AHCCCS Value Based Purchasing (VBP) Strategies

One of AHCCCS’ strategic priorities is to pursue and implement long-term strategies that bend the cost curve while improving member health outcomes. A critical tool in achieving this strategic priority is Value-Based Purchasing (VBP). VBP arrangements seek to reward providers through financial incentives for providing high-quality care to members while promoting value, meaning payments are tied to improving health outcomes while reducing the cost of care.

Through VBP, AHCCCS is committing resources to leverage Arizona’s successful managed care model to address inadequacies of the current health care delivery system, (e.g., fragmentation and paying for volume instead of quality).

AHCCCS: Establish Health Plan requreiments to participate in VBPs. Health Plans: Implement Payment Reforms. Providers: Implement Delivery System Reforms. All this equals: Better Member Health Outcomes and Cost Savings

AHCCCS VBP encompasses a variety of initiatives for payment reform including:

  • Alternative Payment Models (APM)
    • APMs are payment models that reward providers for providing high quality and cost efficient care.
  • Differential Adjusted Payments (DAP)
    • DAPs are positive adjustments to the AHCCCS Fee Schedule for providers who achieve designated actions that improve patients’ care experience, improve members’ health, and reduce cost of care growth. AHCCCS health plans are required to pass through DAP increases to their contracted rates to match the corresponding AHCCCS Fee-For-Service rate increase percentages.
  • Directed Payments
    • Directed payments require AHCCCS health plans to pay specific amounts to providers under their managed care contracts. The directed payments work to advance delivery system reforms and/or performance improvement initiatives.
  • Performance Based Payments (PBP)
    • PBPs are incentive payments to providers for meeting certain performance measure targets incorporated in VBP/APM arrangements.

In its APM Framework, the Health Care Payment (HCP) Learning & Action Network (LAN) presents a continuum of APM models that breaks APMs down into four categories and eight subcategories. AHCCCS works to move providers throughout the continuum by establishing contractually required targets for health plans to contract with providers at a selected percentage of overall medical spend under VBP/APM arrangements, as well as a selected percentage of VBP/APM arrangements in LAN Categories 3 and 4, where providers take on some financial risk.

These requirements ensure that VBP/APMs are a priority for AHCCCS health plans. From Contract Year Ending (CYE) 2017 to CYE 2024, the contractual requirements have resulted in a significant increase in medical spend in VBP/APM arrangements (LAN Categories 2-4), from 36.6 percent to 76.6 percent, and an increase in the proportion of spend in LAN-APM Categories 3-4 from 16.0 percent to 64.3 percent.


Column CYE LAN-APM 1 LAN-APM 2 LAN-APM 3 LAN-APM 4 VBP Arrangments,CYE 24 Estimate 23.4% 12.3% 59.9% 4.4% 76.6%,CYE 23 Estimate 16.7% 11.8% 66.8% 4.7% 83.3%,CYE 22 16.1% 15.5% 64.2% 4.2% 83.9%,CYE 21 19.5% 16.7% 59.5% 4.3% 80.5%,CYE 20 24.2% 8.8% 51.6% 15.4% 75.8%,CYE 19 27.8% 19.0% 52.0% 1.2% 72.2%,CYE 18 40.6% 23.8% 32.3% 3.3% 59.4%,CYE 17 63.4% 20.6% 15.9% 0.1% 36.6%

Helpful Information

AHCCCS Contracts

ACOM Policies

Differential Adjusted Payments (DAP)

Resources