The term care transition describes a continuous process in which a patient's care shifts from being provided in one setting to another, such as from a hospital to a patient's home. Poorly managed transitions can diminish health and lead to hospital readmissions, thus driving up costs for Medicare and other payers. This Health Affairs brief examines the factors contributing to poor care transitions, describes effective care delivery models aimed at improving care transitions, describes initiatives in the recent health reform law aimed at incentivizing greater attention to care transitions, and explores policy issues surrounding payment reform in this area.