value-based healthcare

Value-based healthcare, also known as value-based care, is a payment model that rewards healthcare providers for providing quality care to patients. Under this approach, providers seek to achieve the triple aim of providing better care for patients and better health for populations at a lower cost.

Value-based care focuses on care coordination that ensures patients are given the right care by the right provider at the right time. Thus, in a value-based healthcare model, physicians may collaborate with each other on a patient's care, rather than making decisions separately that can lead to gaps or overlaps in care.

In many ways, value-based care is at the forefront of future medical regulations and treatments. For example, the U.S. government is using this approach to transition towards medical activities that treat the overall health of a patient rather than reacting to symptoms once a person becomes sick.

"We will not achieve value-based care until we put the patient at the center of our healthcare system," Seema Verma, the administrator of the U.S. Centers for Medicare and Medicaid Services (CMS), said in 2018.

Why value-based care is important

A value-based healthcare model prioritizes patient-centered care. It incentivizes healthcare providers to get and keep their patients healthy, which can in turn lower healthcare costs.

One example is hospital readmissions, which occur when a patient is readmitted to the hospital within a specified time period -- usually 30 days -- after being discharged from an initial hospitalization. Hospital readmissions lead to billions of dollars in additional costs; however, readmissions are often preventable with proper post-discharge planning. 

Value-based care vs. fee-for-service

Under the traditional fee-for-service model, healthcare providers are paid for each service or procedure performed; the services are not bundled and each is paid for separately.

Because this model paid per volume of services, rather than value, healthcare providers are incentivized to perform as many services as possible.

Predictive analytics and care

Achieve value-based care through predictive health analytics.

By comparison, under the value-based care model, healthcare providers are pushed to provide quality care that improves patient outcomes. Options exist for bundling payments or alternative payments that give added incentives for high-quality and cost-effective healthcare.

Value-based care and population health

Part of the triple aim is better health for populations. One way healthcare providers are able to achieve this goal is by using data analytics to stratify members of a population by risk to deliver care to patients who have the most need.

Analytics also help healthcare providers identify gaps in care, such as which patients are not coming in for annual check-ups or haven't received immunizations. Using this data, providers know who in the population they need to reach out to.

Examples of value-based healthcare models

CMS offers several value-based programs:

  • Hospital Value-Based Purchasing Program, which rewards acute care hospitals with incentive payments for the quality of care they provide to Medicare patients. This program is designed to improve the patient experience during hospital stays.
  • Hospital Readmission Reduction Program, which lowers payments to Inpatient Prospective Payment System hospitals that have too many readmissions. This program incentivizes hospitals to improve their communication, care coordination and how they work with patients and caregivers on post-discharge planning.
  • Value Modifier Program or Physician Value-Based Modifier, which measures the quality and cost of care for Medicare patients. This program determines the amount of Medicare payments physicians will receive based on their performance on certain cost and quality measures.
  • Hospital Acquired Conditions Program, which encourages hospitals to reduce the number of infections or illnesses that patients receive while admitted. This program reduces payments for hospitals that rank the worst for how often patients get hospital-acquired conditions.

MACRA (Medicare Access and CHIP Reauthorization Act of 2015) is U.S. legislation that provides the framework for value-based healthcare and includes several options for reimbursing healthcare providers for the care they provide to Medicare beneficiaries. These include accountable care organizations, bundled payments and patient-centered medical homes.

This was last updated in April 2018

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