What is value-based healthcare?

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A value-based payment model requires healthcare providers to deliver good outcomes for patients while managing resources economically, all in an effort to reduce the overall cost of healthcare. Since the 2008 introduction of the Medicare Improvements for Patients & Providers Act (“MIPPA”), legislation and policy changes have paved the way for a value-based payment (“VBP”) model in healthcare. Under this model, instead of paying for the volume of care given to patients, payers like Medicare compensate healthcare providers who deliver quality healthcare at a lower cost. However, if you’re thinking of implementing VBP there are numerous challenges to consider in addition to the benefits. To be successful with this payment model requires a significant financial investment, the technological tools for managing data, and a lot of patience.


Value-based payments is defined by the U.S. government as: “Linking provider payments to improved performance by health care providers.” Due to the rising cost of healthcare and declining reimbursements for Medicare and Medicaid claims, government payers of healthcare advocated to replace the previous fee-for-service (“FFS”) model with a model that rewards cost control and performance. Currently under FFS, hospitals and healthcare facilities are paid for the services they provide. This model only incentivizes healthcare providers to order more tests and procedures in order to increase the payments they receive. There is no motivation to improve the quality of care offered to patients.


According to a July 2018 survey by NEJM Catalyst Insights Council and sponsored by Optum, “42% of respondents say they think value-based reimbursement models will be the primary revenue model for U.S. healthcare.” In addition, respondents reported that a quarter of reimbursements their organizations receive are based, on average, on value, and three-quarters of their revenue is based on fee-for-service care. When the FFS model provides a considerable amount of revenue, it’s understandable why healthcare organizations are reluctant to move to a VBP model.


However, the healthcare field’s shift to VBP is inevitable and healthcare providers who hesitate to act may be left behind. A few of the benefits of VBP include:


Data-driven insights

Healthcare based on data insights can improve the quality of care delivered by your hospital or healthcare facility. When healthcare is tracked, measured and reported to payers on metrics such as hospital readmissions, patient outcomes and patient engagement, these valuable data insights lead to improving the quality of healthcare patients receive.


Better outcomes for patients

When healthcare providers use evidence-based medicine, patient engagement strategies, health-related technology and data analytics to offer better coordinated and effective care, patients require fewer doctor’s visits, tests and procedures, prescriptions for medication, and experience improvements in both short-term and long-term health.


Greater efficiency and patient satisfaction

Healthcare providers may need to spend more time on preventative care, but will spend less time on chronic disease management. With a focus on value instead of volume, delivering quality care and engaging with patients will result in greater efficiency and patient satisfaction for your healthcare organization.


However, with the different options for implementing the VBP model, your healthcare organization will have to consider the challenges including:


High cost to implement

Switching to VBP can be intimidating when the financial investment required is quite substantial. The cost to invest in IT platforms and other resources, as well as take on the financial risk involved, can be a deterrent for some healthcare organizations.



To track performance and analyze data, your hospital or healthcare facility may need a new IT infrastructure and knowledgeable staff to oversee complex VBP-related activities. Healthcare organizations who are unable to effectively manage their data may miss meeting their value-based care objectives and be penalized as a result.


Long road to success

Although VBP has been widely embraced, a 2019 study from HealthEdge shows healthcare payers and providers are divided on what VBP programs work best and are struggling with internal (technology, infrastructure, administrative) and external (patient engagement, healthcare partners) barriers that slow down their progress.


As such, there isn’t a one-size-fits-all VBP model that will work for your hospital or healthcare facility. When considering how to implement VBP, healthcare providers have to take into consideration a number of factors including understanding their market position, patient populations, financial status and organizational capability, as well as know how the different payment models work and the best approach for their organization.


The value-based payments model rewards hospitals and healthcare facilities that provide quality care to patients while reducing the overall cost of healthcare. Healthcare organizations who understand where money is going and how to control costs, as well as have the ability to create what-if scenarios and track performance for future planning will be in the best position to manage VBP. Healthcare providers that budget with spreadsheets are at risk of working with inaccurate data and won’t have the ability to analyze data to make decisions quickly. By using a powerful solution such as Questica Budget’s budgeting, performance and transparency suite of products, your hospital or healthcare facility will save time and gain valuable data insights for competently and successfully starting your VBP journey.


About Questica

For over 20 years, Questica been working with public sector organizations – hospitals and healthcare facilities, governments, colleges and universities, K-12 schools and non-profits – to better enable data-driven budgeting and decision-making, while increasing data accuracy, saving time and improving stakeholder trust. Our customers are using our Questica Budget suite to drive budget transformation by creating a single source of data truth. Almost 700 organizations across North America in 46 states and 11 provinces/territories have eliminated spreadsheets opting for smarter planning, budgeting, performance measures, management, reporting, transparency and engagement with our software solutions. To learn more about Questica and how our software solutions can help your organization – watch a product video, read one of our case studies/white papers or request a demo today!