Money Foundations · 12 min read
How care gets paid for
Fee-for-service, capitation, shared savings, and what each one rewards
The formula behind the visit
You finish a 25-minute visit with a patient whose diabetes, hypertension, and depression all needed attention. You pick a code. Weeks later, money arrives at the practice. Between those two moments sits a formula, and the formula has opinions. Fee-for-service rewards volume. Capitation rewards keeping a panel healthy for a fixed fee. Shared savings rewards spending less than expected without letting quality slide. Most family medicine practices run on a blend of all three, and residents rarely get told which is which. This module gives you the arithmetic, then the 2026 landscape, so the scheduling rules and quality dashboards in your clinic stop looking arbitrary.
Resource-Based Relative Value Scale (RBRVS)
Medicare's fee schedule assigns every service three relative value units: work (), practice expense (PE RVU), and malpractice (MP RVU). Each is adjusted by a geographic practice cost index (GPCI) for the locality, summed, and multiplied by a dollar conversion factor (CF). Payment = [(wRVU × wGPCI) + (PE RVU × PE GPCI) + (MP RVU × MP GPCI)] × CF.
For calendar year 2026, CMS finalized two conversion factors in the Physician Fee Schedule final rule (CMS-1832-F): $33.4009 for clinicians who are not qualifying APM participants and $33.5675 for qualifying APM participants. CMS also finalized a −2.5% efficiency adjustment to service valuations for 2026, with a published list of exempt codes. Two points get confused constantly. First, the CF multiplies TOTAL RVUs, not work RVUs alone. Second, the resulting payment goes to the practice or hospital that bills, not to the physician. Commercial insurers often negotiate rates as a percentage of this Medicare schedule, so the RBRVS shapes far more than Medicare revenue.
Why it matters: When an employment contract pays a dollar amount per wRVU, that is a different unit from the Medicare CF, which is dollars per total RVU paid to the practice. Putting one over the other as a ratio produces a number that means nothing. Keep them side by side, each labeled with its unit.
Pricing one office visit, line by line
An established-patient visit with illustrative RVUs of 1.92 work, 1.50 practice expense, and 0.13 malpractice, billed in a locality with GPCIs of 1.000 (work), 0.950 (PE), and 0.800 (MP).
Bottom line: About 56% of this visit's value (1.92 of 3.449 RVUs) is the work component; the rest pays for staff, space, supplies, and liability coverage. The patient owes a 20% share, which is why a Medicare patient may receive a bill for a visit they thought was covered.
Four ways to pay a primary care practice
Each model answers one question differently: what does the practice get paid for? The incentives follow directly from the answer.
| Model | Paid for | What it rewards | Where it can go wrong |
|---|---|---|---|
| Fee-for-service | Each billed service, priced by the RBRVS | Volume and documented complexity | Short visits, extra visits, and little payment for work done between visits |
| Capitation | Each attributed patient, per member per month (PMPM) | Keeping the panel healthy at lower cost; non-visit care | Underservice and avoiding sicker patients unless payments are risk-adjusted |
| Shared savings (ACO) | Fee-for-service, plus a share of spending below a benchmark | Lower total cost of care while meeting a quality standard | Savings depend on the benchmark; small ACOs face noisy results |
| Add-on and care-management codes | Specific longitudinal work, such as G2211 or chronic care management | Continuity and work between visits, within a fee-for-service frame | Documentation and coding rules decide whether the payment arrives |
Capitation and shared savings in dollars
A clinic has 2,000 attributed patients. Under capitation it receives an illustrative $32 PMPM for primary care. Separately, its ACO serves 10,000 assigned Medicare beneficiaries with a benchmark of $12,000 per beneficiary per year and actual spending of $11,600, with an illustrative 50% sharing rate.
Bottom line: Under capitation, an avoided visit costs the practice nothing and an unnecessary one costs it time. Under shared savings, the money comes from what Medicare did not spend, which is why ACO clinics chase post-discharge follow-up, avoidable ED visits, and generic prescribing.
The 2026 primary care landscape, verified
Models start and stop. Here is what CMS shows as of October 2026. Check the CMS Innovation Center site before you rely on any of it, because this list changed twice in the last 18 months.
Medicare Shared Savings Program
The permanent ACO program. As of January 1, 2026: 511 ACOs and 12.6 million assigned beneficiaries, with 58% of ACOs in the ENHANCED track. Results for 2024: $4.1 billion in total earned shared savings.
