Hands-on Healthcare Consulting for Your Practice 

Explore Our Solutions for Providers, Health Plans, and Medical Groups

What is Value-Based Care? Why Should Providers Care?

by | Oct 6, 2022

Wasteful spending directly threatens the sustainability of any health system, especially public programs like those under the Centers for Medicaid and Medicare (CMS). When CMS experienced the strain of exorbitant costs, it was clear that the system needed to change to keep these vital programs afloat. 

Value-based care model (VBC), now rooted in both private and public healthcare programs, offers a win-win solution for administrators, providers, and patients alike. In this article, you will learn what is value-based care as a payment model and philosophy, along with its benefits. 

Benefits of Value-Based Care 

What is value-based care in terms of benefits? Is value-based care good for patients? When implemented correctly, value-based care payment models improve the healthcare experience for everyone involved. 

  • Payer – For both private pay and government programs, value-based care can cut down on wasteful spending as the focus turns to efficiency and health problem prevention. 
  • Providers – Rewards for quality care delivery in the form of financial incentives are available to providers. This also empowers them to offer better quality of care in terms of a patient-centered approach and helps mitigate healthcare professional burnout. 
  • Patients – With providers having the freedom to give more attentive care, patients can pursue a better quality of life by having more problems addressed sooner. Also consider that in mixed populations, changes made to accommodate CMS patients can elevate care for the entire patient base. 
  • Healthcare system Quality measurement and population health tracking offer insights that help stakeholders make better-informed decisions and enact more proactive procedures. The more responsive the healthcare community is to patient needs within a more patient-centered approach, the more the reputation of the healthcare industry will improve. 

When implemented correctly, value-based care payment models improve the healthcare experience for everyone involved. 

What Is the Goal of the Value-Based Care Model?  

What is value-based healthcare’s overall objective? Wikipedia describes value-based care as, “a framework for restructuring health care systems with the overarching goal of value for patients, with value defined as health outcomes per unit of costs.” 

The goal of value-based care is to reduce costs, such as unnecessary medical interventions while improving patient outcomes. The rationale is that if providers pay closer attention to care quality, the system can avoid avoidable costs incurred such as hospitalization or overmedication. 

How Does Value-Based Care Differ from Fee-For-Service Models?  

At a basic level, the difference between VBC vs FFS payment models is quality over quantity. With value-based care, payment is performance-based, so providers earn incentive pay according to quality measures. Value-based care’s predecessor is fee-for-service, where the more patient encounters a provider completes, the more reimbursements they can collect. 

In essence, value-based care payment incentives help make up for the decrease in patient visits incurred by substitution for fee-for-service. For example, providers may address several high-priority health concerns in one visit instead of spreading them out over several follow-ups. This way, the patient’s health matters are addressed sooner to prevent disease progression that could lead to more costly interventions down the line. 

Value-based care offers financial incentives for providing better quality of care 

How Does Value-Based Care Work?  

How does value-based care work? Value-based care follows a set of criteria based on the payer’s quality care measures. While CMS has been instrumental in pushing for more value-based care across the healthcare landscape, some private payers also have established their own cost-cutting incentive programs. 

Types of Value-Based Care  

A simple explanation does not paint the whole picture of the value-based care payment structure. We may understand it in theory, but what is value-based care in practice? To further explain the intricacies and components of value-based care, here are the various forms of value-based care. 


Healthcare providers charge a fixed fee regardless of how many providers treat the patient. The benefits of bundling include:   

  • Improved collaboration  
  • Avoiding redundant testing 
  • Potential for cost reduction and improved patient care 

Shared Savings  

In shared savings models, providers are reimbursed using a fee-for-service model, but payment is based on quality and cost targets. Advantages of this model include:  

  • Providers can share savings with the payer when targets are not exceeded 
  • If targets are exceeded, providers will not be penalized by the payer 
  • Opportunities for providers to partner with Accountable Care Organizations to reduce costs and improve patient care 

Shared Risk  

Shared risk is often referred to as the downside-risk model. Since the provider is accountable to the ACO, this model allows providers to share savings, but not risk.  

