The fee-for-service system has been the main way to pay for healthcare for a long time. In this system, providers send bills to payers like Medicare, Medicaid, or private insurance for each service or procedure they do. Payments mostly depend on how many services are done, not how good the care is.
While fee-for-service makes billing simple, it can cause overuse of services, extra testing, and care that is not well connected. Patients might get different treatments at different times because providers don’t get paid more for prevention or coordinating care. Also, this model does not always promote working efficiently, which causes healthcare costs to rise without better health results.
To fix these problems, new models called value-based care (VBC) have been created. These models focus on quality, linking payments to how well patients do, fairness in care, and cost control. The goal is to promote teamwork, use proven treatments, and focus on preventing illness and managing long-term diseases.
Value-based care aims to reach five main goals:
These goals lead to payment models where providers earn rewards by managing care well. This includes lowering avoidable hospital stays, medical mistakes, and repeated services.
A big part of value-based care is the Accountable Care Organization, or ACO. ACOs are groups of healthcare providers, like doctors and hospitals, who work together to care for a group of patients, often those on Medicare. They try to improve the quality of care while keeping costs down.
In 2019, there were 1,588 ACO contracts with 995 groups covering about 44 million people. This number of ACOs dropped for the first time, partly because Medicare’s “Pathways to Success” program made ACOs accept financial risk if costs go over limits. Despite that, the number of people covered by ACO contracts grew. More commercial contracts and lots of doctor-led ACOs joining helped this growth.
Some ACOs agree to take financial risk, meaning they might lose money if costs are too high. This shows trust in working together and managing risks. Doctor-led ACOs especially show better savings and care quality than hospital-led groups.
The Centers for Medicare & Medicaid Services (CMS) play a key role in moving healthcare toward value-based care. They create Alternative Payment Models (APMs) that push providers to focus on quality and efficiency, not just volume.
Medicare has programs like Primary Care First, Direct Contracting, and specialty models for kidney health and cancer care. These programs slowly move providers away from fee-for-service toward payments based on results and patient-centered care.
Medicare also plans to have all its fee-for-service patients in an accountable care arrangement by 2030, according to CMS’s 2022 strategic plan. This goal shows Medicare’s support for managing health at the population level, with many joining ACOs and similar programs.
Medicare also runs programs like the Hospital Readmission Reduction Program and the Hospital Value-Based Purchasing Program. These give bonuses or penalties based on how well hospitals do on things like safety, quality, and avoiding repeated hospital stays. These programs encourage hospitals to reduce mistakes and unnecessary readmissions.
Primary care faces special challenges and chances during this change. Even though primary care is key for managing chronic diseases, coordinating care, and prevention, it often gets less money than specialty care. In 2022, nearly half of primary care practices said the system was “crumbling” because of paperwork, staff shortages, and low pay.
The CMS Innovation Center created the “Making Care Primary” (MCP) model to fix these problems. MCP offers early payments for building infrastructure, plus bonuses and payments for managing care. Over 820 Federally Qualified Health Centers joined ACO REACH models in 2023, nearly double the previous year. This shows a push to include safety-net providers and focus on health fairness.
Doctor-led primary care ACOs show better savings and health outcomes than hospital-based ones. This suggests that stronger primary care through value-based payments can make the system more stable, especially during economic problems like the COVID-19 pandemic.
Value-based care also applies to patients with serious illnesses who need care from many different healthcare workers. In 2025, a workshop by the National Academies of Sciences, Engineering, and Medicine looked at policies like Medicare Advantage star ratings, the Medicare Care Choices Model, and Medicaid rules for palliative care. These programs aim to improve care quality and make care easier to get for very sick patients.
Experts said that value-based payments help fund home health and personal care services. This allows patients and families to get care that fits their needs while avoiding hospital trips and emergency visits. Good care in these models needs teamwork among doctors, nurses, social workers, and therapists.
