For decades, the traditional fee-for-service or volume-based model dominated healthcare, incentivizing providers to prioritize quantity over quality in patient care. Today, with rising pressures over costs, inefficiencies, and patient outcomes, the focus has shifted to value-based healthcare models.
This new paradigm emphasizes quality outcomes and patients’ overall well-being, aligning incentives to benefit everyone involved—from providers to patients. This model also makes good business sense. The value-based health care market, worth $12.2 billion in 2023, is predicted to grow to $43.4 billion by 2031.
This article will explore the key differences between fee-for-service and value-based care, the benefits of this shift, and actionable strategies for healthcare providers looking to implement value-based care models.
Fee-for-Service vs. Value-Based Care
What is fee-for-service?
Historically, under the fee-for-service (FFS) model, healthcare providers are paid for each service (or volume) they deliver—whether it’s a consultation, test, or medical procedure.
Some FFS advantages include:
- Healthcare providers have more control over their practices, according to the American Medical Association (AMA). Providers can choose which procedures to perform and how to bill for them.
- Providers are reimbursed for every service they offer, which can lead to higher revenue.
While this payment structure ensures providers are compensated for their work, it often leads to barriers in care, including:
- Unnecessary procedures
- Fragmented care
- Rising healthcare costs
- Treating diseases and conditions rather than preventing them
What is value-based healthcare?
Unlike fee-for-service models, value-based care (VBC) links payments to the quality of care provided and patient health outcomes. Rather than providing more services, healthcare professionals offer holistic, coordinated care that focuses on long-term patient health and satisfaction.
One example of a VBC model is Accountable Care Organizations (ACOs). ACOs are physicians, hospitals, and other healthcare providers collaborating to deliver coordinated, high-quality care to Medicare patients. Providers share in savings when they reduce costs and improve patient outcomes. Some VBC advantages include:
- Improving patients’ health by prioritizing preventative measures.
- Reducing costs by focusing on efficient care delivery and reducing unnecessary procedures, hospitalizations, and other medical interventions.
- Holding physicians accountable for their patient’s quality of care through performance measures and financial risk requirements.
While research argues that the VBC model holds more value for healthcare practitioners and patients in the long run, it could be better. Limitations include:
- Complex implementation and potential for higher healthcare costs if poorly managed.
- Need for advanced data infrastructure to measure outcomes effectively.
The key difference between these two healthcare models is the fee-for-service model rewards volume, while value-based care incentivizes results. These fundamental differences are at the heart of the shift from volume to value in healthcare.
Why is the Shift in Models Necessary?
The fee-for-service model has led to unsustainable healthcare spending and a fragmented system prioritizing services over outcomes. Here are some examples:
- FFS may not incentivize doctors to prioritize preventive measures or long-term patient outcomes.
- The model can lead to disjointed care because providers operate independently.
- The FFS structure often results in an administrative burden, with providers spending more time on paperwork than patient care.
- FFS doesn’t provide incentives for cost-containment. Instead, the cost of fees and how fees are determined drives up healthcare prices.
With these issues and others, such as growing rates of chronic illnesses, shifting from volume to value in healthcare has become an urgent necessity. Value-based care focuses on prevention, not crisis – which saves lives and money.
Benefits of Value-Based Healthcare
Adopting value-based care strategies offers many advantages for healthcare providers and patients. Below are four crucial benefits of this model.
1. Improved Patient Outcomes
Patient outcomes in value-based care are significantly better than those under the FFS model. By focusing on preventive care, providers help patients achieve better health and avoid unnecessary hospitalizations. For instance, chronic diseases such as diabetes, which account for some of the highest health costs in the US ($412.9 B), are better managed under VBC.
One example is Level2, a value-based care solution that combines wearable technology with clinical support and aims to help improve the health of people with type 2 diabetes. Research shows this solution leads to sustained lower glucose levels among participants. This proactive approach is just one example of how VBC leads to improved outcomes and economic savings.
2. Lowered Healthcare Costs
Healthcare costs per person for adults in New Jersey insured through an employer is $659 per month, 15% higher than the national average of $575, according to the New Jersey Health Care Affordability, Responsibility and Transparency Program. And this is just a snapshot of one state.
By eliminating redundant or unnecessary treatments, reducing healthcare costs with value-based care becomes a sustainable reality. Providers work collaboratively to deliver efficient, high-quality care, lowering the financial burden on patients and the system.
3. Increased Revenue and Incentives
Healthcare provider incentives are better aligned with value-based care models. Providers are rewarded not for the quantity of services they deliver but for the positive health outcomes they achieve, like reduced hospital readmissions and improved chronic disease management.
For example, VBC models can save medical practices a significant amount of money, with reports showing a cost reduction of up to 23.2% in Medicare Advantage plans compared to traditional Medicare, representing billions of dollars in savings depending on the practice size and patient population.
4. Promotes Coordinated Care
Coordinated care in value-based models ensures that different providers and specialists work together to deliver seamless, patient-centered healthcare. This not only improves efficiency but also enhances the patient’s experience.
Value-Based Care Strategies for Providers
Switching to value-based care requires a deliberate and strategic approach. Below are some actionable steps for healthcare providers to begin the transition.
Invest in Advanced Tech to Monitor Outcomes
As previously mentioned, success in value-based care is deeply rooted in measurable improvements. To achieve this, providers must have an advanced data infrastructure to gauge outcomes effectively. Leveraging technology and analytics tools can help medical offices track patient data, measure outcomes, and identify improvement opportunities.
For example, a communication platform that can integrate with existing electronic health records (EHRs) like Updox can help medical teams succeed in offering value-based care. The platform provides HIPAA-compliant form software to assist providers in streamlining medical forms online for efficient, secure, accurate, and compliant healthcare documentation.
Focus on Preventive Care
Proactively manage patient health through preventive screenings and early interventions. For instance, the Updox platform offers features like Broadcast Messaging to quickly and efficiently reach patients and keep them updated on your practice’s latest services, like flu or COVID-19 vaccinations. Send messages to all patients at once or segment groups based on demographics or diagnoses.
Foster Multidisciplinary Collaboration
Encourage collaboration between physicians, specialists, nurses, and other healthcare professionals to ensure coordinated care and improved efficiencies.
Engage Patients in Their Health
Empower patients with education, tools, and resources to actively participate in managing their health. Patient engagement is a critical driver of better outcomes. Online patient portals are practical tools patients can use to easily access medical records, clinical summaries, and educational materials, or reach out with concerns.
Challenges in the Transition
While the shift to value-based care has immense benefits, it comes with challenges.
- Adopting new metrics: Measuring the quality of care and outcomes requires a shift from traditional methods.
- High costs: The initial investment in systems and technology may deter some providers.
- Cultural resistance: Shifting mindsets from “more services” to “better outcomes” can be challenging within traditional healthcare systems.
The good news? These challenges are surmountable with the right strategies, technology, and resources in place.
The Future of Value-Based Healthcare
The adoption of value-based care is steadily increasing, driven by advances in technology and policy reforms. This shift represents a long-term solution to many systemic issues in global healthcare.
While the transition may take time, healthcare providers implementing value-based care strategies today will be at the forefront of this change, leading to improved health outcomes and better financial sustainability.