  • Benefits of a shared risk model include the increased potential for profit  
  • Caveat Risk increases since providers must cover a portion or all the extra costs above target rates 

Global Capitation  

The global capitation model has providers assuming 100% of the risk. Providers are paid a set amount per patient but can keep any savings remaining. However, they must also take on all losses. To mitigate loss from this risk, providers can employ this model partially. 

There are several ways to approach value-based care and apply its principles, some methods even blend practices of fee-for-service and value-based care together. 

Why Don’t All Providers Participate in Value-Based Care? 

Happier patients and lower costs would sound amazing to anyone running a health system or practice, but transitioning from fee-for-service is not so cut and dried and can be a cumbersome undertaking. 

“When prioritizing between actual reimbursements now versus theoretical reimbursements at a later date, actual reimbursements will almost always win. This is not because providers are greedy, or even short-sighted. It is because the reimbursement for health care services has not increased to match the cost of inflation. The low reimbursement levels and increased pressure to see as many patients as possible can lead to reactive care patterns. The focus of care changes from what is the best care for each patient to what is the best care that we can provide for this patient in the next 15 minutes,” explains expert Consultant Beth Hickerson of Medical Advantage. 

What the Shift Towards Value-Based Care Payment Models Means for Providers  

CMS shows all the signs of being highly invested in the value-based model as it continues to push for influence throughout the healthcare community, even setting a goal for full adoption by 2030. Private payers have also adopted the principles of value-based care, realizing that it can cut down on healthcare costs to benefit the bottom line. 

To put it simply, there will soon come a time when every healthcare system and medical practice out there will have to confront the possibility of transitioning to the value-based care model in some shape or form. 

So, what should you do if this transition is too daunting? Joining an accountable care organization (ACO) may be the solution. These provide ample support for organizations to be successful in reaching value-based care quality targets.  

The role of the ACO is to do everything in its power to help organizations reach performance goals so there will be little to no financial hits. However, ACOs also alleviate the pressure of downside risk by absorbing some or all of the financial consequences of falling short. 

Accountable Care Organizations help make the benefits of value-based care more accessible to providers and patients across the country. 

What is Value-Based Care: A Summary 

What is value-based care in a nutshell? Value-based care is the answer to the tendency of fee-for-service models to run up avoidable costs. Before, the focus was on visit volume, but that led to unintended consequences such as waste, preventable hospitalizations, redundant procedures, and unnecessary prescriptions. Value-based care is designed to be more patient-centric, and this improves the healthcare experience from the provider and the patient’s perspective. 

The consequences of inefficient care are costly, to both patients and payers alike. Payers – both private and government-backed – are influencing the healthcare industry to move toward a value-based care structure that promotes efficiency and better financial stability. 

CMS hopes to see full adoption of value-based care in the national healthcare system by 2030. 

Medical Advantage is Your Partner is Practice Transformation 

For over 20 years, Medical Advantage has worked with healthcare organizations of all kinds to deliver high-quality, efficient healthcare. It is our mission to ensure that practices get credit for all the hard work they put into providing the best care. We offer the following services to support value-based care goals: 

  • Medical Advantage Accountable Care Organization – What was once limited to Michigan will now be open to practices throughout the country. We know how to implement value-based care and make it easier to break free of the fee-for-service structure 
  • EHR Optimization –  EHRs play a crucial role in meeting quality targets. In fact, CMS has made EHR improvements part of its value-based care programs. We provide solutions to EHR quirks that may be holding you back from your best quality performance 
  • Healthcare Analytics – When it comes to proving where your care quality stands, everything hinges on reporting and data analysis. We calibrate your data so that it works for you 

Take the leap toward value-based care today by requesting a consultation! 

Speak with one of our Healthcare Experts today.

Hands-on Healthcare Consulting for Your Practice 

Explore Our Solutions for Providers, Health Plans, and Medical Groups