VH Insights

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July 31, 2019

Shifting States: Value-Based Care Simplified

What does a reimbursement model have to do with the quality of the care patients receive? In other words: can the way providers get paid have any impact on the generalized outcomes of a population? In the United States today, there are two main medical reimbursement models: fee-for-service and value-based care. In a fee-for-service model, payers pay providers for the specific procedures and tests performed. In a value-based care model, payers reimburse providers based on the patient outcomes and the overall value they bring to their populations. Each model comes with its challenges and benefits.


The fee-for-service model is currently the most common throughout the United States, and the model most patients are familiar with. Payers reimburse providers based on the services they render and not on outcomes, so organizations can profit regardless of the quality of care that patients receive. Since providers are trained to err on the side of caution and thoroughness, the fee-for-service model can contribute to overutilization. The fee-for-service model can lead to payers “underpaying for the time that a provider spends with each patient and overpaying for tests and procedures”. Fee-for-service can ultimately contribute to higher costs for payers and, as some studies have suggested, lower quality outcomes for patients as compared to other incentive models, especially for chronic conditions.

Although there are concerns about fee-for-service, the model itself has, historically, been considered quite successful. Providers enter the profession with the best interests of their patients in mind, regardless of the reimbursement model they will end up working with. When patients have the bulk of their costs covered by third party insurance, they are more likely to visit the doctor and seek care. Additionally, the system fiscally discourages turning any patient away since every patient is a potential revenue source, which may not always be the case for some value-based care approaches.

Value-Based Care

Value-based systems are newer to the United States but have gained traction around the world, with varying levels of success. Value-based care systems reimburse providers based on clinical outcomes, the goal being for the least healthy patients to get all appropriate treatments to improve their health and for the healthiest patients to maintain their good health. Providers receive adequate reimbursement so that they can better balance the time spent per patient, depending on their needs. Payers mostly pay for the value that providers bring instead of solely for acute episodes of care. Value-based care has given rise to various payment models, including Accountable Care Organizations, Medicare Shared Savings Programs, Patient-Centered Medical Homes, and Medicare Bundled Payments programs.

Value-based care models are not without their challenges, however. Attribution of payment becomes a problem because it is difficult to assign payment for a patient’s treatment once they visit multiple providers. If the payment is tied to the patient’s outcome, which provider receives the payment? Alternately, which providers are penalized if the patient’s outcome is not positive? One additional problem exists in the case of alternative payment models (APMs) that CMS has already implemented, where some models do not penalize for inappropriate treatments, but do if the treatments surpass the expected costs. Expensive but appropriate treatments can become more noteworthy than inexpensive, inappropriate treatments, which is a potential cause for concern. These are just a few of the issues that many value-based care models face, with each individual model tackling its own additional difficulties.

The Future of Care

A core philosophy for all healthcare organizations (payers and providers, alike) is to improve health outcomes and minimize costs. Almost every state has taken an iterative approach towards incorporating various value-based care strategies into their overall healthcare reimbursement models to improve their populations’ health and drive healthcare costs down. Regardless of the challenges to both fee-for-service and value-based care, there is an unmistakable push towards the overall improvement of care delivery in the United States.

VirtualHealth believes in the potential of integrated value-based care to drive down costs and increase the overall health of populations. For integrated care to work well, health plans need a robust healthcare ecosystem, with care management at its center. The HELIOS® solution is the first cloud-native care management platform that is purpose-built for value-based care and puts the member at the center of care. Its configurable environment means that the solution can adapt with the changing needs of healthcare organizations that utilize it. HELIOS® brings the care team together for easier collaboration, which helps to streamline value-based care processes and decision making. If your team is looking to optimize their value-based care strategy, connect with VirtualHealth to discover how a care management solution like HELIOS® can improve the health of your members.

Types of Reimbursement Models


Name of Model




Shared Savings / Accountable Care Organization (ACO)

ACOs are groups of doctors, hospitals, and other health care providers, who come together voluntarily to give coordinated high-quality care to their Medicare patients.


- Saves money for both providers and patients, thus facilitating efficiency, creating less waste in the Medicare system

- Successful ACOs can lead to financial rewards

- Specific focus on patients with chronic disease, so these patients receive better care

- Physician-driven treatment

- ACOs support independent practice

- Requires engineering a new business model

- Requires sophisticated care coordination software

- Shared decision making within the group can cause issues

- Setting up ACOs requires (balancing the risk) with the interests of both the individuals and the organizations involved

Bundled Payments

Bundled payment programs generally provide a single, comprehensive payment that covers all of the services involved in a patient's episode of care.

- Focuses on quality of care rather than quantity of care

- Improves the coordination of care between providers

- Single payments simplify a complicated system (simplicity of billing logistics)

- Accountability for care in a specific episode

- Distribution of payment to all providers involved in an episode of care can be difficult

- Limitation of effectiveness with certain procedures

- Defining the boundaries of a specific procedure can be difficult 

- Lack of incentive to reduce unnecessary episodes


Capitation is a type of a health care payment system in which a doctor or hospital is paid a fixed amount per patient for a prescribed period of time by an insurer or physician association.

-Physician benefits directly since patient care is associated directly with the physician

- It makes cost much more predictable for payers

- Can limit unnecessary medical services that raise costs and decrease value

- Patients who have a higher per capita cost might be a large financial burden on providers

- Patient’s health risk could increase due to deferred care beyond the prepayment interval

- Can encourage physicians to take on too many patients in order to balance healthy capitated patients with high-utilization patients.


Pay-for-performance is seen as a payment or financial incentive that is associated with meeting defined and measurable goals that are related to care processes and outcomes, patient experience, resource use, and other factors.

- Can improve the quality of care delivered when measurable

- Encourages efficiency of care

- Enhances collaboration and promotes accountability among providers

- Supports overall improvement by emphasizing outcomes of care

- Operational challenges associated with measurement do not necessarily reflect the complexity of caring for patients with multiple conditions

- The burden of administrative work could lead to a decreased focus on patient care


This payment model is reimbursement for specific, individual services provided to a patient, as each specific service (or procedure or intervention or piece of equipment) provided is billed and paid for.

- Encourages the delivery of care and maximizing patient visits

- Relatively flexible and is employed regardless of the size or organizational structure

- Supports accountability for patient care, but it is often limited to the scope of the service a particular physician provides at any point in time

- Offers little or no incentive to deliver efficient care or prevent unnecessary services

- Duplicate services might be rendered due to limited coordination between providers

- Limited to face-to-face visits and acts as a barrier to care coordination and management of conditions via other means

- Patients suffer the logistics involved in this type of model