Resources / Value-Based Care: An Evolution in Healthcare Spending
Value-Based Care: An Evolution in Healthcare Spending

By Timothy Garrett, MD

Dr. Timothy Garrett is the Chief Medical Officer of Zelis and a board-certified MD. He is a Fellow of the American Board of Quality Assurance and Utilization Review Physicians, as well as the American College of Healthcare Executives (FACHE), and the American College of Emergency Physicians (CHCQM). He’s certified in Health Care Quality and Management and a Diplomate of the American Board of Emergency Medicine. Prior to joining Zelis, he held senior management positions at HMS, Cotiviti, Optum, and was a practicing Emergency Physician and Physician Leader at Athens Regional Medical Center. He has an MD from the Medical College of Georgia at Augusta University, an MBA from Auburn University Harbert College of Business, and is the author of the novel A Place Called Jubilee.


I recently wrote about low-value care and the appropriately increased attention that has been paid to low-value care over the past decade. However, identifying instances of low-value care and decreasing or eliminating them is only the first step in making lasting improvements in the value of healthcare for which we pay.

Value-Based Care is the Next Step

Value-based care is healthcare that is paid for based on the outcomes and health measures of the patients for whom the care is given. This differs from fee-for-service models in which providers are paid based on the volume of services delivered. Under value-based care agreements, providers are rewarded for helping patients improve their health, reduce the effects and incidence of chronic disease, and live healthier lives.

Of course, this idea of incentivizing healthcare providers to provide high quality, efficient care is nothing new. The roll-out of diagnostic-related groups (DRGs) in 1983 as the basis for price-setting of Medicare inpatient claims is an example of the shift from straight fee-for-service payment systems to a system that created incentive for healthcare providers to give efficient and effective treatment. 

In the years since then, DRGs have progressed from the relatively simple Medicare Severity-DRG (MS-DRG) system to more complex structures and have been adopted by Departments of Medicaid and commercial insurers across the nation. Regardless of the type of DRG, providers are incentivized to improve quality and efficiency and decrease lengths of stay when this payment methodology is used.

The evolution of value-based care did not stop with DRGs. 

In 2008, CMS began to reward providers for the use of electronic prescriptions through a provision of MIPPA, the Medicare Improvements for Patients and Providers Act. Likewise, 2009’s HITECH (Health Information Technology for Economic and Clinical Health) Act brought incentives to participating providers for the meaningful use of electronic health records. 

The term “patient-centered medical home” first came to use around 2007 and refers to a coordinated approach to care led by the patient’s primary care physician. This approach aims to reduce cost and raise quality by eliminating the unneeded care provided when a patient bounces between specialists. 

The ACA (Affordable Care Act) of 2010 and MACRA (Medicare Access and CHIP Reauthorization Act) of 2015 also introduced a number of value-based programs, such as Accountable Care Organizations (ACOs) and the Hospital Value-Based Purchasing (VBP) program. 

What Are The Benefits Of Value-Based Care?

Because providers are incentivized to become more and more efficient, value-based care models tend to increase the focus of providers on wellness and prevention. Instead of solely concentrating on the treatment of disease after it has already occurred, such steps as smoking cessation, exercise programs, dietary changes, and overall lifestyle adjustments are emphasized by providers who are being paid based on patient outcomes.

Healthier individuals can mean lower costs. Better management of chronic diseases – like diabetes, heart disease, and obesity – will lead to fewer doctor office visits, fewer and shorter hospitalizations, and fewer medical procedures.

Value-based care can also improve patient satisfaction as individuals become more engaged in their own health and wellness. When providers focus on the quality of medical care instead of the quantity of tests and procedures, patients feel better about the care they are receiving.

What Else Can Be Done?

Without taking away anything from the important milestones in value-based care such as HITECH and the ACA, laws and government programs cannot be the only answer. There are steps that can be taken and are even now being accomplished at all levels of the healthcare continuum.

One of the first steps in value-based care is the creation of high-quality provider networks. 

Providers such as hospital systems, multi-specialty medical groups, and others place an emphasis on building networks of clinicians that can meet the varied needs of their members. At the same time, payers depend on these networks and help to incentivize the breadth and quality of the network. 

Zelis has a team of Network Service professionals who help with the creation and maintenance of effective provider networks. As Chief Medical Officer, I take part in this work by chairing the Credentials Committee that reviews the qualifications and quality metrics of clinicians to ensure a safe, high functioning network.

At the other end of the continuum, payment integrity steps are taken to ensure that bundled services are being properly billed. 

In addition to the DRG system for payment for inpatient stays mentioned above, other bundled services – such as global surgical services – act as incentives for providers to be as efficient and effective as possible in their provision of care. 

The Payment Integrity teams at Zelis – Claims Editing and Bill Review – ensure that the incentives built into these bundled payment arrangements are being accurately paid.

The Wrap Up

Ultimately, it is up to all of us as individuals to ensure that the medical care we are receiving is of the highest possible value. 

I, for one, ask my own primary care physician about the medications I have been prescribed and question if I really need to take them or whether some other medication would be better. I inquire about screening tests, like routine PSA tests or regular colonoscopies. (Yes, I have arrived at that certain age.)

I recognize that my being a physician gives me something of an advantage in knowing what questions to ask my doctor. However, services like those that will be offered by the Zelis Member Empowerment solution will help individuals identify the highest quality, most cost-effective clinicians and care programs so that they, too, can make informed choices. The Member Empowerment team will even be rolling out ways to reward members for making value-based healthcare choices for certain procedures and tests.

I encourage you to take a moment to think about your own medical care. What steps can you take to become more informed?

At Zelis, we have one main objective – to pay for care, with care.

For more information on how Zelis can help your organization, contact us here.

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