Healthcare costs around the country are spiraling out of control. At the same time, these high costs are not leading directly to overall improved health. More than half of adults in Arkansas live with one or more serious health conditions and costs continue to rise. From 2000 to 2010, individuals, families and employers in Arkansas saw their monthly insurance premiums nearly double. In the past, our system did little to enable people to expand their understanding, ability, or resources to improve their own health. Even before passage of the federal Affordable Care Act (ACA), Arkansas leaders knew something had to change. As the nation currently implements the ACA, Arkansas is well down a path to maximize its benefits while leading the country in innovations designed to meet the needs of Arkansans. The Arkansas Payment Improvement Initiative (APII) is one of the innovations Arkansas has put in place to increase health care quality and reduce costs of care. The APII is designed to improve Arkansas’s health system in three ways, each with its own quality assurance and cost reducing components. The first approach — patient centered medical homes — focuses on keeping people well, managing chronic conditions like diabetes or asthma, and proactively meeting the needs of patients. Second — health homes — target those patients with the most complex needs who require additional guidance and care. Finally — episodes of care — incentivize doctors to better serve patients needing treatments for specific conditions like joint replacements, pregnancy, or even the common cold.