The Promise of Value-Based Care

Early results are in: Pivoting away from a fee-for-service system can help control costs and boost health outcomes. But many providers feel overburdened.

By Amy Wilkinson

A concerned relative talks with a medical professional while a family member sits on a hospital bed.

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The goals of value-based health care are broadly appealing: Who doesn’t want to increase quality of care and control costs by eliminating waste in the medical system?

To that end, health insurance payers incentivize providers to improve patient health outcomes, rather than simply pay for services delivered. It’s an approach that has reshaped the health care landscape during the 10 years since the Affordable Care Act (ACA) committed the federal government to a value-based vision—although the shift has really only just begun.

The ACA spurred the creation of hundreds of accountable care organizations (ACOs)—groups of doctors and hospitals that share financial and medical responsibility for providing coordinated care to patients—that together work with about 12 million Medicare recipients alone. All told, the U.S. was home to more than 1,000 ACOs touching about 33 million people as of 2018. That year, Medicare reached its goal of having 90% of payments to doctors and hospitals be tied to measures of quality, according to the Health Care Payment Learning & Action Network. Momentum continues to accelerate: 23% of all U.S. patients were in value-based programs in 2018, and health care organizations expect that number to rise to 46% by 2021, according to a 2018 survey by HealthLeaders Media.

A concerned relative talks with a medical professional while a family member sits on a hospital bed.

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“The growth in value-based care and alternative payment models has been driven by a need to reduce costs without compromising the quality of care delivered,” says Jim Jones, vice president of healthcare analytics, medical excellence and tech strategy at AmeriHealth Caritas. “Value-based programs aim to infuse value into care by rewarding providers for impactful, high-quality services.”

At the same time, however, value-based care has faced questions about whether it can deliver on its promise of simultaneously containing health care costs and improving quality. The resources, infrastructure and time required to successfully switch to a value-based model give some stakeholders pause. Studies of Medicare-specific value-based payment programs have found some reductions in costs, albeit below what many observers were hoping to see.

“We need to move toward different models, but it’s challenging,” says Ann Greiner, president and CEO of the Patient-Centered Primary Care Collaborative, a Washington, D.C.-based organization that advocates for implementing value-based models. “It’s a real change in how you practice, and it also requires you to have very good data on patients”—plus the technology to support analyzing all that data. “That doesn’t happen overnight.”

“If your business model is focused merely on increasing volume rather than improving health outcomes, coordinating care and cutting waste, you will not succeed under the new paradigm.”

Confetti falls through the air in front of a happy young woman surrounded by tall green plants.

Priscilla Du Preez/ Unsplash

Dr. Lisa Bard Levine, CEO of The MAVEN Project, a national nonprofit working to increase access to care and support primary care providers through telehealth, says the health care system is in a national state of transition. “Elements of value-based care may be in place, but we might not yet be seeing the quality or the cost measures moving.”

Slow progress hasn’t changed the consensus among health care experts and politicians that the shift to value-based care is long overdue, however. While value-based care gained prominence under President Barack Obama’s health care reform effort, pressure for change in the Medicare and Medicaid spaces continues at the federal level within the Trump administration. In April 2019, the Centers for Medicare & Medicaid Services (CMS) announced a new set of value-based care payment models that aim to strengthen primary care.

The Primary Care First model options, which aim to reduce total Medicare spending, will begin a five-year testing period in January 2021. U.S. Health and Human Services Secretary Alex Azar called the new models the “biggest step ever taken” toward a health care system that pays for value and places the patient at the center. CMS Administrator Seema Verma pulled no punches when addressing the American Hospital Association in September 2019: “Make no mistake,” she said. “If your business model is focused merely on increasing volume rather than improving health outcomes, coordinating care and cutting waste, you will not succeed under the new paradigm.”

Azar and Verma’s exhortations underscore the increasing urgency with which leaders are approaching this change, because many acknowledge the traditional fee-for-service model has fallen short. The U.S. spends far more on health care than any other high-income country, but health outcomes are largely worse. Case in point: Life expectancy in the U.S. is the lowest among large, wealthy countries, while the infant mortality rate is also worse than those of comparable countries. So where do we go from here?


A medical administrative worker at a computer sits facing a patient customer.

ACOs’ Past and Future

First, some good news. After years in which no clear proof existed as to the effectiveness of value-based care, a recent long-term study of a value-based program suggests that it is working.

Published in the New England Journal of Medicine in July 2019, the study shows that over an eight-year period, the increase in average annual medical spending for people enrolled in a Massachusetts value-based care contract was $461 lower than the increase in spending for people not enrolled in such a program—an average savings of 11.7%.

Co-author Dr. Zirui Song, assistant professor of health care policy and medicine at Harvard Medical School, says that the length of the study was critical to its conclusions. That’s because for the first three years of the value-based care contract, spending on enrollees was actually higher than spending on other patients.

