Value-Based Payment (VBP) is the concept by which health care purchasers (government, employers, and consumers) and health care payers (both public and private) hold the at-large health care delivery system (physicians and other providers, hospitals, etc.) accountable for both quality and cost of care. Observations reveal providers vary greatly in their commitment to VBP, appetite for financial accountability controlled by those outside the clinical setting, and capability to improve care via VBP. On the other hand, fee-for-service (FFS) is healthcare’s most traditional payment model where physicians and healthcare providers are reimbursed by insurance companies and government agencies (third-party payers) based on the number of services they provide, or the number of procedures they order.

Potential Benefits

Identification of high-value providers with consistently strong performance would benefit both payers and purchasers. Adoption of this approach could in theory increase patient volume and could both reward and ensure continued participation by devising a sustainable business case within VBP arrangements. Value-based networks would rely upon both quality and management of total health care spending.

What Does it Mean For Physicians?

Physicians navigating value-based care often encounter significant operational and financial hurdles. These arrangements make physicians accountable for the outcomes that they cannot totally control on their own. Complex cases often require management teams and additional specialists at the table as well as supplementary resources in the community and home. Many practices struggle with the administrative burden of tracking metrics, coding for complex risk arrangements, and reconciling delayed payments. Smaller or independent practices, in particular, face capacity constraints, having to invest heavily in technology, care coordination teams, and analytic infrastructure with uncertain ROI. Moreover, taking on financial risk in full-risk models requires robust patient risk stratification and mountains of data integration, which are daunting for clinicians whose primary expertise lies in patient care, not actuarial analytics. Compounding these issues, many value-based payment models have uneven participation among specialists, with primary care physicians more likely to be involved than surgeons or psychiatrists, creating imbalances in care coordination and resource allocation.

Do Value-Based Programs Work?

Do value-based programs deliver tangible improvements? Results are mixed. For instance, Humana reports that Medicare Advantage members in value-based care models saw 32.1% fewer inpatient admissions and 11.6% fewer emergency department visits, contributing to $11 billion in savings. Bundled-payment programs, such as Medicare’s Comprehensive Care for Joint Replacement, have shown net savings of $61.6 million over three years, approximately 2% per episode, without compromising quality. Additionally, the Medicare Shared Savings Program has generated over $8 billion in total net savings, including $1.8 billion in 2022 alone, nearly 3% of spending, while maintaining or improving quality benchmarks. Nonetheless, broader reviews (see ‘Learn More – Primary Sources’ below) caution that despite pockets of success, overall cost control remains modest, and some programs have had limited impact on equity or access for vulnerable populations.

References

Payment and Delivery-System Reform — The Next Phase

ACOG: Clinical Guidelines and Standardization of Practice to Improve Outcomes

The Promise and Challenge of Value-Based Payment | JAMA Internal Medicine

Who participates in value-based care models? Physician characteristics and implications for value-based care

32% less hospitalizations, $11 billion saved from value-based care | Medical Economics

After Fifteen Years, is Value-Based Care Succeeding? | Penn LDI

Value-Based Payment in Medicare: Progress, Challenges, and Future Directions | Journal of Health Politics, Policy and Law | Duke University Press