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October 20, 2023

Leadership in a Value-Based Care (VBC) Environment

Part 1 in a Series of Leadership Articles on Value-Based Care


Edited by Julie Rickman, MBA, CHC, CHPC, CHCO   

This article is the first in a series sponsored by the American Institute of Healthcare Compliance (AIHC) Volunteer Education Committee. Part 1 is an overview of challenges many health care leaders face with shifting reimbursement.  Additional articles will focus on various specific areas, such as data analytics, and key performance indicators (KPIs).


Reimbursement has been shifting to value-based reimbursement models over the past years, labeled Value-Based Care or VBC.   Value in healthcare is the measured improvement in a person’s health outcomes for the cost of achieving that improvement1. While some descriptions conflate value-based healthcare and cost reduction, quality improvement, or patient satisfaction, those important efforts are not the same as value, which focuses primarily on improving patient health outcomes.

Value-based care differs from the traditional fee-for-service approach, where physicians are paid based on the amount of healthcare services they provide because it ties the amount providers earn for their services to the results they deliver for their patients, such as the quality, equity, and cost of care.

Healthcare executives are challenged with finding resources, talent and motivation to lead the workforce in a direction to improve both patient outcomes and reimbursement, in addition to dealing with a shortage of physicians and nurses to staff facilities.  The cost of providing quality care services is soaring, creating a challenge for healthcare C-Suite executives.  It is now the “trend” for healthcare C-suite executives to promote an unwavering commitment to “value-based care” – but can it be achieved?  What type of change is being demanded of leadership?

Understanding the Leadership Challenge

Value-based care and changes in reimbursement is the focus of government and commercial insurance payers as our population is aging and due to an increase in poverty, contributing to Social Determinants of Health (SDOH). Improving a patient’s health outcomes relative to the cost of care is an aspiration embraced by stakeholders across the healthcare system, including patients, providers, health plans, employers, and government organizations1. But healthcare providers haven’t been able to successfully reduce cost, even with the massive number of hospital mergers and acquisition of physician practices over the past few decades.

The result?  The government is reforming healthcare into a new health ecosystem.

Issues leadership faces in 2023-20242 are:

  • Confronting affordability and disrupting costs by shifting to VBC
  • Automating or digitizing healthcare (AI)
  • Rethinking risk
  • Solving clinical workforce shortages
  • Delivering cost-effective quality care
  • Implementing SDOH screening tools

Positive Take-Aways

Shifting reimbursement from quantity to quality has many positives.  Expectations of physicians to see more patients to gain bonuses has led to dissatisfaction.  This was especially true when Health Maintenance Organizations (HMOs) were popular, back in the 1980s.  Physicians were penalized for ordering too many tests or seeing too many patients.  The financial incentive was do less, make more money, resulting in questionable outcomes, at best.

A huge positive impact with value-based healthcare is that it connects clinicians to their purpose as healers, supports their professionalism, and can be a powerful mechanism to counter clinician burnout. When done “right,” value-based healthcare’s focus for better health outcomes aligns clinicians with their patients. That alignment is the essence of empathy.

Moving to a system of value-based care requires that physicians and physicians-in-training view their role differently within the larger care team, such as what constitutes an effective care solution, and about the importance of measuring the health outcomes that matter most to patients. This learning should begin during medical school.

By improving patients’ health outcomes, value-based care reduces the compounding complexity and disease progression that drive the need for more care.  This produces a down-stream positive effect both on the cost of healthcare and patient outcomes.

Measured health outcomes demonstrate a clinicians’ ability to achieve results with patients and families and drive improvement in the results that matter most. The problem, what is being measured, and how?

The Centers for Medicare and Medicaid (CMS)

The Centers for Medicare & Medicaid Services (CMS) has been leading the way to actually reform the healthcare system in the United States for years.  Through financial incentives and other methods, the goal of the government’s value-based care programs is to hold providers more accountable for improving patient outcomes while also giving them greater flexibility to deliver the right care at the right time. 

According to CMS, “Value-based programs reward health care providers with incentive payments for the quality of care they give to people with Medicare. These programs are part of our larger quality strategy to reform how health care is delivered and paid for.”  CMS states that value-based programs also support the government’s three-part aim to achieve the following:

  • Better care for individuals;
  • Better health for populations; and
  • Lower cost.

One CMS example is the voluntary Medicare Shared Savings Program, which allows providers to form groups called accountable care organizations (ACOs). ACOs can earn financial rewards by taking responsibility for caring for a defined group of Medicare beneficiaries and improving the care they receive, largely through better coordination of services.  What does the evidence show?

According to the Commonwealth Fund3, evidence has shown ACOs have produced savings while at least maintaining quality of care, but not necessarily improving health disparities.  ACOs in the Medicare Shared Savings Program, Medicare’s largest voluntary ACO model, serving predominately patients of color, were found to perform worse on quality measures than ACOs with fewer patients of color. They were also more likely to exit the program. These outcomes may reflect longstanding quality disparities and possibly a lack of administrative and financial resources to address disparities in ACOs serving predominately patients of color. However, some experts believe that ACOs have the potential to promote equity through population-based payments, so long as equity is explicitly considered in payment design.  The Commonwealth Fund also states that ACO benchmarking methodologies, which are used to set savings targets, have been controversial because they may discourage participation by adversely impacting certain ACOs. Well-performing ACOs may be penalized over time as they are held to increasingly high savings targets; at some point, these ACOs may be unable to cut costs any further or generate more savings3.

