US Value-based care compared to fee-for-service, theory vs reality and need for adapting innovation


Value-based care (VBC) became a buzzword in the healthcare industry, but what does it really mean? The equation that Harvard Business School came up with for a value-based care looks like that “Value = Quality/Cost”. In other words, we are trying to bring costs down for patients while improving their health outcomes. The US federal government is supporting this initiative with Medicare advantage, accountable care organizations, and bundled payment models. 

As simple as it could sound, it could be challenging to bring value-based care in reality. Some of the problems patients can be confronted with are early discharges, access to care and specialists to name a few. Let’s study closer all the pros and cons of value-based care.

Hospital care avoided means decreased patient satisfaction

One of the major costs for groups using value-based care is management of acute patients staying in hospitals. With $3,000-$4,000 daily cost per stay, hospitals are closely monitoring bed days and admissions. To bring the costs down, avoid hospitalizations and readmissions, hospitals are carefully managing outpatient clinic patients. The outpatient care in this setting often includes advanced access to primary and urgent care with better chronic care management. If outpatient care is not enough, hospitals refer their patients to nursing facilities instead for cost efficiency reasons. 

In reality, the desire to avoid costs under value-based care results in lower quality of care and decreased patient satisfaction with early discharges and consequent readmissions which could be avoided, as well as rushed transfer to palliative care and hospice. 

Avoiding Specialist care results in increase complaints

The specialist consultation and further diagnostics with labs and tests are also associated with high costs for the healthcare system. As opposed to fee-for-service care which allows the patient to almost automatically and without hassle be referred to the specialist, in the value-based care setting, the generalist is dealing with all patients’ concerns unless the referral to the specialist is absolutely necessary. It reduces unnecessary procedures, aggressive care and extra spending, but, on the other side of the coin, we can see the cumbersome administrative process and paperwork to get the referral approved by health plans and medical groups. The delays cause dissatisfaction and complaints among both doctors and patients, especially the ones with acute symptoms and considerable health deteriorations. 

Choice of care is limiting factor

The limited choice stems from a smaller group of specialist and medical centers value-based health entities work with. Being in a network, they usually have a common electronic medical record platform for data centralization, operational efficiency and convenience. The choice of specialists in the network is usually explained by cost-efficiency, which does not necessarily go with quality. The access to care through so-called  ​“high value physicians” carefully curated by the network is considerably complicating the access to care and is subject to delays. 

Complementing teams results in patient confusion 

Value-based care groups are broadening their clinician teams complementing them with nurse practitioners, pharmacists, physician assistants, registered nurses, medical assistants, and community health workers. When communication and coordination are established and roles defined this approach improves access to care and overall outcomes. The use of specialists interchangeably without roles and skills definition, in its turn, results in poor outcomes and coordination. The other downside is the confusion it creates among patients that are expected to see real physicians. 

Innovation can be curtailed

Value-based care groups are very conservative in their spending and investment in innovation. They tend to choose non-branded generic pharmaceuticals often ignoring higher priced branded drugs which could be more effective in disease treatment. The same with innovation, they are reluctant in adopting ​​new drugs on formularies, advanced diagnostics, newer procedural interventions and remote patient monitoring technologies which in the long-term perspective can save them money, increase capacity and provide continuous care to the patients. This approach can conflict with patients who are powered by numerous internet resources and can compare different approaches to care, technologies and drugs available on the market. 



The key learning here is that value-based care entities should be primarily driven by common sense and benefits to the patients and not only financial reasons. Trying to optimize the care for the patient, healthcare organizations are often only optimizing their budget. There should be a middle point between over delivering the care to patients and under delivering. Doing the right thing for the patients will not only affect the quality of care, but also will open more opportunities for healthcare entities using a value-based care approach. 

The shift to aging in place, hospital at home trends in the saving grace as more companies in US move to Value Based Care to help curtail costs. Hence Innovation has to be pushed by VBC stakeholders. 

Our SenSights.AI provides a health intelligence platform that can not only help in care coordination but also help predict and prevent certain medical episodes (like fall detection) from happening in advance that will help reduce emergency visits and re-admissions. We do this by offering passive and ambient monitoring solutions that help increase compliance of patients. This results in increasing patient engagement and they take control of their health.

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Siwicki, B. (2022). Report: 90% of nurses considering leaving the profession in the next year. Healthcare IT news. Retrieved from