Value-based care is the emerging alternative to Fee-for-Service reimbursement–based on quality rather than quantity.

Value-Based Care basics

Value-based care (VBC) is a reimbursement system that rewards providers for efficiency and effectiveness in providing care. Compared to fee-for-service models, this form of reimbursement allows providers retrospective compensation for services delivered based on bill charges or annual fee schedules.

Fee-for-service reimbursement allows healthcare providers payment for the number of services performed, incentivizing providers to order tests, procedures, and increase patient volume to increase revenue with costs determined by what commercial payers would pay in the private market and a percentage of what Medicare would pay for similar services. Rates for services are unbundled, each service is paid for separately.

VBC aims to replace the nation’s reliance on fragmented, fee-for-service care with comprehensive, coordinated care using payment models holding organizations accountable for cost control and quality.

Centers for Medicare & Medicaid Services (CMS) introduced several value-based care models, like Medicare Shared Savings Program, the Next Generation Accountable Care Organization (ACO), and Pioneer Accountable Care Organization (ACO) model, transforming the way healthcare providers are reimbursed for services rendered. Private payers adopted similar VBC models.

Federal regulation proposed reimbursement programs that reward healthcare providers for quality of care provided to patients, rather than quantity of services provided. Value-based care allows improved individual healthcare and reduces costs.

VBC models focus on patient outcomes including how well healthcare providers improve quality of care based on measures, including reduced hospital readmissions.

Cost variations for care increased under fee-for-service models. The healthcare industry spends more treating patients despite outcomes not improving, while practices are struggling.

Value-based reimbursements are calculated based on quality measures and population health. Data driven, providers must report to payers on metrics and demonstrate improvements. Hospital readmissions, adverse events, population health, patient engagement, are regularly tracked and reported.

VBC providers are incentivized to use evidence-based medicine, upgrade health IT and utilize data analytics. Providers are rewarded when patients receive coordinated, appropriate, and effective care. CMS has developed several value-based care models for providers.

Accountable care organizations

In Value-Based Care, risks are assumed by providers, whilst savings and losses are shared. An accountable care organization (ACO) is a network of physicians, hospitals, and other providers coordinating high-quality care for Medicare beneficiaries.

In an ACO, like the Medicare Shared Savings Program, Advance Payment ACO Model, or Pioneer ACO Model, provider participation is voluntary. Financial risk is assumed by most ACO members. A potential for significant savings includes the possibility of shared losses, making it necessary for providers to repay Medicare for failing to provide value-based care.

Bundled payments

Bundled payments are single payment for the entire episode of care. Several physicians, settings of care, and procedures may be involved in treating a specific condition, so reimbursement is shared between providers. CMS combines the set payment to the hospital, surgeon, and anesthesiologist if a patient undergoes surgery and bundled payments are determined by historical prices. Bundled payments involve risk. By lowering the cost of services below the bundled payment price, providers can pocket the savings. If the costs are higher, providers incur losses.

Patient-centered medical homes

Patient-centered medical homes are care delivery models that coordinate patient care through primary care physicians. PCMHs provide patients with a centralized care setting where all needs are met.

Resultant of PCMH certification, medical providers provide patient-centered care, team-based methods, population health management, care coordination, and consistent quality care. In a PCMH, patients develop relationships with care providers, who determine healthcare needs based on medical and environmental factors.

Many providers do not have the option of providing value-based care. More providers feel pressure from payers to participate in alternative payment models as HHS pushes for increased use of alternative payment models.

CMS expanded participation in value-based care programs, such as MACRA and Value Modifier. Among the eligible clinicians for MACRA are ambulatory physicians, physician assistants, nurse practitioners, clinical nurse specialists, and registered nurses. CMS intends to expand eligibility requirements as the program matures. CMS’ goal is to tie all Medicare payments to value-based care models in the future.

What is working?

2020 savings increased by ten times to $4.1 billion, a total of 10 times what they were in 2015. The latest projections from CMS anticipate that all Medicare payments will be value-based by 2030.

A CMS initiative that quantifies value-based care success is the Value Modifier program, which adjusts Medicare payments based on quality assessments.

Most healthcare providers are still implementing value-based care systems into their workflows since it is a relatively new concept. In the United States, one of the biggest financial challenges is the transition from fee-for-service to pay-for-value.

CMS set aggressive goals for making the change with Medicare providers and hospitals. Providers must effectively navigate the challenges posed by a payment model that requires sharing and analyzing data in ways that fee-for-service and its legacy revenue cycle management systems and new business processes. VBC has potential to reduce spending and improve quality of care as new programs, like MACRA improve EHR systems.

If your practice requires a deeper dive, or needs assistance with quality care measures under the value-based care model, please contact Virtual OfficeWare Healthcare Solutions at or 412. 424.2260.