Value-Based Care

Posted by: Alok Prasad

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A new healthcare reimbursement model called value-based care (which replaces the traditional fee-for-service model) has has been gaining traction in recent years. This approach to healthcare payment incentivizes providers to focus on quality and outcomes rather than the quantity of services provided. By prioritizing the health and well-being of patients, this model can lead to better patient experiences, improved outcomes, and lower healthcare costs.

In this blog, we will take a closer look at what value-based care is and why it is becoming increasingly important in healthcare. We will explore the benefits and challenges of implementing a value-based care model and how it can impact healthcare providers, payers, and patients. Additionally, we will discuss some of the key strategies that providers can use to transition from a fee-for-service model to a value-based care model and share some real-world examples of successful value-based care programs.

Whether you are a healthcare provider, payer, or patient, understanding value-based care is becoming increasingly important in today's rapidly evolving healthcare landscape. We hope this blog will provide you with a better understanding of value-based care and its potential to transform healthcare delivery for the better.

Value based Reimbursement

What is Value-Based Care?

Value-based care is a healthcare delivery & reimbursement model which leads to better outcomes and lower costs because it rewards healthcare providers for keeping their patients healthy and for delivering high-quality care.

Provider reimbursements for delivering patient care is linked to the quality of care delivered and incentivizes them to improve patient outcomes which is measured through metrics like reduction in hospital re-admissions, improvement in patient satisfaction, and improving health outcomes for specific conditions or populations.

Providers may be rewarded financially for meeting these goals through a variety of payment models, such as bundled payments, pay-for-performance, and shared savings arrangements. These models often provide financial incentives for providers to focus on preventative care, care coordination, and patient education, which can lead to better outcomes for patients and lower healthcare costs over time. By linking reimbursement to the quality of care, providers are encouraged to adopt best practices, coordinate care, and invest in technology and processes that can improve patient outcomes and reduce costs. Ultimately, value-based care is intended to create a healthcare system that is focused on delivering the best possible outcomes for patients, while controlling costs and improving overall efficiency.

There are several value-based care programs implemented in the healthcare industry. Some of them include Medicare Shared Savings Program (MSSP), Bundled Payments for Care Improvement (BPCI) Initiative, Hospital Value-Based Purchasing (VBP) Program, Merit-Based Incentive Payment System (MIPS) etc.

The overarching objective of value-based programs is to encourage providers to promote preventative care, coordinated care, patient engagement, and outcome-based care. This objectives of these programs are met through a collaborative, patient-centered approach that emphasizes preventive care, disease management, and coordinated care.  

The transition from fee-for-service to value based care represents a paradigm shift for the entire healthcare industry but also promises specific opportunities and challenges for individual providers. If you’re considering transitioning to a value-based reimbursement model, it is important to learn as much as possible about the two systems, the changes ahead of you, as well as your strategic options.


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Understanding value-based care

To understand the government-led transition into value-based reimbursement, it’s helpful to start with MIPS and APM. Starting in 2019, physician practices have to choose between either a merit-based incentive payment system (MIPS) or an alternative payment model (APM). Physicians that are looking to stay closer to a fee-for-service model will likely want to lean toward MIPS but should be aware that fees will be adjusted incrementally by CMS based on scores in

  • Meaningful Use
  • Efficiency
  • Practice improvement
  • Clinical quality

Under this system, physicians will also be compared to peers in the same specialty or to themselves as a reflection of their resource maximization from year to year.

APM works within an ACO, guaranteeing a five percent increase in payment each year during the first six years of the program. APM though, is also a higher-risk model, since physicians who don’t measure up to the metrics of their ACO won’t reap the benefits of their shared savings.

Value Based Care vs. Fee for Service

Fee-for-service (FFS) and value-based care (VBC) are two different models of healthcare payment and delivery. Here are some of the key differences between these two models:


Value-based Care


Payment Model Payment is made based on the quality and outcomes of care provided, rather than the volume of services Payment is made for individual healthcare services provided to patients
Payment Structure Providers are incentivized to focus on improving the health of their patients and preventing health problems before they occur Providers are paid based on the volume of services they provide, rather than the quality or outcomes of care
Patient Choice Patients receive more comprehensive and coordinated care, as providers are incentivized to work together to improve health outcomes Patients have more choice in terms of which services they receive and from whom they receive them
Incentives Providers are incentivized to focus on quality and outcomes, which can lead to cost savings and improved patient outcomes. The model can incentivize overutilization of services, leading to higher healthcare costs. Providers may not work together to provide coordinated care.
Patient Experience Patients are more likely to receive coordinated care that focuses on their specific needs, which can lead to a better overall experience and improved outcomes. Patients may receive more services than they need, which can lead to confusion, higher costs, and potential negative outcomes.
Criticism Providers may be incentivized to avoid treating sicker or more complex patients, leading to potential disparities in care. It is commonly criticized for a lack of focus on prevention and health outcomes.