Taking Leadership Challenges Head-On!

Collaboration and cooperation are key -- not only from the top-down within your own organization, but realizing your organization may need to rely on additional resources.  Start by identifying the common needs of a patient segment.  The goal is to create care teams designed to deliver care that provides a comprehensive solution for patients or families. When the goal of care shifts from treating to solving patients’ needs, care teams can both address the clinical needs of patients and begin to address the nonclinical needs that, when left unmet, undermine patients’ health.

Get the Board of Directors Involved

Provide training on the topic of reimbursement and the shift to VBC. C-suite executives along with the board of directors should first gain a solid understanding of why your organization should plan to shift from fee-for-service and accept more risk under VBC.  

Executive support is required to obtain not only support, but approve the financial means required to be invested in technology and new systems needed in the VBC environment. This includes how physicians will be compensated differently under a VBC model and a shift in incentives.  Get physician leaders involved quickly to help develop a transition plan to obtain physician buy-in for a successful transition.  Risk must be shared between the physicians and their employer because VBC models are at-risk contracts.

Understanding Your Costs

The first and most important factor for organizations to understand is your cost structure. You should know how much it costs for you to deliver a unit of care. And, in light of implementing Artificial Intelligence (AI) technology now or in the near future, cost is a critical factor. It’s important to evaluate how necessary upgrades and a new approach to your operations may need to be made to ensure quality care standards are being met while staying within the negotiated price points.

Knowing the parameters of what your costs are is crucial as you begin to negotiate with insurance companies on a reimbursement strategy. This knowledge is also crucial as you begin to develop your service lines and determine how payments are going to be apportioned among providers in a value-based program.

Getting to your true costs means initiating a detailed, thorough cost accounting program.  If you can’t readily determine your costs for providing various services, you may need to enhance your internal accounting structure on both the clinical and administrative side of the organization.

Understand Your Current and Historical Data – focus on data analytics

Data analytics is the science of analyzing raw data to make conclusions about that information. Data analytics can help a business optimize its performance, perform more efficiently, maximize profit, or make more strategically-guided decisions.  There are three types of analytics that businesses can use to drive their decision making:

  • Descriptive analytics, which tell what has already happened;
  • Predictive analytics, which show us what could happen; and
  • Prescriptive analytics, which inform us what should happen in the future.

Without a strategy that includes sophisticated analytics, it will be challenging to predict proper coverage for quality disease management across the continuum. By analyzing patient data, healthcare providers can lower readmission rates, reduce errors, and better identify at-risk populations.  When utilizing social determinants of health (SDOH) Z codes, you can identify environmental and social factors which impact your organization. 

Comprehensive benchmarking and actual performance in areas such as post-acute care, emergency department utilization, and inpatient care, can guide healthcare organizations to higher-quality care while predicting profitability and VBC contract performance.

Insights gleaned from data analytics can support a provider’s most impactful and strategically prioritized clinical interventions.

Data will also allow you to track your own success and use this information in contract negotiations.  Measurement of results allows teams to know they are succeeding. Measuring health outcomes also provides the data needed to improve care and efficiency while lowering cost.

The Elephant in the Room

While transitioning to a value-based care strategy sounds like an answer to providing better quality care for patients while allowing providers to truly focus on the patients they care for (and, hopefully, reduce or avoid clinician burn-out), the current staffing shortage in the medical profession does not lend itself to easily address this solution. Studies have shown that a primary cause of burnout among healthcare providers is the administrative burden required to carefully document and report on all aspects of patient care. Getting behind in documentation can lead to sloppy, inconsistent reports regarding patient progress, and the stress of burdensome documentation requirements has led to providers exiting the profession.

The impacts of a reduced workforce are being felt across the continuum of care, and patients suffer as a result. Attempting to realign physicians with their calling to truly help a patient’s health and well-being may be an attractive solution to combatting burn-out, but decreased staffing places pressure on existing staff to handle more patients. Without an infusion of more staff, it seems difficult to envision that a value-based care model could truly exist and succeed under current circumstances.  Organizations should carefully evaluate where and how they can take steps toward a VBC model while still addressing the administrative burdens placed on a reduced level of staffing.


Most of us can agree that the fee-for-service reimbursement model lacks focus on truly patient-focused care and best outcomes. The solution for most organizations to achieve a smoother transition to a VBC model will involve advancement into the Artificial Intelligence (AI) arena. 

Although AI is becoming more wide-spread, until additional safety and security measures are developed, the timing may not meet demand for the sophisticated AI needed to meet the government’s reshaping our health care system.  This could force health care institutions into utilizing AI too quickly.  Unless our private sector healthcare system can change to improve patient outcomes, the government will continue to try and solve the problem for us.


1 National Library of Medicine article “Defining and Implementing Value-Based Health Care: A Strategy Framework

2 PWC – Next in health services 2023

3 The Commonwealth Fund Commission on a National Public Health System

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