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Supporting providers in the transition to value-based care

As the industry moves away from the classic fee-for-service model, value-based care (VBC) partnerships between payers and providers are more important than ever.

October 7, 2023 | 5-minute read

For decades, health care’s fee-for-service model charged patients and plans for every CT scan, blood draw and surgery. This has been an unsustainable approach that incentivized volume, not value or health outcomes.

While change has been slow, payers and providers alike have increasingly embraced a value-based care (VBC) model, which rewards providers for the outcomes they deliver rather than the services they provide.

This transition has gained notable momentum. It’s estimated that 238.8 million Americans receive health care in a value-based care model. These numbers are expected to grow significantly in the coming years. In fact, the number of patients treated within the VBC model is expected to increase 15% per year.1

As health care models continue to transform, payers, providers and patients all stand to benefit greatly.

Let’s explore the benefits of VBC programs, as well as ways payers can partner with providers to ease the transition while driving better care and lower costs.

How value-based care drives higher-quality and better outcomes

As this change continues, value-based care benefits are becoming more and more clear. By focusing on evidence-based and preventive health, disease and illness prevention and management are prioritized over costly interventions. 

Value-based care also has the potential to reduce medical procedures and other forms of overtreatment that aren’t needed. In the U.S., it’s estimated that health care waste costs $760 to $935 billion a year, or 25% of total health care spending.2

For these reasons and more, McKinsey estimates that if current trends continue, value-based care could create $1 trillion in potential enterprise value.3

But value-based medical care isn’t just a potential economic benefit. It’s also a way for providers to deliver the right care at the right time in the right place, resulting in better health outcomes and quality of life for their patients.

This upside is clear from VBC successes to date, including capitated fees that pay primary care providers a specific amount of money for each person under their care, no matter the volume of services provided.

According to research published in the New England Journal of Medicine, medical claims for patients with primary care doctors who participated in a VBC model were lower than average, while quality measures were higher.4

Procedure-based specialists, meanwhile, may join in VBC models through bundled VBC payments that encourage improved efficiency and coordination of care by providing a single payment for all the services involved in each care visit. 

One example is a typical kidney transplant surgery. By focusing on collaboration and improving processes, bundled payments can result in5:   

  • Shorter hospital stays
  • Reduced costs 

VBC also encourages earlier transplants in patients with chronic kidney disease. This helps those patients avoid long-term dialysis.6 According to the National Kidney Foundation, early kidney transplants7:

  • Offer patients a far higher quality of life
  • Require fewer dietary and lifestyle limitations
  • Result in fewer organ rejections 

That’s a better way forward for both patients and payers.

VBC has also benefitted the oncology field. This was done by helping compensate both the payer and the member by reducing ER visits and inpatient admissions.

Cancer care often requires the coordination of specialists from several disciplines, such as medical oncology, surgery and radiation therapy. Collaboration required within VBC models is a natural fit.

Oncology providers are better supported to select from a variety of evidence-based treatment pathways. This helps ensure the most effective and appropriate approach throughout the continuum of cancer care.

Given the many ways that VBC can impact a provider’s practice, payers would do well to support providers as they transition away from fee-for-service models. By encouraging them to embrace this payment model, payers can help support better care and higher value for all stakeholders.

A health care system that is more connected, more informed, more human, and more responsive to every person’s needs… These growth opportunities will guide our strategy for many years to come. First is care delivery, specifically, value-based care.

CEO, UnitedHealth Group

Sir Andrew Witty

Here are several strategies to help providers move toward delivering better outcomes for their patients, as well as for payers and for their own practices:

Tie bonuses to provider performance

To engage providers in the value-based care transition, it’s important to make sure they are appropriately compensated for providing real value to their patients. There is some precedent for this approach. And evidence that it has results.

Since the passing of 2015’s Medicare Access and CHIP Reorganization Act, providers who take part in the VBC model get bonus payments.8 Proponents say the amount has greatly helped providers shift to VBC, giving them enough funds to start tracking necessary data and better engage patients.

Going forward, as more providers take part in VBC plans, incentives should be tied to the results they deliver.

Asking providers to assume more risk will drive greater investment in care coordination, technology and other systems that make improved population health management possible. This will also drive improved efficiency and better patient outcomes.

But this sort of change requires a careful approach. Experts think it can be helpful to use a tiered structure (differing levels of incentives based on different standards met).9 It can also help to tie bonuses to a small number of targets so providers don’t attempt to take on too many areas of focus at once.

Change reimbursement policies to encourage and prioritize preventive care

One of the most profound changes a payer can make is to put a premium on preventive care and early screenings, even above and beyond the required coverage mandated by the Affordable Care Act (ACA).

Research shows that even insured patients often skip their routine visits. One report revealed that a full 25% of respondents had not gone in for an annual physical that year.10

To solve this public health issue, primary care doctors and their teams should regularly nudge their patients. Those providers are far more likely to do so if they’re incentivized to offer more thorough preventive care.

This approach is already proven: At one South Carolina health system, increased patient outreach along with extended screening hours resulted in a 39% increase in mammograms.11

Partner with providers around proactive data analysis

Health care data is incredibly powerful. It holds the key to better patient outcomes.

Providers can’t manage what they can’t measure, so when payers can share meaningful data to help inform and improve provider performance and patient outcomes, successful VBC initiatives are created.

Data tracking improves providers’ understanding of patients at risk of poor outcomes. It also helps them:

  • Assess the effectiveness of interventions
  • Highlight areas of opportunities to lower costs
  • Reduce barriers to care access

The power of data is so great that California law mandates that providers share patient data to a centralized location known as the Data Exchange Framework (DxF).12

When cultivated with a spirit of collaboration, this data-is-king principle can also help payers and providers come together to deliver a superior health care experience. Simply adding up numbers and sharing them isn’t enough. And it doesn’t send the right message of collaboration toward a mutual aim.

Instead, payers should consider investing in jointly managed data analytics software tied to electronic health records (EHR) so that the data is at their fingertips at the point of care.

These shared data and analytics tools will highlight not only which services are being offered and how often, but also:

  • How they’re being reimbursed
  • How they tie to VBC incentives and goals
  • Where providers should focus their efforts

Offer programs that put the patient first

How can payers help providers to meet and go beyond those all-important VBC targets? One helpful tactic is to craft programs that engage members with one-on-one interaction and education. This increases members’ health literacy and helps them take on a larger role in their own health and wellness.

And as research has shown time and again, a member’s greater involvement in their own care can lead to far better outcomes.13


While the road to wider adoption of VBC may not be perfectly straight, payers can do a great deal to ease the transition among the providers they work with. Sharing data and creating appropriate and strong incentives and prevention-minded reimbursement policies are important steps.

A collaborative approach between payers and providers can make a big difference. 

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  1. McKinsey & Company. Investing in the new era of value-based care. Accessed August 28, 2023.
  2. NIH, National Library of Medicine. Waste in the US Health Care System: Estimate Costs and Potential Savings. Accessed August 28, 2023.
  3. McKinsey & Company. Investing in the new era of value-based care. Accessed August 28, 2023.
  4. New England Journal of Medicine. Health care spending, utilization, and quality 8 years into global payment. Accessed August 28, 2023.
  5. NIH, National Library of Medicine. Value-Based Care and Kidney Disease: Emergence and Future Opportunities. Accessed August 28, 2023.
  6. Healthcare Innovation. Value-based care catalyzes transformation of kidney disease care. Accessed August 28, 2023.
  7. National Kidney Foundation. Preemptive transplant. Accessed August 28, 2023.
  8. Centers for Medicare and Medicaid Services. MACRA. Accessed August 28, 2023.
  9. The Coker Group. Understanding value-based compensation models. Accessed August 28, 2023.
  10. Insider. 14 statistics you probably didn’t know about preventative healthcare in the United States. Accessed August 28, 2023.
  11. American Medical Association Ed Hub. How a population health campaign increased breast cancer screenings by 39%. Accessed August 28, 2023.
  12. California Department of Health and Human Services. Data exchange framework. Accessed August 28, 2023.
  13. Centers for Disease Control and Prevention. Patient engagement. Accessed August 28, 2023.