Value-based care is dead—focus on what makes an impact in one generation

Despite decades of effort, value-based care (VBC), which CMS defines as designing care to focus on quality, provider performance, and the patient experience, has failed to achieve its promised outcomes. It’s time for healthcare leaders to explore new models that prioritize sustainable impact over outdated measures.

The first example of value-based care—connecting healthcare payments to the value delivered—was the Patient-Centered Medical Home (PCMH). It was created in 1967 in response to sick children being seen by many disconnected specialists but not receiving the care coordination they urgently needed. In the nearly 60 years since then, many acts of Congress, regulations, and models delivered by the Centers for Medicare and Medicaid Services (CMS) and other healthcare entities have experimented with VBC with little to show across the quadruple aim of care (reducing cost of care, enhancing the experience of care, improving health outcomes, and addressing health equities).

Exhibit 1 shows the recent adoption of different types of VBC, seen through payment flows across commercial, Medicare, and Medicaid plans, was below 25% in 2022, though there has been an uptick over the last few years. That increase is a flash in the pan, and the healthcare industry must find a different way to address the quadruple aim of care.

Exhibit 1: The definition of value in healthcare continues to be elusive as VBC adoption remains fleeting

Source: Health Care Payment Learning & Action Network, HFS Research, 2024

VBC history is a string of lost causes fueled by the inability to define healthcare value

Starting with the PCMH, there have been many different efforts to drive VBC, as shown in Exhibit 2. The early 2000s saw an acceleration of CMS experiments with a variety of different programs in four categories (with examples):

• Disease-specific: End-stage renal disease (ESRD); comprehensive care for joint replacement (CCJR)
• Productivity goals: Hospital readmissions reduction program (HRRP); hospital-acquired conditions reduction program (HACRP)
• Payment transformation: Medicare Shared Savings Program (MSSP); merit-based incentive payment system (MIPS)
• Organizational constructs: Accountable care organization (ACO)

To CMS’s credit, some of these programs were ended due to limited progress. Still, many VBC models and programs remain in use as their efficacy continues to be debated, and the overall effort certainly has increased the cost of compliance. Some estimates suggest that, on average, VBC programs consume up to 20% of revenues just for providers to remain compliant, even as their margins are in the low single digits.

Exhibit 2: This historic roadmap is proof that VBC deserves to be buried

Source: HFS Research, 2024

While CMS deserves credit for driving innovation, they don’t always know when to stop. When a model is failing or has failed, CMS creates a new model and transitions to it. A case in point occurred in 1977 when the federal government gave Maryland a waiver empowering the state’s newly created Health Services Cost Review Commission (HSCRC) to set hospital prices for Medicare. When Maryland was at risk of failing the annual test and losing its waiver in 2010, the state and CMS agreed to fold the waiver into a demonstration under the auspices of the newly created Innovation Center called the All-Payer Model, which drives global budgets for general hospitals. Some point to success based on the slowing annual growth rate of costs, while others argue it is not the proper way to measure healthcare success.

VBC is an insurance construct that will NEVER work in a care delivery paradigm

Human life and health are amorphous, intersecting physically, emotionally, spiritually, and in other ways. Performance is measured by various success factors, individual choices, and situations, with constraints weighing each. It is seldom measured by the cost associated with therapy or the outcomes, though it certainly does impact choices when such choices are available, e.g., gunshot wound vs. cataract. Defining value through a VBC construct is a fool’s errand, as seen by the results of 60 years of countless programs.

It is time to stop force-fitting a risk management idea into care delivery. Doctors’ core skill is curing the sick, not managing financial risk. Forcing them to adopt an ever-evolving set of risk management models above and beyond their remit is unfair and dangerous to patients. Here’s what needs to happen instead:

• CMS: Stop experimenting with VBC, which is blatantly biased toward dollars and cents. Instead, focus on the health of the individual. Consider direct-to-provider programs, where DRG sets global prices, and Medicare members can see any provider anywhere in the country. Yes, this means price fixing, which must be considered since it is predictable, can be indexed to COLA, and works in many parts of the world. Member health outcomes can drive incentives and penalties to keep the capitalists happy!
• Employers: Start by firing your health plan and exploring new models to address your employees’ needs. Do not fall prey to VBC’s mythical merits; they are a fantasy.
• Healthcare providers: Get close to CMS and influence their thinking about consumer health. Innovate in disease prevention, nutrition, and wellness. Help create global payment models at the DRG level. Get paid for spending time with patients, incorporating social determinants of health into their treatment plans, and returning them to sustainable health. Reject volume-driven payments and stay true to the Hippocratic oath.
• Service providers: Enable technology to support direct-to-provider at scale. Collaborate on reimaging the value chain where administrative processes are limited and automated. Innovate to maximize clinician-patient time while enabling technology to help clinicians with diagnosis, drug interactions, treatment planning, and patient education.

The Bottom Line: The house (health plans) always wins. VBC makes healthcare providers poorer and patients sicker. It’s time to abandon what has failed for three generations.

While recognizing that healthcare is expensive and outcomes vary by individual, assigning value at a population level and tying provider payments to it is wrong, and 60 years of results validate that. According to the misattributed quote, the definition of insanity is doing the same thing over and over again and expecting different results. That succinctly exemplifies VBC. It’s time to bury it and move on.