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What Value-Based Care Means For Providers

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Value-based care, sometimes referred to as pay for performance, is rapidly emerging as an alternative to the traditional healthcare model of patient care. Historically, providers have been compensated through a fee-for-service model that emphasizes a higher quantity of patients and treatments.

The value based healthcare model seeks to emphasize quality of care over quantity.  

Big or small, all healthcare facilities and their administrative teams understand that this industry’s payment process is more complicated than most. Although value-based care has the potential to improve both patient health and provider profit, the transition may be difficult.

This guide will explain how the value based care model is changing the business of healthcare, and examine what this change means for providers.  

What Is Value Based Care?

Providers earn a large portion of their revenue through reimbursement from both private insurance companies and government programs like Medicaid and Medicare. Traditionally, providers would be reimbursed for the number of medical services they performed. This could include anything from simple check-ups and diagnoses to advanced surgical procedures.

This fee-for-service system incentivizes providers to perform as many services as possible for as many patients as possible. In some cases, this could cause providers to become preoccupied with attracting new customers to their practice, as opposed to focusing on delivering the best patient outcomes. Additionally, providers could feel pressured to order as many tests and procedures as possible for each patient, often unnecessarily, in order to generate revenue and capitalize on patient collections.

The value-based care model seeks to address these issues by changing providers’ incentives.

Instead of reimbursement being tied to the number of medical services performed, value-based care ties reimbursement to a number of qualitative criteria that demonstrate a marked improvement in patient outcomes.

Some of the criteria on which providers are evaluated in a value-based care model include:

  • Reduction of hospital readmissions
  • Improvements in preventative care
  • Use of certified health technology  
  • Increased immunization rates  
  • Reduction in Medicare spending per patient
  • Improved patient feedback
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Value Based Care Pros and Cons  

For both patients and providers, there is a lot to be excited about when it comes to value-based care. However, there are some drawbacks to this model that are important to consider. Here are a few of the most significant pros and cons for value-based care:

Pro: Improved Patient Health

The most obvious benefit of the value-based care model is its emphasis on patient health outcomes, which should be at the heart of any healthcare system.

Value-based care seeks to achieve better population health management, which is a new ideological approach to healthcare that uses data and technology to understand patients not only as individuals, but as part of a group.1 With this approach, providers can more effectively improve outcomes and reduce costs for lots of people.

Value-based care also works to prevent serious and costly chronic conditions, such as:

  • Diabetes
  • Cancer
  • High blood pressure
  • COPD
  • Obesity  

In a fee-for-service model, these conditions may not be treated until they’ve already become dangerous to the patient’s health. A value based model emphasizes preventative care through education and community outreach, which helps to avoid the onset of chronic conditions.  

Con: Increased Regulation for Providers

Providers who work under the current fee-for-service model know that there is already a lot of regulation in the reimbursement process. From the provider’s perspective, these regulations can often seem overly punitive.  

In the value-based care system, private insurers and governmental healthcare agencies can be seen to place even more restrictions on providers. They set the terms of:

  • What services providers can perform  
  • What range of costs the provider must stay within  
  • The patient outcome benchmarks that the provider must meet  

Pro: Streamlined Healthcare Facilities  

In a fee-for-service system, each provider in any given healthcare facility generates revenue based solely on the individual services they provide. This creates a scenario in which providers aren’t working with patients in tandem, but as separate entities.

For example, if a patient goes to the hospital for stomach pain, they may be sent to a primary care provider, then acute care, and finally to a specialist. Each of these three providers is incentivized to perform a number of tests or procedures in order to make money. This doesn’t necessarily translate to the best care for the patient.  

Under a value-based care model, primary, acute, and specialty providers work in unison. They work as a team, making a coordinated group effort to improve the patient’s health, because the quality of the care they provide is how they are evaluated and compensated. The value-based care approach helps healthcare facilities become more streamlined and reduce wasted time and resources.

Con: Difficulty of Implementation

Although the healthcare industry as a whole is known to undergo rapid changes, on the individual level of the facility it can be a challenge to make sweeping reforms. Providers, as well as their patients, may be entrenched in the norms and customs that they’re used to within the overall healthcare experience.  

Although the delivery of most medical services remains unchanged when switching to a value-based care model, the way that those services are analyzed and processed does not. Facilities will have to implement new tools and resources to assist with the following functions:

  • Monitoring how much is spent on care
  • Analyzing advancements in quality of care
  • Processing patient data to demonstrate improved health outcomes
  • Demonstrating a reduction in chronic conditions  

Additionally, providers will have to adjust to a new model that doesn’t always trigger reimbursement for the same services as a fee-for-service system. Many providers are used to being compensated for indirect care measures, such as communicating with a patient’s previous providers and making consultations. These services, which are often necessary and require a provider’s time, may not be part of a value-based care reimbursement model.  

Pro: Better Use of Resources

Value-based care was envisioned not only as a way to promote healthy living and improve patients’ healthcare experience, but also as a way to reduce ballooning healthcare costs.  

In 2019, healthcare costs accounted for just under 18% of the total Gross Domestic Product of the United States.2

Value-based care can help reduce this heavy burden on both patients and providers. An overall reduction in the nation’s healthcare costs can have positive ripple effects throughout the economy.  

Con: Changing Benchmarks

In a value-based care system, providers can be reimbursed by a number of different agencies, including:

  • The Centers for Medicare & Medicaid Services (CMS)
  • Hospital Value Based Purchasing Program (HVBP)
  • Hospital Readmissions Reduction Program (HRRP)
  • Merit-Based Incentive Payment System (MIPS)

These agencies and others like it use certain historical benchmarks of population health to evaluate the quality of a given provider’s care. In the long term, these benchmarks could lower due to declining healthcare costs and improvement to patient health. Providers would have to continually work harder and harder to meet the criteria of these lowered benchmarks.  

How To Navigate A New Payment Model

It can be difficult to parse any kind of payor contract, especially if that contract is transitioning your payment model from fee-for-service to value-based care. To make sure you’re doing what’s best for your business before you sign, ask PayrHealth.

PayrHealth is the contracting solution for providers of all kinds. When you’re dealing with large and powerful insurance companies or governmental agencies, you want a team of experts in the healthcare industry by your side at the negotiating table. PayrHealth has 25 years of payor contracting experience across all 50 states, helping negotiate more than 50,000 payor contracts.

When your payor contracts start working in your favor, you can focus on delivering the best patient outcomes. In a system, this will help you generate even more revenue and expand your business. To sign better contracts, negotiate better reimbursement rates, keep track of any changes to your contracts, and maximize your return on investment, contact us today.

Check out our blog to learn more about best practices for independent providers. From learning about the payer-provider relationship to tips on how to improve price transparency, we’ve got you covered.


  1. Foresee Medical. Population health management.  
  2. Foresee Medical. Value-Based care.  
  3. Business Insider. How and why the value based payment (pay for performance) model is trending in the healthcare industry.
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