What is Value-Based Care?

Posted May 8, 2023 under:

Value-Based Care vs Fee-for-Service Models

A continuing shift toward value-based care models offers patients a new level of choice and cost-savings when seeking care.

Closeup shot of a group of medical practitioners joining their hands together in a huddle

The future of healthcare

A shift away from traditional service models has left many wondering the main difference between fee-for-service and newer value-based care approaches.

What is value-based care? The growing shift in healthcare away from traditional fee-for-service models aims to advance the triple aim:

  1. Providing better care for individuals
  2. Improving population health management
  3. Reducing healthcare costs

At SCA Health, we support advancing and accomplishing each aspect of the triple aim. We see the value-based care model as the future of providing our patients with lower-cost, efficient, high-quality healthcare.

Our goal is to advance how healthcare is delivered, providing education and opportunity to patients who receive care in our practices and centers nationwide.

What Is Value-Based Care?

Revcycleintelligence.com describes the fee-for-service model in comparison to new value-based care approaches.

 “While the traditional fee-for-service reimbursement model promoted the number of services, federal officials have proposed several reimbursement programs that reward healthcare providers for the quality of care that they give patients,” the site says.

At its core, value-based care seeks to reward healthcare providers for the quality of work performed. This is based on standard metrics like hospital readmission rates and providing preventative care. Oppositely, a fee-for-service model aims to reward providers based on the sheer volume of procedures performed. This can potentially lead to increased mistakes and errors.  

Breaking Down the Data

In the early 2010s, The Department of Health and Human Services (HHS) set goals to document this massive change in approach. They aimed to convert 30% of fee-for-service Medicare payments to value-based care by 2016. Furthermore, HHS also hoped that 90% of these payments would move through this new system by 2019. Unfortunately, according to data reviewed by revcycleintelligence.com, only 38.2% of healthcare dollars went through a value-based program in 2019.

While the percentage goals originally developed by HHS may have yet to be met, more recent data does show some positive results. According to the Centers for Medicare and Medicaid Services (CMS), healthcare savings have increased tenfold since 2015, totaling $4.1 billion.

Currently Available Models

As value-based care looks to take root in healthcare, some models have already been developed and are currently in use. These models each offer financial rewards based upon cost savings, incentivizing providers to emphasize high-quality healthcare at affordable prices. However, with reward comes risk, and providers can be subject to repayment to CMS should they fail to lower patient costs.

Revcycleintelligence.com outlines three current value-based care models currently in use:

Accountable Care Organizations

“An accountable care organization (ACO) is a network of physicians, hospitals, and other providers that give Medicare beneficiaries coordinated high-quality care,” the site describes. “CMS designed the program to help providers ensure patients receive the most appropriate care at the right time. ACOs aim to prevent unnecessary and redundant services while reducing medical errors.”

As voluntary groups, ACOs are tempting for some providers who are confident in their ability to provide lower-cost services and partake in the profit-sharing aspect of the organization. Others fear the potential monetary risk of joining and opt to review data before committing.

Bundled Payments

Bundled or episode-based payments provide one price for services throughout the entire care process. For example, payment to a hospital, surgeon, and anesthesiologist will be provided in a precise amount. Providers can pocket any savings provided through this new model of care. However, like ACO’s, they do place themselves at risk for repayment if costs are now decreased.

“Bundled payment arrangements present many opportunities to re-tool the types and mix of post-acute care and materially improve patient care and lower costs,” explained the American Hospital Association in a statement to the House Health Subcommittee of the Committee on Energy and Commerce. “Such efforts may include more standardized hospital discharge practices and post-hospitalization protocols for medical, rehabilitation, and other post-acute care services.”

Patient-Centered Medical Homes

A patient-centered medical home (PCMH) provides patients with a single hub to direct care, typically a primary care physician.

“The PCMH certification indicates that providers deliver patient-centered care, team-based methods, population health management, personal care management, care coordination, and consistent quality care,” revcycleintelligence.com states. “Patients in a PCMH can expect to develop unique, one-on-one relationships with their care providers, who determine healthcare needs based on medical and environmental factors.”

The Future of Value-Based Care

Revcycleintelligence.com reports that a value-based care model is only feasible for some providers at this point. Physicians not presently involved in a value-based care model report pressure from public and private payors to find alternative payment options.

CMS continues to observe how value-based care impacts the market and is working on expanding further eligibility to help speed up the shift.

“The transition from fee-for-service to pay-for-value has been referred to as one of the greatest financial challenges the U.S. healthcare system currently faces,” a Healthcare Information and Management Systems Society survey states.

“Although this change is expected to happen over an extended period, CMS has announced aggressive goals for making a move with Medicare providers and hospitals. This requires healthcare providers to 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 business processes never contemplated.” Moving to a new system will take time, effort, and cooperation. CMS hopes that as providers better understand the model and become more comfortable with the tools and processes, they will begin implementing this new system in their practices, centers, and hospitals.

As more data becomes available, physicians across all specialties will start to see the benefits of making the shift themselves.

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