Understanding the definition of value-based care in healthcare

Value-based care has arrived. This umbrella term describes a category of healthcare payment models that have been designed to incentivize higher quality, more cost-effective care for patients and to evolve the current payment structure to one that better rewards physicians for their work with patients, both during and outside an office visit.

It’s a complex topic but be encouraged—there are many reasons to believe that a transition to more value-based healthcare will have benefits for both clinicians and patients. That’s because the goals of value-based medical care are meant to align with your own goals as a healthcare provider: to deliver better access to care, achieve improved health outcomes for patients, reduce costs, and contribute to building a more sustainable healthcare system overall.

Are you excited? You should be.

Let’s take a closer look.

Understanding value-based care and its growing role in US healthcare

What is value-based care?

Value-based care is an approach to healthcare designed to create better alignment between healthcare providers and the patients they serve. The primary goal of value-based care is to produce better health outcomes for patients while also keeping healthcare costs down.

The alternative payment models that make up VBC hold enormous promise for US healthcare, so much so that the Centers for Medicare and Medicaid Services (CMS) has set a goal of having all Medicare beneficiaries, and nearly all Medicaid beneficiaries, enrolled in value-based healthcare programs by 2030.¹

Why are insurance payers and federal payers concerned about performance?

What’s behind this push from CMS (along with other payers like private insurers) to have more patients enrolled in programs that pay based on performance? The hard truth is that the United States spends a disproportionately high amount of money on healthcare, but that spending isn’t producing a healthier population. In 2021, the US spent 18.3% of its GDP on health care expenditures,² yet ranks last among wealthy, developed countries³ on metrics like access to care, equity,⁴ and healthcare outcomes.

Value-based medical care addresses this imbalance by re-centering patients and motivating them to take a more active role in their own health and care management. It also incentivizes providers to be more accountable for the health of their patients. Together, these characteristics lead to healthier patients, fewer costly hospital and ER visits, lower costs, and a more sustainable healthcare system overall.

What are the key components of value-based healthcare?

What does this look like in practice? According to the American Medical Association, these are the 5 key elements value-based care.⁵

1. A clear, shared vision with the patient: Aligning the health and financial interests of your patients with your own operating needs.
2. Leadership and professionalism of health care workers: You and your team put the value-based care model into practice, so your understanding of and commitment to the programs you use is vital.
3. A robust IT infrastructure: Interoperability, performance tracking and reporting, patient-centric digital tools, and other capabilities are crucial for many quality programs.
4. Broad access to care: value-based care only works if patients can access the care they need, so keeping costs down and expanding access through tools like telehealth are important.
5. Payment arrangements that reward quality improvement over volume: Focusing on quality over quantity is a key component of every value-based care program.

What are some examples of value-based care?

There are a variety of payment models that have been developed under the banner of value-based care. The most common and successful models are fee-for-value, quality incentives, shared savings and risk, and global capitation.⁶

Fee-for-value

Fee-for-value programs deliver value-oriented services typically performed outside the traditional patient encounter.⁷ An example of fee-for-value is a Chronic Care Management (CCM) program in which a designated care manager assists a patient with multiple, chronic illnesses to manage their health through services and support outside the typical office visit.

Quality incentives

With quality incentives, practices are incentivized to deliver certain patient outcomes over a designated period. One example is Medicare's Merit-Based Incentive Payments System (MIPS), which determines Medicare payment adjustments for participating Medicare Part B providers.⁸

Shared savings and risk

Under a shared savings and risk model, providers are rewarded for how well they manage patient costs. One example is the Medicare Shared Savings Program (MSSP).⁹

Global capitation

With global capitation, providers are responsible for the total cost of care for a patient population. They receive a standard fee, per month, per patient, for a set amount of time for a certain set of services.¹⁰

Each of these value-based care payment models carries different degrees of risks and rewards, and choosing the right model—or models—for your specific organization is important. The programs you choose should function alongside the more common fee-for-service model you’re likely already using.

What are key skills providers need to succeed in value-based medical care?

To be successful in value-based care programs, you and your organization must have a few key capabilities in place. It’s likely you can do some of this already and may need to invest in tools or services to round out the rest.

Predict and identify

You must have an efficient way to identify and track patients who qualify for certain programs based on a variety of characteristics.

Coordinate care

Having access to health records and the ability to communicate and coordinate with other members of your patient’s care team are essential for value-based care.

Deliver care

When you’re with a patient, it’s important to have access to relevant information (at the right time) to close care and diagnosis gaps to drive preventative interventions and avoid unnecessary costs.

Engage patients

You must be able to engage with your patients in a variety of ways, including proactive outreach to specific populations, self-service tools for communication and scheduling, and through alternative means of accessing care (like telehealth).

Measure performance

The ability to track, measure, and report on your program-specific quality goals is required, no matter which programs you decide to participate in.

These competencies are crucial for running successful value-based healthcare programs. Thankfully, there are technology tools available to help healthcare organizations scale up their capabilities where needed.

How does technology help with value-based care success?

Every skill needed for value-based care success—the abilities to predict and identify, coordinate care, deliver care, engage patients, and measure performance—can be done most efficiently and accurately in partnership with the right healthcare IT solution and services provider, such as athenaOne, an integrated practice and revenue management, electronic health record, and patient engagement solution.

Advanced technology facilitates much of modern healthcare, and value-based care is no different. In fact, technology plays a central role throughout any value-based medical care-driven process.

If you’re ready to learn more about value-based care and the capabilities you need to succeed with it, visit our blog or click one of the links below.

1. CMS, June 2023, The CMS Innovation Center’s Strategy to Support High-quality Primary Care; https://www.cms.gov/blog/cms-innovation-centers-strategy-support-high-quality-primary-care

2. CMS, Dec. 2022, National Health Spending Grew Slightly in 2021; https://www.cms.gov/newsroom/press-releases/national-health-spending-grew-slightly-2021

3. The Commonwealth Fund, Aug. 2021, Mirror, Mirror 2021: Reflecting Poorly; https://www.commonwealthfund.org/publications/fund-reports/2021/aug/mirror-mirror-2021-reflecting-poorly

4. CMS, Value-Based Care; https://www.cms.gov/priorities/innovation/key-concepts/value-based-care

5. AMA, Oct. 2024, What is value-based care?; https://www.ama-assn.org/practice-management/payment-delivery-models/what-value-based-care

6. Deloitte, Embracing new health care payment models; https://www2.deloitte.com/us/en/pages/life-sciences-and-health-care/articles/value-based-care-payment-models.html

7. AMA, Fee for Value Payment Models/Contracts; https://www.ama-assn.org/topics/fee-value-payment-modelscontracts

8. AMA, Sept. 2023, Understanding Medicare’s Merit-based Incentive Payment System (MIPS); https://www.ama-assn.org/practice-management/payment-delivery-models/understanding-medicare-s-merit-based-incentive-payment

9. CMS, Shared Savings Program; https://www.cms.gov/medicare/payment/fee-for-service-providers/shared-savings-program-ssp-acos/about

10. CMS, Capitation and Pre-payment; https://www.cms.gov/priorities/innovation/key-concepts/capitation-and-pre-payment