Rethinking Care Delivery: The Promise and Practice of Value-Based Care

THE CONCEPT OF value-based healthcare first gained attention in the mid-2000s, introduced by Harvard economist Michael E. Porter, a leading expert in business strategy and competitiveness. His landmark 2006 book, Redefining Health Care: Creating Value-Based Competition on Results, co-authored with Elizabeth O. Teisberg, was the result of a decade of research into why the U.S. healthcare system failed to reflect the competitive dynamics found in other industries.

The book argued that the American healthcare system — driven by a feefor-service model in which providers are paid for each individual treatment — had become fragmented, inefficient and overly focused on volume rather than outcomes. This structure, the authors explained, discouraged performance and innovation, leading the U.S. to spend more on healthcare per person than any other nation without delivering superior health outcomes.¹

Porter proposed a shift to a model centered on delivering high-quality care and maximizing value for patients. His framework called for the integration of all aspects of a patient’s care, along with bundled payments to providers based on overall outcomes rather than individual services. As he put it, “Value-based healthcare’s central tenet is that the overarching principle in redesigning healthcare delivery systems must be value for patients. We define value as the outcomes that matter to patients and the costs to achieve those outcomes.”¹

Since its introduction, value-based care (VBC) has sparked global interest across the healthcare spectrum — from patients and providers to payers, policymakers and suppliers. Implementation efforts have taken root in pilot programs around the world, and peer-reviewed research on the subject has grown rapidly, reflecting a broad shift toward more patient-centered, outcome-driven care.

Defining VBC’s Core Principles

For physicians and healthcare organizations, understanding and embracing VBC’s core principles is imperative for staying ahead in a competitive field. “Value-based care is really a care-delivery system that rewards for patient outcomes and quality of care, managing a population rather than transactional care,” said Maria Ansari, MD, CEO, executive director at The Permanente Medical Group, in a January 2024 interview. “It’s being rewarded for patients who live longer, healthier lives, as opposed to more siloed, transactional care that’s more episodic.”²

At its foundation, VBC is built on a simple yet powerful equation: Value is created by health outcomes that matter to patients divided by the cost of delivering those outcomes. The aim is to improve patient health in measurable ways while making the best use of available resources. Porter emphasized that, “Value should always be defined around the customer, and in a well-functioning healthcare system, the creation of value for patients determines the rewards for all other actors in the system.”³

A core principle of VBC is care coordination across the full continuum of a patient’s needs. Rather than viewing care as isolated encounters, VBC promotes integrated care delivery — where primary care, specialty care, behavioral health and social supports work in unison to manage a patient’s health. This model emphasizes the longitudinal view of care, particularly for those with chronic conditions, and incentivizes collaboration among providers. As the Centers for Medicare and Medicaid Services (CMS) notes, successful VBC programs “ensure patients receive the right care at the right time, while avoiding unnecessary duplication of services and preventing medical errors.”⁴

VBC also emphasizes alignment of financial incentives with quality and outcomes, not volume. In traditional fee-for-service models, reimbursement is tied to the quantity of care delivered. VBC flips that paradigm by offering performance-based payments for achieving specific outcome metrics such as hospital readmission rates, preventive screening adherence or diabetes control. This approach not only encourages evidence-based practice but also empowers physicians to focus on what works best for their patients.

In a recent review, the American Medical Association (AMA) stated, “Value-based care models can support the goals of improving quality, reducing cost and enhancing physician autonomy — when designed with physician input and aligned with clinical realities.”⁵

Addressing Common Misconceptions

Despite its growing adoption, VBC is often misunderstood — particularly among frontline physicians. One common misconception is that it is merely a cost-cutting strategy disguised as reform. While the model does aim to control healthcare costs, its primary goal is to improve health outcomes by focusing on coordinated, highquality and preventive care. CMS says, “VBC incentivizes providers to focus on delivering the best care at the right time in the right setting, rather than maximizing service volume.” In a nutshell, by rewarding outcomes over output, VBC aims to reduce unnecessary procedures — not provider income.⁴

Another misconception is that VBC is exclusively for primary care practices. While the model is often associated with primary care or chronic disease management, it is also applicable across a wide range of specialties, including surgery, mental health, skilled nursing and oncology. The principles of VBC — improving outcomes, focusing on preventive measures and reducing costs — can be applied to virtually any area of healthcare. Specialized models such as bundled payments for surgeries or value-based behavioral health programs show that VBC is more versatile than many realize.

