The United States healthcare system is notorious for higher levels of healthcare spending with poorer health outcomes compared to other wealthy countries. One solution gaining traction in the healthcare industry is value-based care, a different type of healthcare model from the traditional fee-for-service healthcare model. The value-based care model aims to address the inherent issue of ineffective and unnecessarily high healthcare spending by focusing on the quality and effectiveness of patient care.
How does value-based care work?
In short, value-based care focuses on quality over quantity. Under the current fee-for-service model, providers are rewarded for ordering expensive tests or unnecessary procedures. Value-based care shifts the medical provider’s reimbursement from the amount of care delivered to care quality, patient outcomes, and overall cost-effectiveness. For example, providers are incentivized to help patients reduce chronic disease, improve their health, or obtain a vaccination, thus lowering the need for costly hospitalization or specialty care. There is a strong emphasis on improving healthcare quality through preventative care to lower the need for medical spending.
Value-based care models stress a team approach to help coordinate care across multiple continuums and collaborate with multiple providers, making it easier to provide care and measure outcomes. As such, medical homes, accountable care organizations, bundled payments, or capitation payments are becoming more common forms of healthcare delivery and alternative payment models. Risk is inherent in value-based care models for providers and their practices.
Government agencies are one of the major drivers in the adoption of value-based care models as they interface with providers, payors, and patients.
- The Center for Medicare and Medicaid Services (CMS) offers several value-based programs, such as the Hospital Readmission Reduction Program, which incentivizes hospitals to reduce avoidable readmissions by focusing on patient and caregiver engagement during discharge.
- In California, the California Department of Health Care Services introduced the longitudinal plan California Advancing and Innovating Medi-Cal (CalAIM) in 2021 to reform Medicaid healthcare delivery with the goal of a new value-based program, especially for those with the most complex needs. One of the explicit goals was to “improve quality outcomes, reduce health disparities, and transform the delivery system through value‑based initiatives, modernization, and payment reform.”
As the pros of value-based care in our complex healthcare system come to light, entrepreneurs, payors, providers, investors, healthcare and technology companies are beginning to take high levels of interest. These entities are embracing value-based care as the future of healthcare, and so are we.
See some of our outcomes-focused work in healthcare here. Stay tuned for more in our four-part series on value-based care.
