(PAP) for that episode.109 The PAP may be viewed as the “quarterback” for
that patient’s care plan. He or she is the main decision-maker for most of
the care delivered within the episode. The PAP coordinates the care, has the
most ability to influence and improve care for the patient, and has the
greatest opportunity to receive financial incentives when care is effectively
and efficiently managed.110 The PAP is the one accountable for all care
delivered within the episode. Participation by Medicaid providers is not
voluntary.111 If a provider bills, he or she is included in the episode profiling
All episodes generated from a PAP’s caseload during a performance
period, with the exception of outliers meeting defined exclusionary criteria,
contribute to the PAP’s performance profile.112 During the episodes, the
provider submits claims and receives fee-for-service payments in traditional
fashion, easing many providers’ discomfort over payment reform.113 But at
the end of the performance period, typically twelve months, the provider’s
overall results are compared with pre-set targets based on the insurer’s
prior-year payments, and the provider’s incentive payments are
calculated.114 These targets for “Acceptable,” “Commendable,” and “
Gain-Sharing Limit” average costs, graphically depicted in Figure 4 below for a
hypothetical episode of care, create a tiered payment structure for each
provider. If the provider has achieved average costs lower than the
“Commendable” level and has met defined quality targets, the practice
employing that provider shares half the savings.115 If the provider’s results
are more costly than the “Acceptable” level, the provider’s practice must
pay a penalty.116 Between the “Acceptable” and the “Commendable” levels,
109. The role of the Principal Accountable Provider for each episode of care, and the
methods of calculation of payments for each episode, are explained in STATEWIDE TRACKING
REPORT, supra note 103, app. B, at 6-18.
110. Id. at 3, 6. For hip and knee replacement, the orthopedic surgeon is the PAP. For
pregnancy-related claims, the PAP is the provider who delivers the baby. 110. For upper
respiratory infections, it is the first provider to diagnose the patient in-person. For congestive
heart failure, it is the admitting hospital. And for attention deficit–hyperactivity disorder, it is
the treating physician or licensed mental health care provider. Id. at 7.
111. However, private insurers participating in APII may operate slightly differently.
The CEO of one private insurer stated that participation by providers is voluntary but
“strongly encouraged.” Andy Davis, Health Insurer Gives Bonuses for Care Costs, ARK.
DEMOCRAT-GAZETTE, Feb. 4, 2015, at 8B [hereinafter Bonuses for Care Costs] (quoting
QualChoice CEO Mike Stock).
112. Joseph W. Thompson et al., The Arkansas Payment Reform Laboratory, HEALTH
AFFAIRS BLOG (Mar. 18, 2014), http://healthaffairs.org/blog/2014/03/18/the-arkansas-
113. Wilson et al. Jan. 2015 interview, supra note 98.
114. STATE INNOVATION PLAN, supra note 19, at 23.
115. Id. at 23-24; Chernew et al., supra note 7, at 35.
116. STATE INNOVATION PLAN, supra note 19, at 23-24.