That said, even staunch advocates of VBC have come to recognize that it cannot completely replace fee-for-service models. Rather, the two approaches will likely continue to coexist for the foreseeable future. There are certain services or specialties for which fee-for-service may still be more practical or in which a hybrid approach is most effective. The goal is not necessarily to eliminate fee-for-service entirely but to expand the use of VBC programs where it can bring the most benefit.

“Right or wrong, the fee-for-service payment structure has become the backbone of American healthcare finance,” said Michael Wolford, principal at Forvis, a global consulting firm. “Abandoning the fee-for-service structure would be a decades-long and extremely disruptive undertaking. However, there must be scenarios in which the level of fee-for-service rate depression combined with the valuebased care lift will discourage the former and promote the latter.”⁶

Making the Transition

Physicians can begin the transition to VBC by identifying key patient populations that drive the highest costs or suffer from the poorest outcomes — often patients with chronic conditions such as diabetes, hypertension or chronic obstructive pulmonary disease (COPD). Using electronic health record analytics and risk stratification tools, clinicians can prioritize care coordination, preventive screenings and lifestyle interventions. The Agency for Healthcare Research and Quality emphasizes that population health management is foundational to VBC, enabling providers to proactively manage care across a defined population to improve outcomes and reduce unnecessary costs.⁷

It’s also important to embrace teambased, coordinated care models since VBC thrives on collaboration — not only among physicians but across care teams that include nurses, pharmacists, behavioral health specialists and social workers. By establishing workflows for care coordination and closing referral loops, physicians can ensure continuity across the care journey. AMA recommends team-based care as a core pillar of VBC, noting that practices can start small by integrating care managers or health coaches to work with high-risk patients and support shared decisionmaking.⁸

Physicians curious about making a shift to VBC can also consider:

• Joining an accountable care organization (ACO). ACOs work with healthcare professionals to enhance care coordination, expand greater healthcare access and provide coordinated highquality care.
• Investing in technology. Artificial intelligence, machine learning, electronic health records, live patient data, predictive and prescriptive analytics, integrated platforms and other technologies are at the forefront of VBC transformation. Not only do these tools enhance a practice’s care delivery, they offer the capabilities to design a VBC framework that mitigates risk, realigns incentives and facilitates better and more cost-effective care.
• Implementing financial incentives. VBC ties the amount providers earn for their services to the results they deliver for their patients, such as quality, equity and cost of care. Through financial incentives, VBC programs aim to hold providers more accountable for improving patient outcomes while also giving them greater flexibility to deliver the right care at the right time.
• Standardizing processes. According to the Cleveland Clinic,9 the goal of VBC is to standardize healthcare processes through best practices, similar to other industries. Mining data and evidence can determine which processes work and which don’t. This forms a foundational care pathway to help gain the best results for patients.
• Prioritizing continuing education. This includes browsing the latest medical journal articles, taking continuing medical education courses or consulting fellow physicians within the ACO network. In addition, providing education and sharing VBC learnings with peers and staff can help them stay updated on developments and align with shared goals.

Envisioning a Value-Based Future

VBC is far more than a cost-containment strategy or a model limited to certain clinical settings. At its heart, VBC is a patient-centered approach that personalizes care to individual needs, spans across medical specialties and can operate alongside traditional payment models to drive broad, systemic change. Crucially, it emphasizes outcomes over volume — rewarding the quality of care delivered rather than the number of services provided.

Emerging technologies, including generative AI and predictive analytics, are accelerating this transformation. These tools help providers automate routine tasks, reduce administrative burden and manage population health more effectively — all without compromising care quality. Predictive models, in particular, can identify high-risk patients earlier and support proactive, preventive interventions. With the right technology, physicians can confidently enter riskbased contracts with payers and close care gaps in ways that were not previously possible.¹⁰

Sanjay Doddamani, MD, says that while the initial decade of VBC was heavily focused on risk adjustment, the current understanding and evolution of the model emphasize true improvements in health outcomes and quality of care, beyond just reducing total costs. He suggests that true population health initiatives now require a shift toward achieving better health for patients, driven by collaboration and leading to early positive movements in quality and outcomes. “The first decade in value-based care was really focused on risk adjustment without too much of actual true health outcomes improvement,” Dr. Doddamani says. “I think we’ve come to a moment of reckoning that true population health has to be improving quality of care and reducing not just total cost but actually improving health outcomes. And I think that’s what we’ve uncovered — that collaborating together, what we’re seeing is very early movement in quality performance and health outcomes that will continue to evolve as we’ll work together.”¹¹

While VBC is not a one-size-fits-all solution, it holds enormous potential when thoughtfully implemented. Real success depends on aligning systems commitment to continuous improvement — won’t just adapt to healthcare’s evolving future, they will lead it.