What is Value-Based Care (VBC): Advantages, Challenges, and Implementation

Team Innovaccer
Fri 4 Aug 2023
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Healthcare industry is undergoing a fundamental shift from a traditional fee-for-service model to a more patient-centric approach known as value-based care (VBC). It not only brings focus to patients but also has the potential to reduce the total cost of care and improve overall population health. In this blog, we will delve into what value-based care is, why the shift from volume to value is necessary, how VBC model is different from the fee-for-service model, what are the key principles of value-based care, and what are the different existing value-based purchasing programs.

What is Value-Based Care (VBC)?

Value-based care is a healthcare delivery model that emphasizes on high-quality, efficient, and patient-focused care. Unlike the traditional fee-for-service model, where providers are reimbursed based on the volume of services they deliver, the VBC model rewards providers for delivering better patient outcomes and experiences.

Let’s take an example, John visits his physician multiple times for a persistent headache issue. His insurance claim summary shows that the provider was reimbursed for every service provided during each visit. On the contrary, Peter, John’s friend, visits a different provider. But his claims show that the provider was reimbursed on a one-time lump sum basis, based on how well provider managed his condition on quality metrics.

In John's scenario, the provider delivered volume (of services) with little or no strings attached to quality. But Peter's provider aimed to deliver value with the best care possible to meet quality metrics and this helped Peter get improved and proper care.

The introduction of the Affordable Care Act in 2010, has made provider organizations focus and shift from volume to value.

Today's State of Value-Based Care
Fig 1: The Current State of Value-Based Care (VBC)

How is Value-Based Care (VBC) Different from the Fee-For-Service (FFS) Model?

Value-based care differs from fee-for-service in terms of incentives, payment structure, or risk to patients, providers, and payers. According to the 2021 stats from Health Care Payment Learning and Action Network (HCP LAN), Commercial (53.7%) and Medicare (52.3%) payers were responsible for over half of the payments in the fee-for-service model. The levels hold steady for VBC and FFS but the transition is happening to value as we talk. The FFS model isn’t going nowhere instead it will evolve as per the needs of value-driven healthcare industry. So, it is necessary to understand how value-based care vs fee-for-service battle goes on paper to implementation.

A few ways value-based payments differ from FFS:

What are the Key Principles of Value-Based Care (VBC)?

  • Patient-Centered Approach: The patient is at the heart of value-based Care. It demands a clear understanding of individual patient needs, preferences, and goals. Getting a complete picture of the patient’s care journey results in better patient outcomes, reduced hospital readmissions, better chronic disease management, and improved overall health and well-being.
  • Care Coordination: Collaboration between providers, payers, and patients is vital in the VBC model. It is critical for pre-visits, during visits, and post-discharge. The seamless coordination before visits ensures care managers are well-prepared to engage with patients. During the inpatient visit, recording every care episode and sharing information cross-teams encompasses coordination. Delivering coordinated services post-discharge helps improve medication adherence, reduce the chances of readmissions, and enhance the overall patient experience.
  • Outcome-Based Incentives: Providers are incentivized no matter whether they participate in FFS or VBC model. But as we discussed earlier, one depends entirely on the value delivered. This core principle of the value-based care model ties providers to improving patient outcomes at affordable costs. The patient outcomes can include easy access to health data, their overall experience with the provider, and other that adds value for patients.
  • Focus on Prevention and Early Intervention: One of the core focus of value-based care is keeping patients healthy. Under the value-based care model, providers must take a proactive approach by focusing on preventive measures and early intervention. This is primarily to avoid costly and avoidable complications which can impact any patient’s care journey.
  • Data-Driven Care: Data runs our world today from tracking, measuring, auditing, projections, and more. VBC also emphasizes heavily on data analytics to identify trends, patterns, and areas for improvement leveraging complete patient data. This data must be multi-level with a spectrum of insights that can be drilled down from the population level to the patient level.

What are the Different Value-Based Payment Models?

All value-based reimbursement arrangements emphasize quality over the quantity of services provided. The terms ‘value-based care’ or ‘value-based payment’ include a variety of reimbursement arrangements, including APMs (Alternative Payment Models), advanced APMs, bundled payments for episodes of care, pay-for-performance, shared savings programs, and global capitated payments.

Pay for Performance Healthcare providers are only compensated if they meet certain metrics for quality and efficiency.
APMs and Advanced APMs APMs can apply to a specific clinical condition, a care episode, or a population. Advanced APMs are a subset of APMs and allow clinics to earn more for taking on some risks related to their patient's outcomes.
Bundled Payment Under this payment structure, different healthcare providers who are treating a patient for the same or related conditions are paid an overall sum for taking care of a condition rather than being paid for each treatment, test, or procedure. In doing so, providers are rewarded for coordinating care, preventing complications and errors, and reducing unnecessary or duplicative tests and treatments.
Shared Savings The shared savings program facilitates coordination and cooperation among providers to improve the quality of care for Medicare Fee-for-Service (FFS) beneficiaries and reduce unnecessary costs. Eligible providers, hospitals, and suppliers can participate in the shared savings program by creating or participating in an Accountable Care Organization (ACO).
Global Capitation The global capitation system operates on the basis of a network of hospitals and physicians receiving fixed payments on a per-member basis for enrolled health plan members. Generally, providers sign a single contract with a health plan to cover care for members and then determine a method of dividing up the capitated payment among the provider group.

What are the Key Challenges while Succeeding in Value-Based Care?

Value-based care holds great promise but it does not come without challenges. Transitioning from the fee-for-service model requires significant changes in healthcare IT infrastructure including data management protocols and payment models. Here are the biggest challenges that healthcare providers face while transitioning to value-based care:

  • Lack of coordination between different providers: This is a common problem for patients who consult several specialists. These specialists usually have a different electronic record system, so it becomes difficult to get all of the information in one place at once. Not just in this scenario, coordination between providers and their care teams is also critical while managing inpatient care.
  • Staffing shortages: A lot of people don't have access to healthcare because they can't afford it, but even if they do have access, there aren't enough doctors or nurses to meet their needs. In today’s value-based care paradigm, a single care manager is managing hundreds of patients. To support and enhance improve operational efficiency, the health systems face struggle in finding the right tech partner.
  • Lack of healthcare-contextualized technology: There aren't enough tools available for physicians and nurses who want to do more than just treat patients. They need dedicated technology, data capabilities, additional insights and training to enable prevention of any condition at scale. Not just for providers, technology must be readily accessible to patients and payers too. For instance, doctors generally recommend patients with diabetes or high blood pressure to keep track of their numbers and check in regularly with doctors. But majority of patients struggle to track numbers, even if they do, due to technological limitations the data never reaches their charts.

The Future of Value-Based Care

Despite multiple challenges, the future of value-based care remains bright. As technology continues to advance, healthcare providers can harness the power of telemedicine, wearables, and artificial intelligence to better manage patient care and drive value. Moreover, as more healthcare organizations embrace value-based care, they will create a network effect, leading to a more cohesive and integrated healthcare system.

Value-based care represents a revolutionary shift in healthcare delivery that prioritizes patient well-being and quality of care. By focusing on outcomes, preventive measures, and patient engagement, it offers numerous benefits, including improved patient outcomes, cost containment, and enhanced patient experiences. As the healthcare industry continues to embrace this transformative model, the ultimate goal of value-based care is to create a healthier population while building a sustainable and efficient healthcare system for the future.


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Tags: Value-based care, VBC, value-based healthcare
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