Value-Based Care: Financial Impact for Doctors

Value-based Care (VBC) is major healthcare reform. It is the difference between incenting quality over quantity.

The FFS is about quantity. The financial incentive was to increase the number of procedures, tests, and consults. The VBC model is measured on quality. Reimbursement is provided (or withheld) based on the quality of patient treatment.

CMS is behind the move away from the current FFFs model. CMS is the largest healthcare provider in the U.S. They provide healthcare to over 90 million people. The agency has the clout to force change.

As of 2019, the Medicare Access & CHIP Reauthorization Act begins Medicare VBC reimbursements. Congress is on board. Businesses are desperate to slow healthcare costs. Patients need relief too.

The goal of the VCB is to increase the quality of care, encourage teamwork, and reduce costs.  But how does it affect what doctors get paid?

payment models
Figure 1 This graph from HRSA shows the progression by Medicare and commercial payers for Medicare      Advantage or other APMs.

VBC Terms

It’s helpful to have an understanding of the financial terms you’ll encounter in the new landscape.

Accountable Care Organization:

ACO’s are groups that share responsibility for coordinated patient care. ACOs have to provide care to 5000 Medicare patients for three years, as per the ACA.

Medicare Shared Savings Program: 

Medicare Initiative to help develop ACOs and get reimbursed under a shared-savings arrangement. Over time, the program requires participation in shared-risk arrangements.

Merit-based Incentive Payment System:

MIPS offers a performance-based payment adjustment for participating clinicians.

Advanced APMs:

Participants earn a Medicare incentive payment for participation in an innovative payment model. This model requires the use of certified EHR technology.

Pay for Performance:

Physicians use the FFS model with bonus payments for meeting quality metrics. They can also be penalized for not meeting targets and receive a reduced payment.

Bundled Payments:

Bundles are payments for a course of treatment for a specific condition. This eliminates separate payments to hospitals, physicians, and other services. The group keeps any money they save by reducing spending without an impact on the quality of care.

Global Capitation:

A per-person per-month payment intended to pay for any qualified patient care, no matter what services are needed.

Patient-centered medical home (PCMH):

Primary care physician creating a team approach to holistic, evidence-based care. Doctors can earn extra payments for performance-based incentives, on top of FFS payments.

Shared risk: Reimbursements are based on cost and quality of care. If set targets aren’t reached, penalties are applied. They include repaying cost differential between target and actual and reduced payments.

Downside risk:

A provider is penalized if patients have worse-than-average quality/cost outcomes.

Upside risk: 

A provider gets a bonus when patients have better-than-average quality/cost outcomes.

Just a reminder, VBC applies to Medicare services, including Medicare Advantage. If you want to provide Medicare services, apply here. Even if you don’t see Medicare patients, financial reforms aren’t going away. As positive data is collected on VBC, a push for a broader implementation is inevitable.

VBC Plan to Reduces Healthcare Costs

Value-based care focuses on prevention, following the whole person model. Some are operational, others are conceptional. They are marked with an *.

  • Reducing visits to ER
  • Patient education for managing chronic conditions or post-op recovery
  • Standardize processes for cost-effectiveness*
  • Minimize the overuse of medical tests
  • Reduce readmission to hospitals
  • Aggregating and analyzing data to see care patterns and create best practices *
  • Build alliances with drug companies to align drug costs to health outcomes*
  • Encourage employers to offer VBC programs to employees*
  • Improve coordination between medical teams and increase access to services

How does VBC work?

The goals are altruistic. The FFS model is contributing to waste and higher costs without better outcomes. The shift to VBC is likely to improve patient care, but the transition is challenging for doctors. VCB is popular with executives in hospitals, but physicians are slower to come on board.

The logistics of operationalizing VBC are not easily understood. There’s a focus on Health IT infrastructure that many practices don’t have. Integrating EHR data with other systems is not an easy (or inexpensive) task. Some smaller practices don’t even have online intake systems.

Define Value

This is probably the biggest obstacle to the adoption of VBC. Value means different things to different stakeholders. For hospitals, Value = Quality / Cost. For patients: “What do I needs and how much will it cost?”

And for doctors? How value is measured has everything to do with how they get paid. While some support the concepts of VCP, the financial uncertainty is discomforting.

Medicare payments are already well below market value. The incentives offered have not been sufficient to pull in more doctors.

CMS provides a database of measures. It’s not as clear as it needs to be

Cost measurement is a constant in the discussion on quality. Cost is quantifiable, which makes it easier to measure. The 2016 Doctors Survey by Deloitte found doctors thought cost had too much priority. They wanted more focus on improved health outcomes.


Many doctors feel metrics need to address improvements in patient outcomes, not just cost savings.  They see the pendulum swinging in the opposite direction from FFS inefficiencies.

As an example: A patient needs a knee replacement. The medical team is using a bundled payment model. The team makes the most money if they reduce costs. Is there potential for abuse? Yes.

Aren’t patient outcomes supposed to be a measure? Yes, but how are they confirmed, and on what timeline? It’s unclear at what point in the process payments are made. Neither is it known when health outcomes are “confirmed.”

If the knee surgery patient develops complications after payment, is there a clawback? How and who is monitoring?

