In 2010, Arkansas health officials faced a triple threat: a deficit in Medicaid dollars, a population that suffered from pervasive chronic disease, and a fragmented provider community. In response, policymakers and other stakeholders created the Arkansas Health Care Payment Improvement Initiative, a statewide payment reform program spanning outpatient and inpatient care. A new brief examines the initiative—which includes episode-based payments and alternative care models such as health homes for people with complex health care needs—and highlights the lessons Arkansas can provide to other states.