What Is Value-Based Care? Overview and FAQ

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Written by Kerry Larkey, MSN, RN Content Writer, IntelyCare
A nurse puts his hand on a patient's shoulder as they discuss her treatment plan.

Value-based care (VBC) is a healthcare delivery model that prioritizes patient health outcomes by reimbursing providers (e.g., physicians and healthcare facilities) based on quality results instead of the number of services provided.

Value-based incentive programs encourage the healthcare system to deliver more value to patients. The focus is not on financial value or cost savings — although those may be secondary benefits. Instead, the intention is to increase health value, measured by improvements in health and patient outcomes.

In this article, we’ll answer the question, What is value-based care? by exploring the context of the healthcare model and its rising popularity. Then, we’ll dive into the most frequently asked questions and provide answers highlighting how the model impacts your facility’s bottom line.

What Is Value-Based Care?

Models for healthcare in the U.S. have historically based payments on the number of services (e.g., office visits, treatments, and procedures) provided. These “fee-for-service” models incentivize providers to increase the number of services to maximize reimbursement. For example, a facility that performs three services for an admitted patient will be reimbursed for three, but if the patient received 10 services, 10 will be reimbursed.

In contrast, newer value-based care payment models reward providers for the outcomes of their services. The facility above would have to demonstrate that the services improved the patient’s health, using measurements related to the condition treated and expected outcomes. In other words, the increase in services wouldn’t automatically increase reimbursements for that hospital stay.

Why the switch to value-based care? Basically, it’s meant to address the mismatch between healthcare costs and outcomes in the U.S. Almost one-fifth of the U.S. gross domestic product, twice as much as other developed nations, is spent on healthcare. And yet, health outcomes, including life expectancy and maternal mortality, are significantly worse in the U.S. than in similar countries.

In the 1980s, the Centers for Medicare and Medicaid Services (CMS) were instrumental in shifting toward value-based care to improve the quality of care. Medicare initiated a payment system to pay hospitals a fixed amount for patient care based on a diagnosis-related group (DRG). In the 2010s, additional Value-Based Purchasing (VBP) programs were added to further drive health outcomes and reduce costs. In a final push, by 2030 CMS aims to have 100% of its traditional Medicare beneficiaries receiving healthcare through value-based programs.

Frequently Asked Questions

Now that we’ve reviewed the purpose and history of value-based care systems, we’ll answer some of the most frequently asked questions.

What measures of success are providers accountable for under value-based care?

Success is measured in several key areas, including:

  • Quality — effectiveness, efficiency, equity, patient-centeredness, safety, timeliness
  • Cost — reduce costs to avoid penalties and increase payments
  • Equity — reduce health disparities by increasing access and quality of care

What is value-based healthcare’s main benefit?

There are quite a few key benefits to using this approach; but, to fully answer the question, we must take a comprehensive look at the advantages of prioritizing patient outcomes. The benefits of a value-based approach include:

  • Establishing performance measures for safety and quality
  • Providing facilities with upfront information about prospective payments for certain patients and services
  • Lowering healthcare costs to save patients money and reduce financial toxicity
  • Helping providers achieve greater efficiency and patient satisfaction
  • Improving coordination of care for patients
  • Promoting healthier lives for patients and the greater society
  • Helping patients make more informed decisions as consumers by providing public reporting of outcomes data
  • Creating healthier communities by reducing health disparities
  • Decreasing unnecessary services to create more cost efficiencies and savings
  • Moving closer toward the Institute for Healthcare Improvement’s “triple aim

What value-based care examples are currently being used?

CMS has a range of value-based programs to reward providers that improve care quality for Medicare beneficiaries and lower costs, including:

What are the benefits of value-based care for patients and populations that are underserved?

The holistic approach of this system encourages better care coordination and utilization of community resources for marginalized populations. Treating the whole person by using a comprehensive approach encourages providers to take a holistic view of community health. Increased preventative care services, expanded access to care, and cost savings offer benefits for vulnerable populations.

Are there problems with value-based care?

Yes. There are adoption barriers from providers who prefer the fee-for-service payment model, even if it excludes Medicare patients from their services. Some argue the fee-for-service model, although flawed, is more straightforward for providers and patients to understand. Linking payment to outcomes can make billing unnecessarily complex and challenging.

In addition, some have argued that instead of addressing health disparities, value-based care exacerbates the issue and widens the gap. Safety-net hospitals, for example, are disproportionately penalized by many of the outcome measures — some of which haven’t been shown to provide any health benefits. Vulnerable populations are more likely to access healthcare through these safety-net institutions which are already often underfunded and under-resourced.

How does the model transform the approach of healthcare providers?

With its primary aim of improving health, value-based programs put patient-centered care at the forefront of healthcare delivery. The model also encourages preventative and holistic care practices. By changing the focus of the payment structure from services to people, care can be delivered in more compassionate and personalized ways. Care is relational instead of transactional.

Looking for More Ways to Improve Patient Care?

Now that we’ve answered the question, What is value-based care? and answered your FAQs, you might be looking for additional ways to boost patient outcomes at your facility. IntelyCare is here to help — our newsletter is full of free quality improvement resources to support healthcare managers.