Which statement correctly describes the relationship between PMPM and episode-based payments?

• A. PMPM is a fixed monthly per member payment that covers all possible services with no risk to the provider.
• B. PMPM is paid per encounter, and episode-based payments reimburse a fixed bundle for an event.
• C. PMPM is a fixed monthly per member payment; episode-based payments reimburse for a defined set of services around an episode, shifting risk to the provider for that episode.
• D. PMPM and episode-based payments are the same mechanism.

Answer: (C)

The main idea is comparing two payment approaches. PMPM, or per member per month, is a fixed monthly payment made for each enrolled member to cover a defined set of services, regardless of how many services the member uses. This capitation style shifts financial risk to the provider to manage care within the budget. Episode-based payments, on the other hand, reimburse a fixed amount for a defined clinical episode or bundle of services surrounding that episode, and this arrangement places the risk for the total episode costs on the provider. So the correct statement cleanly links PMPM to a fixed monthly per-member payment and describes episode-based payments as a fixed bundle for an episode with the provider bearing that episode’s risk.