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Everybody’s Talking About Value-Based Health Care. Here’s What They’re Not Saying.

Attend any healthcare conference and you’ll quickly discover that it’s become downright fashionable for healthcare leaders to talk about their unwavering commitment to “value-based care.”

The expression has become ubiquitous in healthcare circles. Its virtuousness goes unchallenged.

But should that be the case?

Since that time, the federal government has introduced a number of policy instruments to accelerate the transition to value-based care including Medicare Advantage, accountable care organizations, and bundled payment models.

New startups—such as Aledade, Iora Health, Landmark Health, Oak Street Health, and VillageMD—have arisen with the intent of bringing value-based care to the masses.

And big-box retailers such as CVS, Walgreens, and Walmart, too, have jumped on the value bandwagon.

The underlying principle of “value-based care” is simple enough—managing to a lower cost of care for a population of patients, while aiming to improve outcomes.

But what does this value-based care look like in practice in the real-world of patient care (beyond the industry conference jargon and academic expositions on the subject)?

On one occasion, his mother was discharged from a hospital sooner than he felt she should have been (she was later readmitted). On another occasion, she was denied access to a tertiary cancer center, where he believed she should have gone for a second opinion. And on a third occasion, she was denied access to a specialist who my friend felt could have corrected an earlier, botched cataract surgery.

As my friend decried his mother’s care experience, I couldn’t help but think that he (and others) are somehow failing to connect the dots between the promise of value-based care and its real-world implications. Which got me thinking that it perhaps might be helpful for all of us to look closely at what value-based care means—good and bad—for patients receiving care governed by its principles.

These observations arise from my time as an academic studying value-based care; my leadership of CareMore and Aspire Health, the value-based care delivery divisions of Anthem Inc; and my current role leading SCAN Health Plan, a non-profit Medicare Advantage health plan that partners closely with many value-based groups.


While pharmaceutical costs get a lot of attention, the single most expensive line item for many groups operating in the “value-based care” space is management of acute hospital bed days. A day in the hospital can cost as much as $3,000-$4,000. Given these hefty cost implications of a single day in the hospital, leaders of many value-based care organizations are in the habit of tracking hospital bed days (bed days/1,000 patients) and admission rates (admissions/1,000 patients) on a daily basis. The lower the numbers the better.

The overall goal is to try to avoid hospitalizations by closely managing patients in outpatient clinics and sometimes directly admitting patients to skilled nursing facilities, whose costs are significantly lower than those of hospitals. Intensive outpatient management often includes enhanced access to primary and urgent care and better management of chronic disease—all with the goal of reducing emergency room visits and subsequent hospitalizations. Many value-based care groups also make house calls to patients. The more technologically-enabled ones remotely monitor patients at particularly high risk of hospitalization.

Such aggressive bed day management often translates into lower hospitalization rates and shortened hospitalizations, but it can sometimes leave patients and families feeling rushed and uncared for in their most vulnerable moments. Patients who expect (and sometimes need) long hospital stays might be surprised when they’re discharged rapidly to their homes with home care services or to skilled-nursing facilities in lieu of an extra few nights in the hospital.

In addition, many value-based care groups prioritize palliative care and proactively transition patients to hospice—in part, because it’s often the right thing to do, and in part because patients with end-stage conditions often get admitted to the hospital and utilize countless expensive (and futile) hospital bed days. Patients in these groups sometimes feel that their doctors are rushing them down the path of palliative care and hospice prematurely, when they themselves have a desire to keep fighting their illnesses.


Like hospitalizations, specialist care—with all of its associated tests and diagnostic procedures—can be expensive. In fee-for-service environments, primary care physicians often refer patients reflexively. Chest pain? Cardiologist. Stomach pain? Gastroenterologist. Rash? Dermatologist. Aggressive specialty consultation is a mainstay for many fee-for-service primary care doctors.

