The healthcare revolution is evolving beyond discussions of universal healthcare or reforms to the Affordable Care Act. Central to this transformation is the shift from fee-for-service (FFS) models to value-based care. This article outlines what Value-Based Care entails and its distinction from the traditional FFS model.

Americans are more likely to die younger, and from avoidable causes, than residents of peer coutries.

Why value-based care is on the rise in U.S.

The Necessity of Value-based Care

Despite significant healthcare spending, both per capita and as a percentage of GDP, the United States lags behind other high-income nations in healthcare outcomes. Data from the Commonwealth Fund highlights critical issues: the U.S. has the lowest life expectancy at birth, the highest death rates from avoidable or treatable conditions, alarming maternal and infant mortality rates, and one of the highest suicide rates.

These challenges are compounded for minorities and individuals with lower incomes, who historically face barriers to accessing care and often experience worse health outcomes. Such disparities are partially attributed to the inherent flaws in the nation’s traditional FFS payment model, which often prioritizes quantity over quality of care.

Value-based care seeks to address these issues by aligning incentives with patient outcomes rather than the volume of services provided. Under this model, healthcare providers are rewarded for helping patients improve their health, reduce the incidence and impact of chronic disease, and live healthier lives in an evidence-based way. This approach not only focuses on treating illnesses but also emphasizes preventive care, resulting in better health outcomes and potentially lower healthcare costs.

The adoption of value-based care is driven by its potential to enhance patient care quality while controlling costs. By shifting the focus to patient outcomes, this model encourages healthcare providers to offer more coordinated, efficient, and effective care. This, in turn, could lead to a more sustainable healthcare system that better meets the needs of all Americans, particularly those who have been underserved by the traditional healthcare system.

Value-based Care Explained

Value-based care (VBC) is an approach where healthcare providers’ earnings are directly linked to patient outcomes. This model emphasizes the quality, equity, and cost-efficiency of care, shifting focus from the traditional volume-based services.

In VBC models, the emphasis is on delivering high-quality, cost-effective care while minimizing unnecessary service utilization. These programs aim to increase provider accountability for patient outcomes, using financial incentives and greater care flexibility to ensure optimal care delivery.

Value-based care is centered around four primary goals:

  • Better Outcomes: Ensuring improved health results for patients.
  • Lower Costs: Reducing healthcare expenses through efficient care delivery.
  • Improved Patient Experiences: Enhancing the overall patient journey within the healthcare system.
  • Better Clinical Experience: Fostering a more satisfying and effective environment for healthcare professionals.

Comparison with the Fee-for-Service Model

Contrastingly, the Fee-for-service (FFS) model compensates healthcare providers for each service performed, regardless of patient outcomes. This method often leads to an increased number of services provided, as reimbursement is tied to volume, not the quality of care. While this might increase healthcare costs, it does not necessarily translate to better patient outcomes.

In the value-based care framework, reimbursements are closely tied to the quality of care and patient outcomes. This approach incentivizes healthcare providers to prioritize patient health, connecting financial rewards to effective and efficient care delivery.

The adoption of value-based care models by Medicare and private insurers has prompted healthcare providers to adapt. This transition requires significant changes in how healthcare is provided, communicated, and monitored, focusing on the continuous improvement of patient health progress.

This shift toward value-based care represents a significant transformation in healthcare delivery, aligning financial incentives with the ultimate goal of achieving better health outcomes for patients.

VBP models are designed to encourage the delivery of high-quality, cost-effective care while reducing avoidable utilization of services.

Types of Value-based Care

In the evolving healthcare sector, the critical question remains: how will services be funded? Numerous complex answers exist, but value-based care offers pre-existing, adaptable payment solutions, allowing healthcare organizations to select or design an optimal model.

Value-based reimbursement prioritizes quality over quantity of services. There are four primary forms:

Performance-based Payments:

Beyond traditional Fee-For-Service (FFS) payments, providers receive additional compensation for achieving specific metrics or completing designated activities.


This approach consolidates services typically offered separately. Instead of individual payments for hospital, physician, and other services, a bundled plan incorporates these into a single payment for a specific condition, procedure, or service (e.g., a hospital stay). Providers save costs on certain care aspects and can retain these savings, promoting patient-customized care and cost-effective practices.

Shared Savings and Risk:

Both models use traditional FFS payments, but compensation hinges on meeting quality and spending benchmarks. Provider departments strive to reduce expenditures and adhere to budgets. Annually, spending is compared against a set target. Spending below the target allows providers to share the savings as bonuses. Conversely, exceeding the target incurs repayment penalties.

