AAPM&R Post-Acute Care (PAC) Toolkit

Value-Based Purchasing, Narrow Networks, ACOs

Value-based purchasing is the concept that “Linking provider payments to improved performance by health care providers. This form of payment holds health care providers accountable for both the cost and quality of care they provide. It attempts to reduce inappropriate care and to identify and reward the best-performing providers.”[i] CMS rewards hospitals based on the quality of care, following best clinical practices, and patients’ care experience during their hospital stay.[ii]

Narrow networks are created using cost and quality criteria to select health care providers from a broader provider network, then establishing strong incentives for beneficiaries to seek care from just that set of providers.[iii] Narrow networks’ main objective is to direct patients toward a group of providers that offer care at a reasonable cost, while maintaining on quality. With consumers and purchasers concerned about rising premiums, narrow networks may be appealing, even though the number of providers consumers may choose from will be limited. Another major objective of narrow networks is that, in reasonably competitive markets, they can provide payers with leverage to negotiate price with providers. If patients are steered toward a small set of providers in their network, the growing number of providers outside that network will lose patients unless these providers are willing to negotiate with health plans for lower prices so that they can be included in the narrow network.[iv]

Accountable Care Organizations (ACOs) are groups of physicians, hospitals, and other care providers, who come together to provide coordinated care to Medicare beneficiaries.[v] Medicare offers several different ACO programs.