“However, starting at year four and through the eighth year, we saw that the story was flipped,” he says. At the same time, quality of care stayed the same or improved. As a result of this study and other similar research, “what we’ve learned is that value-based payment models generally take some time for providers to adapt to and learn how to change the delivery system on the ground before you’re able to observe net savings,” Dr. Song says.

Kevin Mehta, chief operating officer, Payformance Solutions, and director of the Center for Value in Health Care at Altarum, an Ann Arbor, Michigan, nonprofit focused on health IT, agrees. He notes that some large health management organizations that established early ACOs are reporting savings in the 5% to 10% range. “If you take the time and make the investment to set up your organization correctly, you can recognize savings,” Mehta says.

As of 2018, 83% of ACOs remained in the upside-only risk track. Many health care executives believe a market in which providers assume both upside and downside risk remains years away.

Room for Cost Savings

Ever-rising health care costs in the U.S. are fueled, in part, by inefficiencies that leading health care organizations are working to address.


Minimum amount the U.S. health system could save annually—approximately 25% of all expenditures


is wasted annually because many cancer drugs are sold in vial sizes that exceed typical patient doses

Where’s the excess cost?*


Failure of care delivery


Administrative complexity


Failure of care coordination


Pricing failure


Fraud and abuse


Overtreatment or low-value care

*All figures are minimum amounts and in billions.

Sources: BMJ, “Overspending Driven by Oversized Single Dose Vials of Cancer Drugs,” March 2016; JAMA, “Waste in the U.S. Healthcare System,” October 2019

Easing the Burden on Providers

In addition to worrying about downside financial risk, doctors also bristle about the cost of the technology needed to comply with the government’s complex quality reporting measures, as well as the general administrative burden introduced by value-based care.

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“Providers are human beings, and as such, most are initially resistant to change,” says June Simmons, president and CEO of Partners in Care Foundation, an organization dedicated to developing high-value models of community-based care. “Any new program brings costs with it, often out-of-pocket costs. Changing workflows is a major issue.”

The investments physician practices have had to make in technology and human resources have been significant, American Medical Association President David Barbe told in 2017. “[I]t has taken a toll and changed the way a physician’s day goes…[leading] to incidents of physician frustration or even burnout.”

Frustration spiked after CMS announced in 2015 a goal to have half of all Medicare payments be value-based instead of fee-for-service by the end of 2018. To reach that goal, the agency implemented its Quality Payment Program, giving providers two ways to participate: the Merit-based Incentive Payment System (MIPS) or Advanced Alternative Payment Models. But many doctors didn’t understand MIPS—and some decided that participation simply didn’t make business sense, Barbe explained to

“If a physician has $100,000 in Medicare receipts and gets the maximum incentive on that of 4%, that’s $4,000,” Barbe said. But, he added, “[i]t costs multiples of $4,000 to ramp up IT and staff in order to do that.”

Advocates for value-based care acknowledge that doctors and other providers shoulder an undue load.

“We started focusing on cost, equality and access, but we missed one additional component here, which is who is actually bearing the burden of this transformation: doctors.”

“We started focusing on cost, equality and access, but we missed one additional component here, which is who is actually bearing the burden of this transformation: doctors,” Mehta says. “The problem is that doctors are simply overworked and are getting an increasing amount of administration put on top of them.” With many value-based payment models placing more risk on providers, many doctors may end up getting paid less for more work, he says.

The reason behind the huge administrative workload is that value-based care lacks standardization. 

Right now, a provider might have one value-based care contract for diabetes with Payer A, and an entirely different one with Payer B. Moreover, providers and payers each start with their own data set around value-based metrics and often spend months trying to reconcile the data before they can begin negotiations.

Recognizing this disconnect, AmeriHealth Caritas’ Jones says, is key: “We are willing to align metrics with ongoing provider efforts or to join other payers in a larger collaboration, creating synergies across value-based programs,” he says of AmeriHealth Caritas’ PerformPlus® programs. (See “What It Takes to Make Change” sidebar for more about those programs.) 

But there is still more to be done. “No one has built the data infrastructure to collect the patient-reported outcome measures in order to report them,” says Elizabeth Mitchell, president and CEO of the Pacific Business Group on Health, a nonprofit in San Francisco. “We need to look at the data systems that would enable us to report more meaningful information with less burden to providers.”

Mehta is trying to address this issue through his role as chief operating officer of Payformance Solutions, an Altarum subsidiary. The company has developed a tech platform to enable all providers and payers to log in to one system to review health outcome data.

“In Michigan, we were able to process all of the data from the entire Medicaid data warehouse within three weeks,” he says. Providers could then see where they ranked from both cost and quality perspectives. “And so there is no discussion, no negotiation, no reconciliation that needs to happen. Providers can just immediately start to focus on the opportunities for value-based payments.”

A female doctor works at a tablet device while a woman stands next to her, pointing to the screen.

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A doctor visiting a patient at bedside discusses care while holding a smart phone.

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Primary Care to the Forefront

Providers’ hesitancy to commit to payment systems designed around outcomes doesn’t bode well for value-based care’s immediate future. But CMS’ new Primary Care First initiative may draw in more physicians. The program pays primary care doctors a fee for office visits plus a monthly per-patient fee for care coordination and other “behind-the-scenes” work that can take up a significant amount of time.