In shared savings, providers benefit from savings without risk. If spending is under the target, they share in the savings. In shared risk (downward risk model), providers are accountable for keeping spending within or below the target; excess costs are their responsibility. This model offers higher potential rewards but also increased risks.

Global Capitation:

Here, both short-term and long-term patients contribute to cost-sharing, with payments structured on a per-person, per-month basis. Providers receive a fixed payment to cover all care for individuals, regardless of the services used. This model aims to alleviate provider financial pressure while maintaining patient care quality.

No single healthcare reimbursement model is universally ideal. Each payer’s choice depends on their capabilities and objectives.

Various combinations of these methods exist alongside less common cost management techniques. Healthcare stakeholders encounter unique opportunities and challenges in implementing value-based healthcare reimbursement. Each system is customizable, enabling organizations to adapt these models to their strategic needs.

Fee-for-Service (FFS) Reimbursement Models: Characteristics and Challenges

Compensation Based on Quantity: FFS models primarily compensate healthcare providers based on the volume of services rendered. This approach often emphasizes quantity over quality, as providers are paid for each test, procedure, or visit, regardless of its necessity or outcome.

Lack of Outcome Consideration: In FFS models, the reimbursement amount is not linked to patient outcomes. Consequently, there is little direct financial incentive for providers to ensure the long-term effectiveness of treatment.

Potential for Unnecessary Procedures: Given that compensation is tied to the number of services provided, there’s a risk of unnecessary tests and treatments. This not only increases healthcare costs but may also expose patients to unnecessary risks, particularly when less invasive or less expensive options could be more effective.

These characteristics of FFS models have led to concerns about inefficiencies, escalating healthcare costs, and suboptimal patient outcomes.

Value-Based Care (VBC) Models: Focusing on Patient Outcomes

Linking Reimbursement to Outcomes: Unlike FFS, VBC models tie reimbursement to patient outcomes. Providers are incentivized to focus on delivering care that results in better health outcomes. This alignment of financial incentives with patient health can lead to more effective and efficient care.

Promoting Preventive and Holistic Care: VBC encourages a holistic approach to patient health, emphasizing preventive measures and the management of chronic conditions. This proactive stance aims to reduce the need for more intensive treatments and hospitalizations.

Encouraging Innovation in Care Delivery: Providers under VBC are motivated to innovate in healthcare delivery, exploring new methods and technologies that can improve patient outcomes and reduce costs. This includes the use of telehealth, personalized medicine, and integrated care models.

The Shift Toward Value-based Care

Implications for Healthcare

The ongoing shift from FFS to VBC is reshaping the healthcare sector. It promotes a more patient-centric approach, aligning financial incentives with the goal of achieving the best possible health outcomes. This transition supports the sustainability of healthcare systems by focusing on preventive care and reducing unnecessary procedures.

Challenges and Considerations

While the benefits of VBC are clear, the transition is complex. It requires significant changes in provider payment structures, patient data tracking, and overall healthcare management strategies. Providers must adapt to new metrics for success, focusing on long-term patient health rather than immediate revenue from services provided.

The evolution from Fee-for-Service to Value-Based Care marks a pivotal moment in healthcare, one that promises to reshape how care is delivered, measured, and valued. This transformation addresses the pressing need to improve healthcare outcomes, reduce disparities, and manage costs more effectively. By fostering an environment where quality and patient outcomes are paramount, Value-Based Care offers a path to a more equitable, efficient, and patient-centered healthcare system. The journey towards this new model is complex and requires a concerted effort from all stakeholders, but the potential benefits for patients, providers, and the broader healthcare system are immense.

As the healthcare landscape continues to evolve, staying informed and prepared for these changes is crucial. For those looking to navigate this transition with expertise and insight, Moriconi Flowers stands ready to guide and support. Our team of professionals brings a wealth of knowledge and experience in healthcare law and policy, offering tailored solutions to meet the unique challenges of this shifting terrain.

Connect with Moriconi Flowers today to explore how we can assist in optimizing your strategies for the Value-Based Care model. Let us help you align your practices with the future of healthcare, ensuring success and sustainability in this new era. Visit our website or contact us directly to start the conversation and take a proactive step towards embracing these transformative changes in healthcare.


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Neal Benjamin

Neal Benjamin is a licensed pharmacist and practicing attorney assisting long-term care, home health, and retail pharmacies in a variety of legal matters, including nonexclusively, operations, licensing, regulatory compliance, PBM[JM1] audits, and pharmacy sales and acquisitions. Neal’s practice is active in regulated cannabis, Drug Enforcement Administration (“DEA”) and healthcare regulatory compliance; cannabis and start-up business planning and permitting, as well as general corporate matters.