Navigating Payment Models: What Palliative Care Teams Need to Know

A note about terminology: For the purposes of this blog, “clinician” refers to a professional who delivers care to a patient. “Provider” refers to clinicians as well as entities such as hospitals, home health agencies, skilled nursing facilities, etc.—any person or entity that can bill for health care services.

Health care payment models play a crucial role in how clinicians deliver care. For palliative care teams, understanding the payment structure they operate under is essential for ensuring sustainability and optimal patient care. How does payment structure influence priorities and services provided? How can teams understand and succeed under the model(s) they're working with, and navigate models that potentially conflict? This blog explores the ins and outs of payment models by outlining key features of each, uncovering how to identify the model you are operating under, and how to optimize palliative care within each.

The FFS model is the traditional method of health care reimbursement, where clinicians are paid for each individual service they deliver, such as consultations, tests, or procedures. Even under alternative payment models, it is common for FFS to be the starting point from which reimbursement is calculated.

• Payment for each individual service: Clinicians are reimbursed separately for each service rendered, down to specifics such as venipuncture or advance care planning conversations.
• Incentives for More Volume: Clinicians are encouraged to increase service volume, because revenue is tied to the quantity of care delivered.
• Common Usage: FFS is the payment model used in traditional Medicare and is still the most frequent payment model used in commercial health plans, covering more than 76% of 2023 provider contracts.

• You are encouraged to document and bill for each individual service, like consultations or procedures.
• You are encouraged to be familiar with Current Procedural Terminology (CPT) codes and their subtle differences.
• Revenue depends on the number of services provided, with no requirement to measure patient outcomes.

To optimize revenue under the FFS model, palliative care teams need to maximize billable encounters by using team time efficiently, utilizing accurate billing codes, highlighting all patient issues, and ensuring all eligible visits are documented and billed.

• Maximize Billable Encounters: Make sure to document inpatient, outpatient, and home-based services. Deploy your “billable clinicians” to the types of services that result in FFS revenue and rely on other team members for triage and follow-up, especially where no CPT code exists.
• Use the Right Codes: Most patient visits can be billed as “evaluation and management (E/M) services.” Goals of care conversations can often be counted as “advance care planning” add-ons, and community-based-programs longitudinally managing patients should be eligible for the monthly “chronic care management” (CCM) and “complex care management” codes.
• Train Your Team: Educate your team on billing and documentation practices and conduct regular audits to identify missed billing opportunities. We encourage you to meet regularly with your organization’s coders to understand the documentation they might be looking for. Often, billing documentation is not a matter of quantity but rather the inclusion of specific words and phrases.

• CAPC Billing and Coding Toolkit
• Webinars on Billing for Palliative Care
• Inpatient Billing and Coding, a small-group consulting call about inpatient palliative care billing, and billing and coding practices.
• Billing for Community-Based Palliative Care, a small-group consulting call about billing for services provided in the home, office, or long-term care settings.

In value-based payment, quality is part of the calculation that determines revenue for the clinician or provider. This may include bonuses for achieving quality targets, penalties for poor performance, or alternative payment models (see below) that inherently incentivize quality outcomes. The goal is to improve the measured patient outcomes and reduce avoidable spending.

Note that many payers use VBP: Medicare uses it in their CMMI models; Medicare Advantage plans and commercial payers may use it in their contracts with clinicians and providers; and Medicaid Managed Care plans are increasingly experimenting with this.

• Quality Measures: The clinician/provider/organization is measured on specific outcomes compared to a target. The measures typically include the proportion of patients receiving evidence-based services, utilization of health care (e.g. emergency department visits and/or hospital admission rates), and patient satisfaction scores.
• Organization to Enhance Communication: Accountable Care Organizations (ACOs) are the most common VBP model. Regular meetings help to refine patient coordination processes across settings and services. .

• Leadership is paying attention to specific measures and processes.
• The program seeks influence on hospital admission decisions.
• Emphasis on quality improvement efforts changes as quality incentives change or performance declines.

Palliative care naturally aligns with value-based payment because it focuses on improving patient outcomes, reducing avoidable crises and hospitalizations, and enhancing quality of life and patient experience.

While palliative care is well-positioned, remember that many value-based payment models are built on an “FFS chassis,” so volume incentives may still exist, and programs must balance these potentially conflicting goals through efficiency in care delivery and continuous quality improvement.