In value-based care organizations, patients benefit in the hands of confident generalist primary care physicians who take more responsibility for patients and their outcomes than those who work in traditional primary care models. These generalist doctors only refer to specialists when they need an advanced opinion or the patient requires a procedure that they aren’t able to perform themselves.

Of course, there can be a downside. Patients who belong in the hands of specialists are sometimes delayed getting there—and can suffer and have poor outcomes as a result of those delays. Because of the focus on gatekeeping, patients often find themselves frustrated by utilization management—the administrative process through which health plans and medical groups review referrals to specialists and orders for diagnostic tests. And patients aren’t the only ones complaining. Almost every practicing doctor will tell you stories about how much work it sometimes takes to obtain approval for referrals that are absolutely necessary and just make common sense.


Many value-based care groups contract with narrow networks of specialists and medical centers. Members of these networks are usually chosen because they have relationships with the primary care groups and are sometimes employed members of their group (as with Kaiser Permanente).

Increasingly, groups are using network analytic tools like Cotivity’s RowdMap and Embold Health to identify so-called “high value physicians” who are thoughtful and careful about their use of diagnostic tests and procedures.

The benefits of these kinds of networks are manifold. Groups carefully curate specialists who communicate and coordinate effectively with primary care physicians and practice high-quality, evidence-based medicine. Group selection of specialists eliminates the guess-work that sometimes plagues patients (“Who should I see for….?”). And these specialists often operate on common electronic health record systems that can more seamlessly facilitate care coordination and the flow of patient information across clinical sites.

The downside is that some value-based networks are so focused on cost management that they tend to contract with specialists and hospitals based more on cost than on quality. Many “value-based” groups seem to steer clear of contracting with the most reputable (and sometimes higher quality) hospitals and their associated physician groups because they are expensive. Patients used to going to whatever facility they like for care are often surprised at how narrow the offerings are within their networks, especially in the unfortunate circumstances when patients tend to seek out highly specialized care facilities (i.e. cancer centers) and specialists.

In addition, some patients find that small, carefully curated specialist networks subject them to significant, potentially harmful delays in accessing care.

Pro Teamwork?

Again, seeking to reduce costs, many value-based care groups often introduce new types of clinicians in the care of patients. This is frequently known as “practicing at the top of the license.” In practice, it means groups supplement the work of physicians with nurse practitioners, pharmacists, physician assistants, registered nurses, medical assistants, and community health workers.

The addition of these clinical practitioners can improve access to care and also improve outcomes when they work as part of a team to more effectively coordinate the care of patients and manage their chronic conditions. The best value-based care groups have clear and effective rubrics for how all members of the clinical teams work together to serve patients.

On the other hand, patients who want to see physicians—or, sometimes, need to see physicians—often get frustrated that access to generalist physicians (and specialists) might be limited by non-physician gatekeepers. What’s more, the worst value-based care groups use professionals of all types interchangeably without paying close attention to differences in skills and knowledge across clinician types—or articulating a clear view as to how to coordinate efforts across disciplines.


Value-based care groups that are managing to the cost/quality threshold are often quite conservative in the development of the formularies they employ for the care of patients.

In practice, this means they tend to favor drugs with a significant evidence base and often prioritize the delivery of non-branded generic pharmaceuticals in lieu of branded drugs, and sometimes older drugs in lieu of newer drugs. What this translates to for price-sensitive patients is often lower drug costs and a focus on affordability of the therapies that they are prescribed.

That said, some critics argue that value-based organizations sometimes seem anti-innovation, as they can be slow to adopt new drugs on formularies and are sometimes price-focused to the point of ignoring higher cost drugs that can meaningfully alleviate patients’ suffering. The same can be said about advanced diagnostics and newer procedural interventions.

Value-based care groups can quickly find themselves at odds with their patients when their recommendations and treatment plans contradict what patients themselves learn doing their own research on the best and most modern course of action for their condition.

Pro Non-Clinical Interventions?

