Final answer:
Alternative Payment Models (APMs) were created to address the limitations of the traditional fee-for-service (FFS) health financing system. APMs aim to align financial incentives with quality and value of care by offering alternative ways of reimbursing providers, such as bundled payments, accountable care organizations (ACOs), and capitation models. These models encourage preventive care, care coordination, and overall patient outcomes.
Step-by-step explanation:
Alternative Payment Models (APMs) were created to address the limitations of the traditional fee-for-service (FFS) health financing system. In a fee-for-service system, medical care providers receive reimbursement based on the cost of services they provide. This can incentivize overutilization of services and does not necessarily promote efficient and coordinated care.
APMs, on the other hand, aim to align financial incentives with quality and value of care. They offer alternative ways of reimbursing providers, such as bundled payments, accountable care organizations (ACOs), and capitation models. These models encourage providers to focus on preventive care, care coordination, and overall patient outcomes, rather than simply the quantity of services provided.
For example, bundled payments involve a single payment for an episode of care, such as a hospitalization or a surgical procedure, which encourages coordination among different providers involved in the patient's care. ACOs are networks of providers that are responsible for the health outcomes and costs of a defined population. Capitation models involve a fixed payment per patient, which encourages providers to provide comprehensive and cost-effective care.