Value Based Care for Small Practices

Value-based care though, is much larger than MIPS and APM. Here are a few examples of models that will be helpful in understanding what this approach to reimbursement can potentially look like for your practice.


Financial incentives are tied to performance to encourage better clinical outcomes. Individual providers within an organization are rewarded based on predefined quality metrics that stand relative to other providers regarding performance and ability to lower costs.

Who it benefits: Providers looking to reduce errors, improve efficacy, and increase physician engagement.

Shared Savings

These programs provide rewards for providers who reduce their spending to or below a level set by a payer. They incentivize providers to spend less on patient treatment (than they would in a FFS arrangement) and entitle them to part of the savings.

Who it benefits: Healthcare organizations who don’t want to make huge investments in technologies.

Shared Risk

In a Shared Risk model, providers are given savings targets. If the targets aren’t met, they might have to share cost savings with insurers but are also at risk of paying penalties as compensation if the cost of healthcare services exceed expectations. Risk can be limited if providers pay a fixed fee to a third-party insurer who in exchange, takes on the financial risk of excessive costs.

Who it benefits: Providers who are confident in their ability to keep costs down.

Bundled Payment/Episode of Care

The Bundled Payment model involves an arrangement with third-party payers where they provide performance and financial accountability for set episodes of care. Providers can generate savings by eliminating unnecessary care episodes and improving efficiency. Fixed payments are made to providers based on clinical standards of risk stratification, care, and balanced scorecard performance.

Who it benefits: Providers who are particularly efficient and focused on metrics.


Accountable care organizations are probably the most well-known value-based model and are volunteer-based programs in which physicians and hospitals are paid by health plans to improve outcomes and meet specific quality metrics (for good reason). They can involve payment models including value-based purchasing, shared savings, and pay-for-performance. Providers themselves are “accountable” for health management of their enrolled patients at all levels of care and in turn, are entitled to bonuses for slowing spending growth in comparison to peers in a determined region.

Who it benefits: Practices who can afford higher startup costs and stay under expenditure targets.

Value-Based Timelines

To understand the history of value-based reimbursement, here’s an overall look at the implementation timeline for CMS’ value-based programs:

Value Based Care

How do value-based programs work with other CMS quality efforts?

What are the Requirements of Value-Based Care?

The requirements for value-based care vary depending on the specific program or initiative, but there are some common elements that are typically required for providers to participate. These may include:

1. Data collection and reporting

Providers must have the ability to collect, analyze, and report data on patient outcomes, quality of care, and other relevant metrics.

2. Quality improvement initiatives

Providers must demonstrate a commitment to continuous quality improvement and adopt best practices for delivering care.

3. Patient engagement

Providers must involve patients in their care and prioritize patient satisfaction and engagement.

4. Coordination of care

Providers must coordinate care across the continuum and collaborate with other providers to deliver high-quality, efficient care.

5. Clinical integration

Providers must integrate clinical and administrative processes to improve care coordination and reduce waste.

6. Use of technology

Providers must utilize technology, such as electronic health records (EHRs) and telemedicine, to support the delivery of high-quality, efficient care.

7. Financial risk management

In some cases, providers may be required to take on financial risk and share in the cost savings generated by the value-based program.

These requirements are designed to support the delivery of high-quality, cost-effective care and to incentivize providers to prioritize patient outcomes and satisfaction. To participate in value-based reimbursement programs, providers must demonstrate a commitment to continuous improvement and the adoption of best practices.


Planning to migrate to value-based care

Migrating to value-based care can be a complex process, but there are several key steps that a practice can take to make the transition:

  1. Assess readiness: Assess the readiness of the practice to transition to value-based care, including its current infrastructure, technology, and culture.

  2. Develop a strategic plan: Develop a comprehensive strategic plan that outlines the goals and objectives of the transition, including the specific metrics that will be used to evaluate success.

  3. Build a care team: Build a care team that includes healthcare providers, care coordinators, and support staff, and establish clear roles and responsibilities for each member.

  4. Invest in technology: Invest in technology and tools, such as electronic health records (EHRs) and data analytics software, to support the collection, analysis, and reporting of data on patient outcomes and quality of care.

  5. Engage patients: Engage patients in their care and prioritize patient satisfaction and engagement in the delivery of care.

  6. Coordinate care: Coordinate care across the continuum and collaborate with other providers to deliver high-quality, efficient care.

  7. Continuously evaluate and improve: Continuously evaluate and improve the quality of care and patient outcomes, and make necessary adjustments to the care delivery model to ensure success.

By taking these steps, a practice can begin the process of transitioning from FFS to value-based care and build a foundation for delivering high-quality, cost-effective care that prioritizes patient outcomes and satisfaction. However, it is important to note that the transition to value-based care requires a significant investment of time, resources, and commitment, and that practices should expect to encounter challenges along the way.