Many groups that are “value-based” assume full responsibility (often known as “full risk”) for the total cost of care. These groups, which are known for trying to drive at the root cause of why someone is consuming healthcare services, sometimes focus on non-traditional, non-medical interventions that improve outcomes while lowering the total cost of care for patients.

When I was at CareMore, our care management team once procured a refrigerator for a patient who needed it to store his insulin, recognizing that without the refrigerator, the patient would likely land in the hospital with high blood sugar. Rushika Fernandopulle, the founder of Iora Health, tells the story of buying an Apple iPod to soothe a patient whose anxiety led him to the emergency room more than 100 times a year. At SCAN, our Healthcare in Action medical group, which treats people experiencing homelessness, sometimes provides cell phones to patients; connectivity is important for people trying to access shelter housing.

Some people, hearing these exceptional stories, might argue that they are just that—stories—that don’t reflect their own experience of care. And few large-scale studies of interventions to address social determinants of health have failed to demonstrate any meaningful healthcare quality or cost benefit to the programs.

What’s more, while many value-based care organizations (including two I have led) provide access to gym benefits, transportation, food, and other interventions designed to improve key drivers of health, the published literature does not support the notion that these benefits have a meaningful effect on cost or the quality of outcomes—though the effect on select individual patients is incontrovertible.

Excessively Revenue-Focused?

While in its purest form, value-based healthcare is about lowering the total cost of care by ensuring that patients are healthier and are making judicious use of the healthcare system, many organizations spend significant energy trying to optimize revenues they earn serving patients.

Payers (including the federal Medicare program) typically adjust payments for patients based on the severity of their illnesses. As a result, many value-based care organizations spend significant energy documenting the severity of illness—time some patients may feel takes away from actually caring for them. For example, some medical groups employ home-based “welcome visits” from third-party vendors separate from annual physicals. The purpose of these visits is not at all clear to patients. But for the medical groups, these “welcome visits” identify unmet medical needs and trigger appropriate referrals, while enabling groups to document all of the medical conditions patients experience.

Yet as few would dispute, at their worst, these visits are sometimes totally divorced from a patient’s care and serve exclusively to maximize the payments groups receive from payers. These types of visits are often regarded as non-value added overhead.

In Whose Best Interest?

As I explained to my friend who was concerned about his mother’s care, the untold story of value-based care is that lowering the total cost of care while improving quality necessarily means creating some abrasion for some patients some of the time. And with this abrasion will inevitably come the feeling of a conflict of interest, real or imagined. The financial bottom-line of the doctor and his medical group may sometimes go against the care that the patient feels he or she needs. As my late economics teacher, Martin S. Feldstein, often said, “There’s no such thing as a free lunch.”

When a doctor denies a patient a test or new drug or referral to a specialist, is it because we are truly optimizing the care of the patient?

Or is it because we are optimizing the economics of the value-based group?

In an era when many “value-based groups” are backed by venture capital, owned by private equity firms, or publicly traded, is the decision to deny a specialist referral or the latest new pharmaceutical being made to optimize care or to protect quarterly earnings?

Said another way, is the near term action focused on the cost portion of the famed value equation? Or the quality portion?

It’s not always easy to know.

This set of questions and observations should not be read as a defense of the costly, traditional fee-for-service system, which has its own skew towards over-delivering care, often with little to no benefit to patients. Nor should it be read as a rebuke of value-based care.

But with all of the optimistic fanfare (a small portion of which I, too, am guilty of generating) must also come a dose of realism. Value-based care can indeed be an answer to some of what ails American healthcare, but at its foundation there must be something somewhat increasingly quaint and elusive:

For value-based care to succeed, groups must have a robust clinical (and financial) culture in place to ensure that aggressive practices to manage costs are pursued through the lens of true benefit to the patient, not the financial interests of the group. The actions to which we subject patients must be guided by the “radical common sense” that every one of us would want to see in play for ourselves and our parents.

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