Technology is important in moving toward value-based care. Good health IT systems help collect and share data needed to check quality, manage health for groups, and improve how care is given.
Electronic Health Records (EHRs) are more important for tracking outcome data. For example, some programs use special EHR systems to help doctors talk about advance care plans and record patients’ wishes. This is important for care quality, especially in palliative and value-based care.
Healthcare workers and managers are using artificial intelligence (AI) and automation to work more efficiently and meet value-based care goals. Companies like Simbo AI make AI tools for answering phones and handling administrative tasks.
By automating simple front desk jobs like booking appointments, registering patients, and answering calls, medical offices can reduce staff workload, cut mistakes, and improve how patients are involved. This lets the staff spend more time on managing care and coordinating treatment, which is key to value-based care.
AI tools also help find patients most likely to be readmitted to hospitals or have problems. This helps care teams act earlier, prevent problems, and meet goals for better care.
Data platforms with AI give real-time support for clinical decisions. Providers can adjust treatments and track results quickly. Getting data fast helps improve care and meet reporting rules in value-based payment programs.
Using AI for front office tasks also helps with access and fairness. Quick and correct communication means patients get reminders and info on time, reducing missed appointments and helping those in underserved areas stick to their care plans.
Changing from fee-for-service to value-based care is not easy. Many practices, especially small ones or those in rural areas, find it hard to change how they work. They need to learn new IT systems, change workflows, and handle financial risks based on patient results.
Providers face more paperwork because they must collect and report data on quality, costs, and fairness. Financial risk can be scary, especially for those not used to contracts where they could lose money. Still, more doctors are joining ACOs, with nearly 60% of U.S. doctors part of them by 2025.
Programs like the Quality Payment Program (QPP) help with support and encourage use of certified electronic health records. Systems like the Merit-based Incentive Payment System (MIPS) and Advanced Alternative Payment Models (APMs) give paths for doctors to take part in value-based care while getting payment bonuses.
For medical practice leaders, owners, and IT managers, knowing about the changing payment systems is important for success in the long run. Switching to value-based payments takes money for technology, staff training, and better processes. It also needs clear plans to manage financial risks and improve care coordination.
Technology partners that focus on AI and automation, like Simbo AI, can offer tools to make admin tasks easier, improve patient communication, and support data analysis. Using these tools helps build a practice that works well with value-based care aims.
Keeping up with CMS programs, state and commercial payer efforts, and good methods for sharing data and engaging patients will help healthcare groups change smoothly. The move to value-based care is a chance to improve care quality and lower costs, which helps patients, providers, and the health system overall.
Value-based payment for care delivery focuses on rewarding healthcare providers for delivering high-quality care rather than simply the volume of services provided, aligning payment models with patient outcomes.
ACOs are groups of doctors, hospitals, and other healthcare providers that come together to provide coordinated high-quality care to their patients, aiming to improve outcomes while reducing costs.
The 2019 report found that the number of ACOs decreased for the first time, with a net reduction since 2018, while the lives covered by ACO contracts increased, particularly due to growth in commercial contracts.
Downside risk indicates that ACOs may lose money if they exceed cost targets, which reflects a provider’s willingness to manage and improve care efficiently, signaling confidence in their care management capabilities.
There has been a significant increase in the proportion of ACOs, especially physician-led organizations, accepting downside risk contracts, indicating a growing comfort level with risk-based arrangements.
Medicare has introduced models such as Primary Care First, Direct Contracting, and specific specialty models for kidney health and radiation oncology to expand value-based payment arrangements.
Projects focusing on innovative care delivery methods, such as for Parkinson’s Disease and integrated pain management, are essential in identifying strategies for effective value-based care implementation.
Data analytics platforms like Torch Insight are crucial for integrating and analyzing healthcare data, helping organizations make informed decisions regarding patient care and payment models.
As of 2019, ACOs were estimated to cover approximately 44 million lives, illustrating their significant role in the healthcare landscape and potential to influence care delivery on a large scale.
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