Alternative Payment Model (APM)

Key facts

Medicare framework

Quality Payment Program, created by MACRA (2015)

Regulations

42 CFR Part 414, Subpart O

Advanced APM criteria

CEHRT use, MIPS-comparable quality measures, more than nominal financial risk

Qualifying APM Participants

Excluded from MIPS; higher fee schedule conversion factor update from 2026

What is an alternative payment model?

Alternative payment model is a broad term for any arrangement that pays providers differently from pure fee-for-service, usually by adding accountability for quality and total cost. Accountable care organizations, bundled payments, primary care capitation and episode-based specialty models are all APMs.

The term also has a specific legal meaning in Medicare. The Medicare Access and CHIP Reauthorization Act of 2015 (MACRA) created the Quality Payment Program, which gives clinicians two paths: the Merit-based Incentive Payment System (MIPS) or significant participation in an Advanced APM.

How Advanced APMs work

To count as an Advanced APM, a model must meet three criteria:

• Require participants to use certified electronic health record technology (CEHRT).
• Base payment in part on quality measures comparable to those used in MIPS.
• Require participants to bear more than a nominal amount of financial risk, or be a Medical Home Model expanded under CMS Innovation Center authority.

Why alternative payment models matter

APM participation shows how a clinician or organization is paid, which shapes what arguments land. A practice in a two-sided risk model cares about total cost of care, avoidable admissions and quality scores; a practice paid purely fee-for-service is more sensitive to per-service reimbursement.

CMS publishes participant data for many models, and Quality Payment Program participation status can be looked up by National Provider Identifier (NPI), so APM involvement can be joined to provider directories for targeting and network analysis. Policy analysts track APM penetration as a measure of how far payment has moved from volume to value.

APMs, Advanced APMs and Qualifying APM Participants

Not every APM is an Advanced APM. Upside-only models and some tracks of larger programs do not meet the financial risk standard.

Clinicians with enough payments or patients flowing through Advanced APMs become Qualifying APM Participants (QPs). QPs are excluded from MIPS, earned a lump-sum APM incentive payment that began at 5 percent and was later extended by Congress at lower rates, and from 2026 receive a higher annual Physician Fee Schedule conversion factor update (0.75 percent) than other clinicians (0.25 percent).