What is Value-Based Care?

Executive Summary

There has been a recent shift toward concepts such as value for money, return on investment and value-based healthcare. This article introduces the concept of value-based care, explores trends toward new funding models and discusses some of the challenges inherent in that shift. Links to relevant case studies, tools, and related articles are also provided.

  • Introduction
  • Value-based Care Funding Models
  • Challenges in Shifting Payment Models

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Value-based care is a team-based model that uses a patient-centered medical home/neighbourhood approach and increased patient engagement. It is focused not just on a physician delivering care, but on a whole team working to deliver better healthcare and “health”. The patient becomes a partner and has an influence on their medical care (see a related tool on changing patient behaviours). There is also a new focus on outpatient care.

The value-based care approach includes the following elements:


Determining which aspects of the care process add value to a patient or client is a key step in providing care that matters. Various lean tools may be helpful in this regard.

Value-based Care Funding Models

Traditional fee-for-service models are shifting slowly toward outcome or value-based care where providers are paid for delivering quality care. Most of these emerging contracts are based on a shared savings model where providers are incented to reduce spending on a defined patient population by offering them a percentage of any net savings they realize (e.g., The Medicare Shared Savings Program in the U.S.). Other models include episodic bundling which pays a set rate for an entire episode of care; and wellness payment models which are similar to next-generation capitation but include a wellness component and severity-adjusted payments.5 St. Joseph's Healthcare successfully segmented specific chronic disease patient populations using a bundled funding model to deliver more streamlined, efficient care in their Integrated Comprehensive Care Project. A bundled care approach was also used in a recent pilot at Children's Hospital Boston for asthma patientsHealth systems are therefore becoming more nimble in terms of the information systems required to support these models - both from an accounting standpoint and on the quality metrics side. The figure below3 demonstrates this trend toward reducing utilization and the short-term challenges involved in reducing volumes where traditional models would have paid for such increases. 


Challenges in Shifting Payment Models

The shift in payment models involves two major challenges for healthcare provider organizations:2

  1. there is a need to live in both worlds of fee-for-service and value-based payment for several years; and
  2. economics do not support a quick shift to population-based healthcare and there is limited payment in value-based approaches.
Four stages of migration to value-based approaches include:2
  1. Preparation: assessing the delivery system and training providers on the various nuances of population health;
  2. Transformation: building the model of population health and creating things that make sense in both payment models;
  3. Operational: involves understanding the payment and attribution model and setting up the right payment infrastructure for specific providers;
  4. Growth: growth in the marketplace is critical; pilot programs can be introduced and then expanded over time.

Moving toward value-based models will take time and health care organizations will need to find ways to reduce waste, improve operating costs and eliminate inefficiencies.