Primary care “absolutely needs to be the foundation of any high-performing health system” centered around value-based care, Greiner says. Primary care is important “because it works upstream, partnering with patients to help them take steps to manage their health so things don’t deteriorate.”

Greiner’s organization focuses on cultivating the “patient-centered medical home” model, as it is called, and other advanced primary care models. These models provide comprehensive, coordinated care—imagine a team of clinicians, including a primary care doctor, all working together for the patients.

“It’s a way of delivering care that is proactive, so you understand the health needs of the population you’re providing care to, particularly the patients who have chronic conditions,” Greiner says. “You don’t wait for patients to come into your office; you reach out to help them manage their diabetes or their asthma or whatever condition they might have.”

The value of primary care providers’ time will have to be viewed differently in order for value-based care to fully succeed, Dr. Levine says. “It’s a lot easier for a primary care provider to write on a piece of paper, ‘Go see a cardiologist—here’s a referral,’ than it is for her to take the time to connect with a cardiologist and get the information that would really optimize the patient’s care locally in the clinic,” she says.

Providers are working under a system that incentivizes them to see more patients, she adds. That leaves follow-up care in the hands of patients who may not have an in-network specialist covered by their insurance or the ability to take time off work for another appointment—increasing the risk that patients will not receive the right care at the right time.

“If we don’t want to bankrupt our children and grandchildren, we must find ways to improve the outcomes-to-cost ratio.”

Looking to the Future

The challenges facing value-based care are real, but experts agree that the U.S. health care system is moving in the right direction.

“It has the right design intent,” Dr. Levine says. “If we can optimize patient care locally in the community, we should be able to produce better health outcomes at a lower cost.”

Examples showing the right path forward are multiplying across the country. “We’re starting to see initial findings coming in from early adopters of value-based payments, such as New York, Arkansas and Tennessee—those states are starting to see positive results,” Mehta says. “You’re seeing costs come down; you’re seeing patients have better outcomes. A clear pattern is being developed.”

Continuing to expand different value-based care models while troubleshooting issues and innovating new techniques is critical. “If we don’t want to bankrupt our children and grandchildren, we must find ways to improve the outcomes-to-cost ratio,” Simmons says. “We know the ways—we just need to further scale them.”

What It Takes to Make Change

AmeriHealth Caritas introduced value-based care approaches more than a decade ago. Jim Jones, vice president of healthcare analytics, medical excellence and tech strategy, explains how his organization carefully tracks performance to drive value.

Portrait of Jim Jones.

Jim Jones

How can value-based care help states control Medicaid and Medicare costs?

By measuring performance indicators, we’re able to help providers identify gaps in care. They can then adopt evidence-based practices to close those gaps and improve care utilization. Providers are most successful when care team members actively collaborate, because they can eliminate silos of care, streamline care plans and reduce duplica­te tests. All of these can reduce preventable health care usage and expensive clinical interventions.

How has AmeriHealth Caritas’ PerformPlus suite of products evolved over time? What are the program’s main goals?

AmeriHealth Caritas introduced its first value-based arrangements in 2006, but we trademarked what is now the PerformPlus suite in 2014. Our programs have evolved from our early primary care quality enhancement programs to shared savings programs and now include a comprehensive suite for every point of the value-based care continuum. We have value-based arrangements with a wide array of providers, including primary care, behavioral health, dental, hospitals and federally qualified health centers.

Our value-based strategy focuses on improving cost and quality outcomes. All our models share the common goal of meeting providers where they are and developing collaborative relationships. Our approach is working: Today approximately 90% of our members receive care from providers who are participating in a PerformPlus value-based arrangement.

What ‘success’ metrics do you use to evaluate PerformPlus programs?

Success in value-based programs can mean a lot of different things. These programs should drive improvements in quality of care, cost, efficiency and the overall patient experience. They should also result in lasting partnerships with providers.

We use objective measures to help us evaluate program performance. The quality metrics that form the basis of our evaluation are nationally recognized measures from the Health Effectiveness and Data Information Set, National Committee for Quality Assurance and National Quality Forum. These measures promote both wellness and chronic care management in accordance with evidence-based clinical guidelines. We can customize our models to achieve market- and practice-specific objectives.

Historically, providers have been slow to adopt shared-savings programs and other new payment models. Why?

Provider feedback has shown us that potential administrative burdens and a fear of the unknown are the most common barriers to adoption. Providers are often managing multiple value-based programs, which can involve different populations and quality metrics. This creates difficulties in the design of programs, deployment of resources and evaluation of progress.

We work hand in hand with providers to overcome these barriers, empowering them with data and collaborating on program design. 

How is AmeriHealth Caritas incentivizing providers, beyond just savings?

All of our programs prioritize quality. To achieve quality outcomes, we may offer providers additional revenue streams outside of savings, such as care management fees. These revenue streams create additional capacity at the provider level to do innovative, impactful work.