Introduction to Value-Based Care

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Value-based care (VBC) is a healthcare delivery model that focuses on providing high-quality care to patients while controlling costs. Rather than paying healthcare providers based on the volume of services they deliver (as in fee-for-service models), value-based care compensates them based on the quality of and the outcomes related to the care they provide. This model is designed to improve patient health outcomes, enhance patient experience, and reduce overall healthcare spending by emphasizing patient-centered preventive care, chronic disease management, and coordinated services.

Key Components of Value-Based Care:

1. Patient-Centered Care: Prioritizes the needs, values, and preferences of patients.

2. Improved Health Outcomes: Focuses on achieving better health results, such as improved recovery times, fewer complications, and lower mortality rates.

3. Preventive and Coordinated Care: Emphasizes prevention of disease and the coordination of care across multiple providers and care settings.

4. Reduced Costs: Aims to lower healthcare expenditures by reducing unnecessary services, avoiding hospital readmissions, and managing chronic conditions more effectively.

While “value” has multiple definitions, in the realm of value-based care it is fairly simple: “health outcomes achieved per dollar spent” on a patient. The focus is on improving outcomes and patient experiences while controlling costs. Value can be tracked across multiple quality metrics, including:

1. Clinical Outcomes: Patient survival rates, complication rates, and improvements in quality of life.

2. Patient Experience: Satisfaction with care quality and the overall experience.

3. Efficiency: Avoiding unnecessary costs and utilizing resources effectively.

4. Patient Safety: Reducing adverse events, infections, and errors.

5. Prevention Initiatives: Preventive screenings, medication management, timely care delivery.

Quality metrics can be measured through standardized frameworks like the Healthcare Effectiveness Data and Information Set (HEDIS), CMS quality ratings, and Agency for Healthcare Research and Quality (AHRQ) standards.

Today’s value-based care models typically involve capitation¹ or some variation of it related to managing global budgets for certain predefined populations as the framework to allow providers to participate in varying levels of risk and share in the cost savings generated by managing patient care. Under the global budget model, which is typical in accountable care organizations (ACOs), a fixed annual payment for a predefined population’s healthcare is provided. Providers must

manage all care within the budget, incentivizing them to use prevention initiatives and other care coordination tools to prevent high-cost events like hospitalizations and emergency visits. This model allows providers to manage resources and use funds more effectively. The evolution of payment models has led to the development of comprehensive VBC programs that integrate financial incentives with quality and efficiency goals. Examples include:

  • Direct Contracting and Primary Care First (PCF) models are newer, more flexible alternative payments models (APMs ) launched by CMS to test direct partnerships with provider groups, giving them more control and responsibility over patient outcomes and costs.
  • Direct Contracting Entities (DCEs): The DCE model, launched by Medicare in recent years, allows provider organizations to contract directly with Medicare and take on full financial risk for managing care. This model promotes flexibility in care delivery and enables innovative approaches to improve patient outcomes and reduce costs.
  • ACO Reach Model: The ACO Reach model reimagines traditional ACOs with a focus on health equity and access. It emphasizes flexibility in financial arrangements, allowing capitation and shared risk options, and includes social determinants of health (SDOH) that address factors such as housing, food security, and transportation to improve health outcomes for underserved populations.

With advancements in technology and data analytics, VBC models are expected to continue evolving toward full-risk arrangements that address both healthcare and social needs. Future models will likely emphasize:

  • Increased Use of Predictive Analytics: Data-driven approaches to identify at-risk patients and manage chronic conditions more proactively.
  • Broader Adoption of Capitated and Global Budget Models: As systems gain experience in managing populations under fixed budgets, capitation will continue to play a central role.
  • Implementation of novel payment arrangements with high-quality preferred specialists under the value-based enterprise (“VBE”) Stark Law exception, including e-consult fees, phantom gainsharing arrangements, and other care coordination agreements.

As should be expected, however, any novel payment model will present challenges and will need to evolve continuously through experience. And with CMS’ initiative to have all providers who accept Medicare enrolled in a value-based payment arrangement by 2030, the push to value will continue to gain momentum in the coming years.

Root Partners has significant experience working across the full spectrum of value-based care entity types, including but not limited to health systems, private practices, ACOs, IPAs, PHOs, and management services companies. Our competencies include building, or improving upon, population health analytics infrastructure, developing value-based care payor contracting strategies, and exploring novel compensation arrangements that support your value-based care goals. Contact us today to learn more about our full service offerings and how we can help to better prepare your enterprise for the broad adoption of alternative payment models and the expansion of value-based care for your patients.


1 Capitation is a fixed amount of money paid to the physician (or provider) in advance on a “per patient per unit of time (e.g. month)” basis for the delivery of health care services.
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