An Introduction to ‘Value-Based Care’

It is a popular belief in healthcare circles that America offers the best healthcare in the world, and seen through a certain lens that is very likely true. But some studies paint a less flattering picture.

For example, a 2021 report by The Commonwealth Fund, a healthcare research organization, showed that the U.S. lagged far behind 10 other developed countries in areas such as equity, access to care, administrative efficiency and healthcare outcomes. Countries like Norway, the Netherlands, and Australia led the list, even though the U.S. spent a far higher percentage of its gross domestic product on healthcare (16.8%) than other countries.

“Compared with other high-income countries, the U.S. has the highest rate of infant deaths as well as the highest rate of preventable deaths,” the organization wrote in a separate article. “And a history of inequality in access to care has meant that people of color and individuals with low income are more likely to experience adverse health outcomes than the rest of the population.”

Statistics like these have led to an industry-wide discussion of what is known as “value-based care” over the last decade, a system that leans away from fee-for-service in favor of payment based on patient outcomes and quality of care. The concept can be applied widely, from doctors and nurses to hospitals and labs, and we are all likely to hear more about it in the months and years ahead. For those in private practice, it’s a concept worth understanding.

Understanding Value-Based Care

Value-based care systems calibrate compensation by measuring health care outcomes, such as the reduction or management of chronic disease, against the cost of care. Healthcare providers are paid according to how they perform against a set of goals, most of which are related to patient health, equity and costs.

“Under fee-for-service, health care providers like physicians and hospitals are paid for each service they provide,” The Commonwealth Fund reported. “In other words, they are rewarded for volume—they are paid more if they deliver more services, even if they don’t achieve desired results. Value-based care programs aim to change that dynamic, so physicians earn more for delivering health care that helps patients get better, while also keeping costs down.”

Value-based care is being tested in different systems nationwide. Much of this testing has taken place under the umbrella of The Centers for Medicare and Medicaid Services (CMS), which has tested programs involving physician groups, hospitals, health plans and other organizations. While many are optimistic about the potential for value-based care, others say that the efforts to date have yielded uneven results.

“Studies of value-based care programs so far suggest that they can reduce costs and improve quality of care, although results have often been mixed and impact modest,” The Commonwealth Fund reported.

However, CMS hopes to have all people enrolled in Medicare, and most enrolled in state-based Medicaid programs, involved in value-based care programs by 2030, according to a strategy document released in 2021. That means we’re going to be hearing more about value-based care in the months and years ahead.

Accountable Care Organizations

One of the ways that value-based care is being tested is through Accountable Care Organizations, or “ACOs,” which are groups of doctors, hospitals and other providers who band together to deliver coordinated care. The practice traces its roots to the Affordable Care Act of 2010, which authorized ACOs to work with Medicare under certain CMS programs.

The coordinated aspects of an ACO theoretically allows providers to avoid duplication and medical mistakes while lowering costs through efficiency. Reimbursement from Medicare, Medicaid and private insurance companies is tied to performance metrics that measure quality of care, costs and other factors.

For doctors in private practice, it often requires increased collaboration, data and reporting requirements. For example, the Silver State Accountable Care Organization, a group of more than 40 independent practices with more than 470 doctors in Nevada, kicked off in 2014 with about 15,000 Medicare patients and grew to more than 40,000 by 2019, according to a CMS case study. That same year, the ACO employed eight quality coordinators “who produce, review, and deliver quality improvement scorecards to practices and providers.”

CMS has run a series of projects that test various ACO models. The Medicare Shared Savings Program, for example, has facilitated the creation of more than 450 ACOs across the country, serving almost 11 million people. CMS announced this year that it expects the numbers to grow as it continues to launch new initiatives.

“We have made significant progress in addressing our greatest health care challenges,” CMS Administrator Chiquita Brooks-LaSure said in a January statement. “Health care providers coming together as Accountable Care Organizations provide high quality and equitable care to people with Medicare while improving the sustainability of the Medicare program.”

How to Learn More

Of course, every practice will have a different outlook on value-based care and accountable care organizations. What matters is that your outlook is well informed and rooted in independent research and facts. Doctors, nurses, office managers and others who want to learn more can find materials in abundance, from nonprofit studies and insurance company analysis to CMS case studies and commentary. To help you study up, here are some resources that may be helpful: