Value-Based Care
Value-Based Care is a healthcare delivery model in which providers are paid based on patient health outcomes and cost efficiency rather than the volume of services delivered — the defining shift in US healthcare payment policy over the past decade.
What is Value-Based Care?
Value-Based Care (VBC) encompasses payment and care delivery models that link financial incentives to quality performance, patient experience, and cost outcomes rather than the volume of services rendered. The concept was articulated by Michael Porter and Elizabeth Teisberg in "Redefining Health Care" (2006) and operationalised through the Affordable Care Act (2010) and MACRA (2015) at the federal level, with commercial payers increasingly following suit.
Major Value-Based Payment Models
- MSSP ACO (Medicare Shared Savings Program): ACOs that keep Total Cost of Care below their benchmark while meeting quality performance thresholds share in Medicare savings. Track 1+ models are upside-only; ENHANCED track includes downside risk for higher shared savings percentages.
- BPCI Advanced: Bundled payment model where providers accept a target price for a 90-day episode beginning at hospitalisation. Reconciliation payments or repayments based on actual vs target cost.
- Primary Care First: CMS primary care model with prospective population-based payments and performance-based adjustments. Replaced the CPC+ model.
- Hospital VBP: Adjusts Medicare DRG payments by up to ±2% based on Total Performance Score across Clinical Outcomes, Person and Community Engagement (HCAHPS), Safety, and Efficiency/Cost Reduction domains.
Total Cost of Care (TCOC)
Total Cost of Care is the sum of all Medicare expenditures for attributed patients across all care settings — primary care, specialist, hospital, post-acute, pharmacy, and behavioural health. In MSSP ACO models, the TCOC benchmark is set based on the ACO's historical expenditures, updated annually. ACOs that achieve quality thresholds and generate TCOC savings below benchmark receive a percentage of savings as a shared savings payment.
Why Analytics is Foundational to VBC
Succeeding in value-based contracts requires population-level visibility that fee-for-service medicine never needed: who are my attributed patients? What is their risk level? What care gaps remain open? What is my total cost trending versus benchmark? Quality measure performance directly determines whether shared savings are distributed. Without analytics, VBC participation is financially dangerous rather than advantageous.