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Value-Based Reimbursement Knowledge Hub

Health care payment reform aims to fix the broken reimbursement system in the U.S. See what it takes to thrive in this new, value-based payment environment.

Basics of the Affordable Care Act (ACA)

Catalyst for Payment Reform

Launched in March of 2010, the Affordable Care Act is a catalyst for payment reform, designed to protect patients from the rapid increase in U.S. health care costs and the lack of value associated with those costs. The federal government projects that national health spending on health care will rise from $2.8 trillion to $4.8 trillion over the coming decade,1 yet the broad consensus has emerged that higher costs are generally not translating to better care. One report estimates that if the nation makes a concerted effort to move away from the traditional fee-for-service system, in which providers are reimbursed per patient visit and procedure, we could realize net savings in health care costs of $200 billion to $600 billion cumulatively over the next 10 years.2

How the ACA works

The ACA was created to reduce the cost of care, extend insurance coverage to more people, and improve the overall quality of health care in this country through government mandates, subsidies, and insurance exchanges established to increase coverage and affordability. The law requires insurance companies to cover all applicants within new minimum standards and to offer the same rates to all applicants regardless of pre-existing conditions or sex. The initiatives within the ACA are expected to provide health insurance coverage for an additional 33 million Americans.

Additional reforms take aim at reducing costs and improving health care outcomes by shifting the system of reimbursement towards quality over quantity (rewarding the value of care rather than volume), doing so through increased competition, regulation, and incentives meant to streamline the delivery of health care.
Merit-Based Incentive Payment System (MIPS)

Following the SGR repeal of 2015, the U.S. government passed the Medicare Access and Children's Health Insurance Program (CHIP) Reauthorization Act, or MACRA. The law replaces the flawed SGR system and is expected to accelerate progress toward physician-hospital integration and will bring further alignment between the quality of care and what patients are paying. Under this new legislation, providers will have two Medicare value-based reimbursement options: the Merit-Based Incentive Payment System (MIPS) or Alternative Payment Models (APMs). With MIPS, initial programs like Meaningful Use (MU), Physician Quality Reporting System (PQRS) and Value Based Modifiers (VBM) are being consolidated into a single program to simplify the reporting process. The penalties still have the potential to be great (up to 9%), but the financial opportunities could be significant, with as much as a 27% upside. 

MIPS is designed to promote value and encourage widespread interoperability, requiring physicians and hospitals participating in MU to attest they’re not willingly blocking the exchange of health information. This means it’s going to be even more important for providers to partner with EHR and RCM vendors capable of providing them clear visibility into their quality and cost performance in an actionable way, so they can easily understand and respond to their performance on measures that will affect how much they get paid.

Professionals will have the flexibility to participate in MIPS in the way that best fits their practice. For example, participants can be assessed with an affiliated hospital or facility, as a group, or as a virtual group of up to 10 providers, which allows unaffiliated providers to be measured together. Technical assistance will be provided to help practices with 15 or fewer professionals to improve their MIPS score and to transition to APMs. Priority will be given to practices with low MIPS scores and those in rural or underserved areas. Professionals will receive feedback on performance in the quality and resource use categories at least quarterly.

Alternative Payment Model (APM)

Those practices operating under an Alternative Payment Model (APM) are exempt from otherwise mandatory participation in MIPS. The Medicare Access and CHIP Reauthorization Act (MACRA) specifically called out PCMH as a model for providing care worthy of the additional 5% incentive payment for APMs. CMS has not yet issued rules detailing how they will implement this law. We expect more details to come through a series of rules that will be finalized and fleshed out by end 2016.


1 Centers for Medicare & Medicaid Services. National Health Expenditure Projections 2011-2021 Forecast Summary. Available at: 

2 UnitedHealth Center for Health Reform & Modernization. Farewell to Fee-For-Service? December 2012. A “Real World” Strategy for Health Care Payment Reform.

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