Assortment of medical supplies to highlight value based care

Value Based Care

By Liz Kwo, MD, MBA, MPH - Chief Medical Officer, Everly Health. To give you technically accurate, evidence-based information, content published on the Everlywell blog is reviewed by credentialed professionals with expertise in medical and bioscience fields.

Statistics indicate that the U.S. spends on healthcare more than any other country. Yet, this does not necessarily mean that our healthcare system is one in which patients receive the best care with the best outcomes. In recent years, the main players in healthcare system have begun a process of shifting the sector’s focus from volume of procedures to value of procedures and medical act provided to patients. In many American states, the outbreak of COVID-19 pandemic has accelerated this process, whilst in others many steps still need to be taken.

What is value based care?

Value based care means providing care in a system where the focus is placed on the patient and patient outcomes. This sounds good on paper, yet is a long and often difficult process which involves primary care and specialty physicians, patients, insurers, midlevel clinicians (such as nurse practitioners) and all third parties involved in care providing and care payment flow.

Why is value based care important?

  • Shifting the current volume-based system to a quality-based system is important for several reasons:
  • Lowering the costs of healthcare;
  • Improving the quality of life and life expectancy of patients;
  • Creating favorable conditions for high quality care providers to stand out;
  • Adjusting reimbursement methods of payers to quality and not quantity.

Costs of healthcare

United States spends more on healthcare than any other country. This is a fact backed up by statistics, but behind these statistics there are also other immaterial costs: the efforts made by families to afford contracting or keeping a medical insurance for all family members, the difficulties encountered by these families when a disease not covered by their insurance occurs, the occasional modifications government has to make for providing as much insurance for as many people as possible, all these are part of challenges faced by a nation that pays individually and collectively more for healthcare than anywhere else in the world.

In 1970, health expenditures – which include healthcare and healthcare related activities such as research and public health from both private and public sectors – were $74.6 billion. In 2000, this amount increased to 1.4 trillion and in just 18 years, has escalated to $3.6 trillion. Per capita, the $355 spent in 1970 became $11,172 in 2018. From a GDP perspective, if in 1970 the United States were allocating 6.9% to health spending, in 2018 this percent reached 17.7%. In 2018, 33% of the health expenditures were coming from hospital spending, while the out-of-pocket individual expenditures increased in 2018 to $613 compared to $119 in 1970.

These numbers don’t include health insurance premiums. In 1970 private insurance spending represented 21% from total health expenditures, with 34% in 2018, whilst the public insurance (which includes Medicaid, Medicare, Veterans Administration and Department of Defense and CHIP) grew from 22% in 1970 to 41% in 2018.

All this information is important in assessing the performance of healthcare system. And, with updated information, patients can make better decisions about their healthcare, including what insurance plan to choose, what provider to contract and how to tackle better the out-of-the-pocket expenses. On the long term, overall costs allocation and values should enable the healthcare system to improve itself and patients to benefit from high quality care.

Improving the quality of life and life expectancy of patients

Currently, the volume and complexity of procedures conducted are the metrics that dictate how much a physician is paid. This draws some of the clinicians to prescribe drugs in abundance and to perform as many surgical interventions as possible in a short period of time, with the goal of being paid more by the insurers. But this can leave patients with bills that have to be covered out-of-the-pocket. Faced with this risk, some patients prefer not to seek the medical services or products they need, which in some cases decreases the quality of their lives and even their life expectancy.

Whilst methods to measure the volume of procedures rendered are clear, the indicators for measuring the quality provided by the medical procedures used are not. The scores based on which insurers measure the quality of services and products provided to patients (such as treatments, diagnoses, preventive medicine management) have been developed by authorized organizations, payers and providers, yet there is still not a clear method to calculate the total gains brought by a high quality medical procedure, diagnose or treatment. A complete shift of the healthcare system towards value would ensure that care providers analyze in depth and a priori the treatments applied and the drugs prescribed. This would determine a wider access of patients to high quality care, hence improving the quality of their lives and their life expectancy.

Creating favorable conditions for high quality care clinicians providers to stand out

In the current model, a clinician is paid in most cases based on the reimbursement rates linked to the complexity of the procedures performed. It’s no wonder that migrating towards a value based care model that would change the way care providers operate has determined some of them to show resistance to the process.