Benefits of Value-based Care

Value-based care offers several significant benefits over traditional fee-for-service models. Here are some of the major benefits:

1. Improved Patient Outcome

It places a strong emphasis on quality and patient outcomes. By incentivizing providers to focus on preventive care, care coordination, and patient engagement, it can lead to better health outcomes, reduced complications, and improved overall patient well-being.

2. Enhanced Care Coordination

This model encourages collaboration and coordination among healthcare providers and can lead to more integrated and seamless care delivery, reducing fragmented services, and improving the patient experience.

3. Cost Savings

By emphasizing cost-effective care and reducing unnecessary services or interventions, value-based care has the potential to lower healthcare costs. Providers are incentivized to avoid unnecessary hospitalizations, re-admissions, and other costly interventions, leading to more efficient resource utilization and cost savings.

4. Focus on Prevention and Population Health

Providers are encouraged to implement proactive measures to prevent illness, manage chronic conditions, and promote wellness. By focusing on preventive care and early intervention, value-based models aim to improve population health and reduce the need for expensive acute care services.

5. Patient-Centered Approach

These models prioritize patient satisfaction and engagement. By involving patients in their care decisions, providing better care coordination, and focusing on patient preferences, value-based care can lead to more personalized and patient-centered healthcare experiences.

6. Incentivizing Innovation and Quality Improvement

Encourages providers to innovate and implement evidence-based practices that improve care quality and outcomes. The focus on measuring and rewarding performance drives a culture of continuous quality improvement and encourages the adoption of best practices.

7. Shift from Volume to Value

Moves away from the traditional fee-for-service model, which incentivizes providers based on the volume of services delivered. Instead, it aligns financial incentives with the quality and value of care, promoting a more sustainable healthcare system.

Overall, value-based care aims to achieve better health outcomes, improve patient experiences, and control healthcare costs by incentivizing high-quality, cost-effective care delivery and promoting a holistic approach to healthcare.

Key Transition Challenges

Transitioning to value-based care can be a complex and challenging process, and practices may face several key challenges along the way. These challenges may include:

  1. Financial instability: The transition to value-based care can be financially challenging for practices, as they may need to invest in new technology, hire additional staff, and bear financial risk.

  2. Data management: Collecting, analyzing, and reporting data on patient outcomes, quality of care, and other metrics can be a significant challenge for practices, especially those that do not have robust technology infrastructure.

  3. Clinical integration: Integrating clinical and administrative processes and coordinating care across the continuum can be difficult for practices, especially if they have limited experience in these areas.

  4. Patient engagement: Engaging patients in their care and involving them in the delivery of care can be challenging for practices, especially if they are not equipped with the technology and tools necessary to support patient engagement.

  5. Clinical culture change: Changing the culture of the practice to prioritize patient outcomes, quality of care, and cost efficiency can be difficult, especially if providers are used to the fee-for-service model.

  6. Measurement and evaluation: Measuring and evaluating the success of the transition to value-based care can be challenging, as it requires the collection and analysis of complex data and metrics.

These challenges highlight the need for practices to take a strategic and comprehensive approach to the transition to value-based care, including a careful assessment of their readiness, a comprehensive strategic plan, and a commitment to continuous improvement. By addressing these challenges head-on and making the necessary investments in technology, staff, and processes, practices can successfully make the transition to value-based care and improve the quality of care for their patients.

How to transition to value-based care?

A strategic and organization-specific approach to transitioning away from fee-for-service will be critical to your success and maintaining healthy margins. If you’re considering making the transition, you should consider

  • A focus on driving out waste: Providers should understand which service lines perform the best for them and how to keep their costs below those of their competitors.
  • Choosing the ideal model: While there are a broad range of options, evidence-based research on pioneer models will give insight into decisions and value-based contracting processes that best align with your goals.
  • Collaborating with other providers: Investing in analytics and tracking quality measures can be expensive and collaboration can help cut costs.
  • Evaluating results: Outcomes of strategic choices should be evaluated periodically even while working to increase patient volume as a buffer against risk and decreased procedure volume.
  • Investing in data sharing and integration: This investment will serve as the foundation of streamlined informational processes among network providers.

Ultimately though, the goal is to standardize patient care processes and focus on wellness instead of individual care episodes. Clinicians focused on preventative health will be much more effective in a value-based system that those that are fee-focused.


Looking ahead

Value-based healthcare is the inevitable future of healthcare, and it is one that will rely heavily on not only strategy but also the right technology. Small clinics, in particular, will need an integrated EHR and practice management software to help their patients and staff navigate the transition successfully. These clinics should look for software that promotes collaboration, emphasizes analytical reporting, and facilitates integration with existing third-party software and hardware. This is a great place to start.

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  1. 3 Reasons Why EHR Software Usage and Patient Loyalty are Positively Correlated
  2. Comprehensive Guide to MACRA Implementation : Proposed Rules Simplified For You
  3. Electronic Medical Records: Practices and Compliance for Modern Healthcare
  4. Don’t Let the Transition to Value-Based Care Throw Your Practice Off Course

Topics: Value Based Reimbursement, Fee For Service, Value Based Care

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