Value-based care is quickly emerging as an alternative to traditional fee-for-service models of reimbursement. Designed to drive better patient outcomes, this updated payment model reimburses care provided to patients according to quality rather than quantity.

This model considers how well providers offer care to effectively reduce hospital readmissions and improve preventative care.

Here’s all you need to know about value-based care, how it affects your reimbursements as a health provider, and how to transition to this reimbursement model as seamlessly as possible. 

Value-Based Care vs Fee for Service

While the traditional fee-for-service model would pay providers based on retrospective bill charges or fee schedules, value-based care increases the accountability of providers to patients by tying these payments to the quality and effectiveness of services provided—further incentivizing high-quality care.

To reimburse these services, the Centers for Medicare & Medicaid Services (CMS) has introduced various value-based care models to hold providers accountable for quality care. These would include the Pioneer Accountable Care Organization (ACO) Model, the Medicare Shared Savings Program, and the Next Generation ACO Model. 

6 Most Common Value-Based Care Models

Here are a few of the more common value-based care models being introduced as an alternative to fee for service.


Bundled payments, also known as episode-based payments, are one-off amounts paid for services provided for an entire episode of care. Expected costs to provide care for a patient’s specific condition are collectively reimbursed to the provider, factoring in the number of physicians and procedures involved in the treatment of the patient.

For example, based on historical prices of a certain type of treatment, CMS would combine payments for surgery by including the average cost of hospital admissions, the surgeon performing the procedure, and the anesthesiologist present.

This presents a certain risk to providers, with both the opportunity to pocket savings as a result of this average being higher than actual costs, as well as the possibility of it being lower and providers bearing a financial loss.

Patient-Centered Medical Homes

A patient-centered medical home (PCMH) is a value-based care model that involves a primary care physician who coordinates a centralized care setting for patients to meet their different needs. Through one-on-one relationships with their care providers, patients can benefit from a more personal approach, and treatment is determined based on both medical and environmental factors.

In one Colorado-based PCMH, emergency department visits declined by 15 percent, inpatient admissions fell by 18 percent, and ROI was $4.50 for every dollar spent.

Accountable Care Organizations

Accountable care organizations (ACOs) are patient-centered networks with the goal of lowering costs while improving the quality and delivery of patient care. They comprise a group of physicians and healthcare providers who work together and leverage health information technology to gather data efficiently for improved patient care at reduced costs.

Shared Savings

The shared savings model is a type of agreement that can be made with ACOs. They differ from the fee-for-service model in that payers reimburse providers based on quality and spending targets. When targets are met, savings can be shared with the payers by providers. However, when spending is above the target, no penalties are incurred by the provider.

Shared Risk

While shared savings agreements do not include sharing risk, shared risk plans, also known as downside risk models, hold the provider accountable to the ACO. The prospect of greater financial rewards comes hand in hand with the risk of losses.

With shared risk models, it is crucial for the provider to stay at or below the target rates set or risk covering all or part of the extra costs involved in patient care.

Global Capitation

Global capitation is on the riskier end of the spectrum when it comes to value-based care models, requiring the provider to assume 100% of the risk. This model designates a certain amount per patient for providers and allows them to keep any savings. However, this also means providers need to take on the risk of any losses incurred.

Challenges When Transitioning to Value-Based Care

Despite the many benefits value-based care will bring both patients and providers, the initial transition from the traditional fee-for-service model to these newer models potentially poses a few challenges.

The American Medical Association presents providers with three recommendations in order to successfully make the shift to value-based care:

Aligned Values

Healthcare providers need to prioritize and define the outcomes that are most important to both providers and patients. This can be challenging during the initial stages of the transition because with value-based models being primarily quality-focused, definitions of what is truly important will vary from provider to provider.

Smart Data Management and Measurements

Understanding patient data is key to quality delivery of care. By introducing methods of collecting patient data and implementing the systems to analyze it effectively, providers are in a much better position to provide quality care to patients.

Anticipating Challenges

By preparing for the challenges that come with transitioning from a volume-based payment model to a value-based care model, providers will be in a much better position to cope with the shift. As updates to Medicare policies are constantly evolving, providers need to stay in the loop with the latest developments to anticipate these challenges.


How HRS Can Help Navigate the Transition to Value-Based Care Modelsvalue-based reimbursement in healthcare

A telehealth and remote patient monitoring solution that is aligned with your organization’s goals is key to helping you successfully transition to value-based care, resulting in benefits like improved patient outcomes, reduced costs, and decreased hospital readmissions. Speak to one of our reimbursement experts to learn how we can help. 

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