• Demonstrate Cost Efficiency: Track and report the rate of emergency department visits, hospital admissions, ICU admissions, and re-admissions within 30 days for the patients you care for. High-quality palliative care reduces unnecessary health care costs, and you need to be able to demonstrate that this is so.
• Align with Population Health Professionals: Often, organizations establish disease management or complex care management programs to ensure high-quality care for risky populations. Teach care managers basic palliative care skills and encourage them to refer appropriate patients to palliative care.
• Enhance Care Coordination: Strengthen collaboration with primary and specialty care teams to minimize unnecessary hospital visits.

• CMS Value-Based Payment Models Overview, a relevant News Bite about VBP.
• Beyond Billing: Covering Costs and Generating Revenue, a toolkit that teaches the fundamentals of payment, FFS billing strategies, and other basics of securing revenue.
• CAPC Measurement Guide, which provides measurement recommendations relevant for palliative care programs that are common to VBP programs.
• Making the Case for Palliative Care: Demonstrating Value through Measurement, a small-group consulting call focused on using metrics to demonstrate the impact of palliative care on quality and costs across all care settings. using metrics to demonstrate the impact of palliative care on quality and costs across all care settings.
• Payment Quick Tips: Value-Based Payment Introduction, a monograph introducing value-based payment and its implications for palliative care.
• Payment Quick Tips: Value-Based Payment Capabilities, a monograph outlining leadership and operational competencies that palliative care teams need to succeed under value-based payment.
• Payment Quick Tips: Understanding Medicare, Medicaid, and Commercial Insurance, a monograph introducing U.S. health insurance with a focus on Medicare and what it means for palliative care.

In capitation, clinicians receive a fixed amount of money per patient for a defined period, regardless of the number of services delivered. Most commonly in palliative care, a program receives a “per-member-per-month" payment for each patient enrolled in their program, but there may be payments that bundle a three-month period or other periods of time. In addition to a fixed payment, clinicians and providers are also required to produce specific outcomes via bonuses and penalties, including termination of the contract. In this way, at least in theory, patients are protected from “skimping.”

Fixed Payment: Clinicians receive a set amount per patient so that the incentives are for fewer services per patient —while still needing to provide appropriate services to deliver the required quality outcomes.

• Risk and Incentives: Clinicians assume financial risk if care costs exceed the payment amount. **Note that the risk will vary significantly by payment contract or model. Some programs may be at risk for just the services they deliver. In contrast, others may be responsible for the “total cost of care” and, therefore, be financially responsible for all services, including inpatient care.**
• Focus on Prevention: Encourages clinicians to focus on preventing illnesses and crises to reduce the need for costly interventions.

• There is no encouragement to deliver a volume of services.
• There are efforts to understand the population under care and stratify them by level of risk.
• There is an emphasis on avoiding costly interventions, such as hospitalization or ICU admissions.

Palliative care teams must focus on delivering efficient, high-impact interventions.

• Identify High-Risk Patients Early: Use data to pinpoint patients who would benefit from palliative care, and which patients should be more closely monitored than others.
• Reduce High-Cost Utilization: Provide 24/7 access to palliative care to manage crises outside of the hospital. Pay attention to caregiver burden and use the interdisciplinary team to reduce distress.
• Focus on Goals of Care: Ensure care aligns with patient goals to prevent unwanted interventions.

• Payment Arrangements Options, an overview of the payment arrangements that currently exist for palliative care services.
• Program Efficiency and Productivity, a toolkit that can be used to improve team processes and role clarity and to design a program that matches service level to patient need.
• Population Stratification Considerations, provides some guidance on how to “dose” your services so that patients with the highest needs are more closely monitored.
• When Palliative Care Demand Exceeds Capacity: A Virtual Panel Discussion, a blog covering how palliative care program leaders throughout the country have creatively and effectively responded to an increased demand for consults.
• Spotlight on Home-Based Palliative Care, a report that examines key characteristics of home-based palliative care programs from across the U.S.—including patients served, program operations and funding, and staffing.
• Payment Quick Tips: Payment Partnerships, an introduction to building partnerships that can financially support palliative care programs.

Palliative care teams must understand their payment models to optimize their available resources for quality patient care. By aligning services with the specific goals of each payment model—whether it's fee-for-service, value-based, or capitation—teams should focus on specific patient outcomes, high-quality and efficient care delivery, avoiding crises, high patient and family satisfaction, and demonstrating the value of palliative care. Engaging with coders and contractors and tracking relevant metrics are essential to ensuring long-term success and sustainability in palliative care delivery.