Primary Care First and Making Care Primary
Both ended early. Primary Care First's final performance period ended December 31, 2025. CMS concluded Making Care Primary on June 30, 2025, one year into a model designed to run through 2034.
ACO REACH and LEAD
ACO REACH is in its fourth and final performance year (2023–2026). CMS announced LEAD (Long-term Enhanced ACO Design) as the successor, a 10-year voluntary model running January 1, 2027 through December 31, 2036.
ACCESS
A 10-year Innovation Center model that began July 5, 2026, paying participating organizations outcome-aligned payments for technology-supported chronic care (such as hypertension, diabetes, chronic musculoskeletal pain, and depression). Participants are Medicare Part B-enrolled organizations, and a primary care organization may join as one. Most primary care physicians will meet ACCESS as referring clinicians: they can refer patients, receive progress updates, and bill a new co-management payment for documented review and coordination.
G2211, the visit complexity add-on
Payable since 2024 with office/outpatient E/M codes 99202–99205 and 99211–99215. For 2026, CMS extended it to home or residence E/M codes (99341, 99342, 99344, 99345, 99347–99350). It is not paid when the base E/M carries modifier 25, except when the other same-day service is an annual wellness visit, vaccine administration, or a Medicare Part B preventive service. Patient coinsurance applies. Confirm the current national payment in the PFS Look-Up Tool.
Check your understanding
One question on incentives.
Your clinic is paid a fixed PMPM for primary care for its commercial patients. A PGY-2 manages a stable patient's blood pressure titration through three portal messages instead of a return visit. What happens to the clinic's primary care revenue for that patient this month?
Capitation pays per patient per month regardless of how care is delivered, so revenue is unchanged and the clinic saves the visit slot. Under fee-for-service the clinic would have lost a billable visit unless the portal work was separately billable. G2211 is an add-on to an E/M visit and does not apply to portal messages.
What to carry into clinic
- Medicare payment = [(wRVU × wGPCI) + (PE RVU × PE GPCI) + (MP RVU × MP GPCI)] × CF; the 2026 CF is $33.4009, or $33.5675 for qualifying APM participants.
- The CF multiplies total RVUs and pays the practice; a contract's $/wRVU is a different unit and is never divided by it.
- Capitation makes avoided visits revenue-neutral; shared savings pays a share of spending below a benchmark, gated by quality.
- Primary Care First and Making Care Primary have ended; ACO REACH ends after 2026, LEAD starts in 2027, and ACCESS began July 5, 2026.
- G2211 now attaches to office and home E/M visits, and pays alongside modifier 25 only for an AWV, vaccine administration, or Part B preventive service.
Do this next: Ask your clinic manager or medical director which payment arrangements (fee-for-service, capitation, ACO) cover your continuity panel, and what share of patients falls under each.
Residency curriculum · lesson 29 of 38
Next: Cost awareness in the exam room.
List price, allowed amount, out-of-pocket, and how to talk about all three A free account keeps your place, records completion for you alone, and opens the interactive version with the calculators. Your program sees aggregate completion above five residents, and your own status only if you turn that on.
Create a free account to continue →Sources (10)Show →
- CMS, Calendar Year (CY) 2026 Medicare Physician Fee Schedule Final Rule (CMS-1832-F) fact sheet (accessed 2026-10-12)
- CMS MLN MM14315, Medicare Physician Fee Schedule Final Rule Summary: CY 2026 (efficiency adjustment) (accessed 2026-10-12)
- CMS Physician Fee Schedule data portal (2026 CF $33.4009) (accessed 2026-10-12)
- CMS, Shared Savings Program Fast Facts, as of January 1, 2026 (accessed 2026-10-12)
- CMS Innovation Center, Primary Care First Model Options (accessed 2026-10-12)
- CMS Innovation Center, Making Care Primary evaluation summary (2026) (accessed 2026-10-12)
- CMS Innovation Center, ACO REACH Model (accessed 2026-10-12)
- CMS Innovation Center, LEAD (Long-term Enhanced ACO Design) Model (accessed 2026-10-12)
- CMS Innovation Center, ACCESS Model (accessed 2026-10-12)
- CMS MLN006764, Evaluation and Management Services (May 2026) (accessed 2026-10-12)
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