As opposed to fee-for-service reimbursement where providers are paid separately for each service, episode-of-care covers all the care received for a specific illness, condition or medical event. Episode-of-care payments are meant to incentivize providers to deliver high quality and cost-efficient care.

The episodic risk to providers is that a patient’s needs for an episode may exceed the predetermined payment for that episode. In the event that the predetermined payment for an episode exceeds the utilized services, providers and payers agree to share in the savings, so there is diminished risk to the payer for overpaying.

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