for Advanced APM status, linking performance incentives to cost and quality outcomes across an attributed population. See Medicare Shared Savings Program.

Controversies and debates

Administrative burden and small practices: Critics argue that participating in Advanced APMs requires substantial investment in data systems, analytics, and care design, which can be challenging for small or independent practices. Proponents counter that well-designed models can reduce long-run administrative costs by simplifying claims and improving care coordination.
Risk selection and patient access: There is concern that providers might avoid high-cost or high-risk patients to protect financial performance. From a market-friendly perspective, the remedy is stronger risk adjustment, transparent reporting, and flexible model design that preserves patient access while rewarding efficient, high-quality care.
Measuring true value: The debate over which metrics reflect meaningful value—cost, quality, patient experience, or a combination—persists. Supporters argue that credible, clinically relevant measures aligned with patient outcomes drive real improvements; critics worry about gaming or misaligned incentives. The practical cure is ongoing refinement of measures, better data, and independent evaluation.
Impact on innovation and competition: Some worry that centralized model design could stifle experimentation. Advocates maintain that Advanced APMs create a predictable framework for investment in care redesign and data infrastructure, while still leaving room for competition among providers and payers to improve efficiency.
Equity and outcomes across populations: Critics say value-based schemes could inadvertently worsen disparities if providers focus on populations that are easier to treat or reimbursed more favorably. Proponents argue that well-designed risk adjustment and targeted programs can, with proper safeguards, improve care for underserved groups by reallocating resources toward preventive and coordinated care.

Woke criticisms and the pragmatic response

Criticism claim: Opponents from broader ideological strands argue these models ration care or suppress patient choice, and that performance metrics can be used to push standardized protocols that ignore individual circumstances. They sometimes frame Advanced APMs as a step toward centralized control that limits physician autonomy.
Pragmatic rebuttal: In practice, the aim of Advanced APMs is to align incentives with patient-valued outcomes, not to micromanage every clinical decision. When designed with meaningful physician leadership, transparent risk-sharing, robust quality measures, and strong data infrastructure, these models can preserve clinical judgment while reducing waste and unnecessary care. Evidence from multiple models shows that coordination and clear episode targets can drive improvements in care pathways without sacrificing access.
Why this line of critique is unhelpful in the policy discussion: The fundamental critique often assumes the worst about market-led reform and ignores the potential for targeted reforms to reduce costs and improve quality. The more constructive approach emphasizes better risk adjustment, simpler administrative requirements, and more patient-centered measures rather than dismissing value-based reforms as inherently hostile to care.