Data Interoperability

Sharing data is a significant component of VBC. CMS lists the following electronic clinical quality measures (ECQ) on their website.

  • Patient and Family Engagement
  • Patient Safety
  • Care Coordination
  • Population/Public Health
  • Efficient Use of Healthcare Resources
  • Clinical Process/Effectiveness

There are no parameters on what data to collect, nor data sources. The EHR can be a source for some but others are unclear.  Data from remote monitoring devices will be included.

To be effective, data aggregation includes:

  • Health care billing/claims data
  • Clinical data from electronic health records or patient registries
  • Data on the costs of health care services; and
  • Data on patient-reported outcomes
  • Environmental factors on health data
  • Social factors of health data

As we move toward VBC, a broader definition of health is appearing. The idea of the whole patient is the first change in mindset. The next step is to incorporate data on lifestyle, environmental, and social factors. From there, health informatics carve out population health visibility.

These data are combined to visualize patterns of care. The goal is to see what’s most effective, reducing the number of unnecessary procedures. Those data sets provide transparency for consumers and show areas for improvement.


For a clinician to qualify for APMs, they must have a credentialed HITECH system. For smaller practices, this is challenging. It takes an IT professional to set up and validate your systems. To share data with other systems, i.e. labs and hospitals, they have to be compatible.

It takes multiple links to find out how to collect, report, and utilize the data set. You need to sign up for a Unified Medical Language System (UMLS) account and a JIRA account to start – see the instructions here.

Doctors express concern over ambiguity in measures. The biggest concern is the severity or complexity of a patients’ condition.

Data transparency isn’t always helpful. Payers are using data to compare doctors to their peers, communicating with those underperform. It’s unclear if other users can see the comparison data. Questions have been raised about privacy. This type of pressure can add to the growing epidemic of physician burnout.

Issues around data collection and aggregation, as well as privacy and security, are complicated. They require investment in IT infrastructure. It’s doubtful small or rural practices can afford to participate. The only option is to build a strategy to leverage the pay for performance model.

Reduce Variations in Care

Guidelines are evidence-based recommendations to support decision-making for clinical care. Some doctor’s offices have them and some doctors use them.

It’s a given that how guidelines are followed will vary among practices and doctors. But when quality of care is a measure, how the care is provided must be consistent. If not, the data is skewed. This is the same data that helps determine value-based payments.

The creation of clinical guidelines falls to third parties. Hospitals are better at standardizing care guidelines than individual practices. This is a guide for writing a clinical guideline by the American Association of Family Physicians.  It’s doubtful that physicians would have time to create them.

The expectation is for evidenced-based, trust-worthy guidelines. There is currently no model to measure if those standards are being applied in practice.


There is no data set of national, evidence-based clinical guidelines. There’s no comprehensive database. The Agency for Healthcare Research and Quality lost funding for their clearinghouse. AHRQ does have some guidelines published here. They also recommend the US Preventative Services Task Force database which may prove helpful.

Still, the approach is piecemeal. The complexity of developing this type of repository is daunting. The number of guideline records is extensive. The information infrastructure would need to organize content into manageable, searchable categories.

The bigger issue is that no single agency or organization owns this process. How does CMS render reimbursements based on quality of care without a shared standard?

Quick Facts on Medicare

As of 2018, 36% of Medicare reimbursements fell under VBC reimbursement models.

The number of doctors who are willing to accept Medicare is shrinking. Only 72% of Medicare-approved doctors are willing to accept new Medicare patients. This despite a growing number of seniors.

  • Only 81% of physicians accept Medicare, down from 93% in 2015
  • Almost 3% of family doctors have dropped the program entirely
  • The payments from Medicare are much lower than private insurance

The variance in payment has been frustrating doctors for years. More and more doctors are looking at letting patients pay direct. By eliminating payers, red tape and paperwork, direct pay services become more affordable.


Value-based care has yet to prove doctor compensation will improve. Payers are already pushing doctors to consider performance-based payment plans. Healthcare reform is necessary. It will not be successful if physicians can’t afford to practice. No one seems to realize that doctors can default.

Summarizing Value-Based Care

The reasons for transitioning to VBC are valid. Everyone wants to improve the quality of care for their patients.  The inefficiencies of the current FFS system are undeniable.

Cost is the single, consistent, available metric in VBC, yet there is no consideration for providers’ operating costs. The stakeholders in value-based care are payers (CMS), hospitals, patients, and doctors.

The program is patient-centric. Transparency helps them make better choices. Treating the whole person should improve their health outcomes.

Hospitals can standardize clinical guidelines for a large number of patients. Even 93% of small rural hospitals have certified health IT.  Large organizations will initially benefit more than most from the new. But downside risk increases over time. We have yet to see clawbacks or penalties from the inability to meet targets.

Doctors and practices will not be able to respond so quickly. Many practices do not have the IT infrastructure to support the transition. Most do not have IT support for their practices.

By 2008, 42% of physician offices had an EHR system installed. (Imagine using a 12-year-old phone.) It’s unclear how older systems will be able to share data to participate in APMs.

Value-based care is a good idea. But from a physician perspective, it’s not quite ready for prime time.


Share This