Shifting to Value-Based Care: How it can benefit your practice

There are a lot of buzzwords floating around healthcare and value-based care, at first glance, might seem to just be the newest in the long line. But, here’s how it’s different and how you can prepare your organization for the transition. 

What is Value-Based Care? How is this different from Pay-for-Performance?

Value-based care models work to reduce spending and improve outcomes and quality of care. With a framework that focuses on the quality of services — instead of incentivizing the quantity like traditional fee-for-service (FFS) or pay-for-performance (P4P) — and providers are compensated based on their patient outcomes, not the number of patients seen in a day. 

Although under the FFS/P4P models,  providers have the ultimate goal of improving health outcomes, the traditional model does not reward them for actually providing the improved outcome. hospital bonuses and penalties with cost, quality, and outcomes.

What are the Benefits of Moving to a Value-Based Care Model?

In a nutshell, value-based care models are proactive instead of reactive. 

Because value-based care isn’t centered on the number of patients seen in a day or the number of services provided, you are freeing your providers to focus solely on patient outcomes. This, in turn, allows them to be proactive in patient healthcare planning. Often, this means preventing problems before they arise, and by doing so your organization can provide lower-cost care and improve patient satisfaction. 

According to the American Medical Association, some additional benefits may look like this:

  • Overall reduction in medical errors
  • Suppliers align prices with patient outcomes
  • Patients are more informed
  • Organizations can share one vision of success
  • An overall healthier society

What are the Value-Based Payment Models? 

According to the US Department of Health and Human Services, 59 percent of healthcare payments are tied to value-based care or pay-for-performance (P4P). The premise of value-based care and, in-turn, value-based payments is to align physician and hospital bonuses and penalties with cost, quality, and outcomes.

Shared Models

Shared Savings is the payment method where an organization is paid using the traditional FFS model, but at the end of the year, total spending is compared with a target; if the organization’s spending is below the target, it can share a portion of the difference as a bonus. 

Alternatively, a Shared Risk payment model is when an organization spends more than its intended target. In this scenario, the organization  must repay some of the difference as a penalty.


A Bundled payment model is an all-in-one solution. Instead of paying separately for hospital, physician, and other services, a payer bundles payment for services linked to a particular condition or period of time. The servicing organization then keeps any savings through reduced spending on different aspects of bundled care. 

Global Capitation

With Global Capitation models, a participating organization receives a per-person, per-month (PP/PM) payment intended to pay for all individuals’ care, no matter which services they use.

Healthcare costs are expected to reach nearly $6 trillion, or approximately 20% of GDP by 2027. Because of this, alternative payment models are increasingly becoming more vital to manage the ever-increasing cost of healthcare. 

I Want to Implement a Value-Based Care System. How Do I Measure Success?

Depending upon your organization, you’ll need to determine whether they require daily, weekly, or monthly monitoring. Understanding the numbers will help your team to determine reimbursement for contracts and success or failure of the agreement. By understanding the numbers, your organization can create a system of care that is good for patients and your organization’s bottom line.

Key performance indicators (KPIs) are a key component to understanding the effectiveness of any initiative — new or old. When implementing value-based care and payment models, some KPIs to consider are:

  • Cost per revenue per treatment 
  • Cost or revenue per patient 
  • Revenue expense per location
  • Revenue expense per referral
  • P&L by contract
  • P&L by budget
  • P&L by location

Next Steps

Are you ready to take the next steps and learn about how you can implement a value-based healthcare model into your organization? Contact us for a complimentary consultation.