A Kaiser Family Foundation/Commonwealth Fund survey conducted online and by e-mail in 2015 on 2,149 care givers (1,624 primary care physicians and 525 nurse practitioners and medical assistants) has revealed interesting data:

  • The Affordable Care Act has intensified the efforts of replacing the fee-for-service model with alternative payment models;
  • 64% of primary care givers stated they were being paid by capitation or by salary. Capitation brought physicians gains based on a set of services provided to a certain number of patients, whilst the salary provided them gains for treating an entire category of patients;
  • 87% of middle level care givers (nurses and medical assistants) declared they were being paid based on fee-for-service and other payment methods, while 34% of primary care givers relied exclusively on fee-for-service model;
  • 50% of primary care physicians thought that adoption of quality metrics to evaluate their performance was having a negative impact on the quality of care provided.

The migration towards value based care is challenged by many care givers concerned that this step would decrease their incomes. However, this shift creates favorable conditions for clinicians who provide high quality care and who can demonstrate how this quality is impacting the patients health results. While the firsts might leave or be removed from the healthcare system unable to meet the new requirements of care providing process, the latter might fill the voids left by them, since the demand for healthcare is on the rise, especially in the current COVID-19 environment. These high quality care givers are the ones who will improve not only their results, but also the overall system, as they will be able to deliver increased quality medical services to a larger pool of patients. They can also benefit from better reimbursement rates that the organizations they belong to can negotiate with the insurers, based on the improved results they deliver.

Adjusting reimbursement methods of payers to quality and not quantity

Most of current reimbursement payments are based on fee-for-service model, meaning care givers are paid based on the volume of procedures performed. For each procedure there is a reimbursement rate established by the insurer based, among other things, on the patient’s coverage.

In opposition to this traditional model, alternative reimbursement methods such as medical homes focused on patients or bundled payment have gained ground during past years. These alternative methods, built around patient outcomes, can be used efficiently provided that insurers can monitor the (improved) patient outcomes. This monitoring relies on data and metrics that are linked especially to “episodes” of care providing process, as procedures performed during these non-permanent occasions are easier to track, measure and study. Alternative reimbursement methods are more suitable for medical specialties that usually involve long stays in the hospital, as they can avoid the high costs of medical procedures completed during hospitalization.

One of the alternative reimbursement methods used in recent years is a “version” of “carve-outs”. Originally, a “carve-out” represents a part of a bill issued by a health provider that is refused for payment by an insurer. This refusal was most often referring to a certain period of time (such as a day) when no medical procedures were completed for a patient in a hospital (e.g. Sunday). Payers and care providers have shifted this into a lucrative alternative payment method by migrating the patient “risk” from payer to provider. Basically, a physician takes over the entire process of care delivery for one or more patients and the insurer pays a lump sum in exchange of patients outcomes.

In this arrangement, the better outcomes the patients display, the higher are the revenues received by the care provider from the payer. Of course, the reverse is also applicable: if the treatment costs for a patient are high and the results are low, then the care provider (primary care clinician, specialty doctor) will lose money. This is another way through which exceptional care givers can stand out, whilst the ones stuck on fee-for-service models can struggle or eventually leave the healthcare system.

This version of “carve-outs” also gives insurers the chance to improve the pool of care givers they use by retaining the ones who deliver the best possible patients outcomes at the lowest costs possible. Payers will want to offer slightly higher reimbursement rates to care givers who, by delivering more positive results patients, indirectly draw more enrollments for them.


All this shows that the goal of value based care is to stimulate high quality health care at lower costs. The resistance that some of the primary care physicians display towards this model may be one of the reasons for which they are considering to retire earlier than scheduled, alongside their dissatisfaction with the changes made in healthcare system in the past 20 years.

However, as more stages of the value based care transition are implemented, we might see a change of mindset from these physicians, especially from those capable to adjust not only their medical practice, but also their entire approach of patients to the new model.

As far as insurers are concerned, the value based care model is already bringing higher margins to those who adhered to it, even if the reimbursement rates might have slightly increased.

Last but not least, the shift of health care from volume based to value based has to be tracked especially in terms of impact on patients. And not only in regards to outcomes, but also in terms of access to this model, along with the quality and costs of care provided.

Future of the Medical Home

The Smart Care of the Future: Home Health

The Promise of IOT in Healthcare

Sources used

How has U.S. spending on healthcare changed over time?

Measuring the quality of healthcare in the U.S.

Vital Signs: Core Metrics for Health and Health Care Progress

Primary Care Providers’ Views Of Recent Trends In Health Care Delivery And Payment

Primary Care Providers’ Views of Recent Trends in Health Care Delivery and Payment

What is fee-for-service?

Medical dictionary: carve-out

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