Value-based care: the new, sustainable approach to healthcare

05 June 2019 7 min. read
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A new report from innovation consultancy PA Consulting examines the de rigueur healthcare approach, and how the industry can get the ball rolling.

Healthcare systems are under increasing pressure as populations grow and age, and more people deal with chronic conditions. The traditional fee-for-service model, which incentivizes volume of treatment over the “right” treatment, seems increasingly unsustainable. Value-based care, which links processes, structures, and reimbursement to patient outcomes, is widely viewed as a better and more sustainable healthcare model going forward.

Developed in 2006 by noted US academics Michael Porter and Elizabeth Teisberg, value-based care rebuilds healthcare systems around giving patients a better quality of life. The approach prioritizes the quality of treatment over quantity, avoiding duplication and waste, and delivering more for less.

Value-based care has already wooed policymakers struggling with escalating healthcare costs. The NHS’ Five Year Forward View stresses measuring patient outcomes and improving preventative measures – both key parts of value-based care. The US Department of Health and Human services, meanwhile, set a goal of tying 50% of Medicare benefits to value-based payment models by 2018.

How far advanced is your organization in its transition towards value-based care

PA Consulting recently investigated the value-based care scene, examining how widespread it is, what obstacles it faces, and how healthcare systems can effectively implement it. The study queried 520 healthcare organizations across the US, Europe, Middle East, and Africa.

Sixty percent of respondents said they hadn’t taken a single step towards value-based care in the past two years – stymied by complexity, regulations, and incentives that favor the status quo.

Of the 207 organizations that had made progress, 82 “Leaders” said they were progressing well from the fee-for-service model to value-based care – ranking themselves eight or higher on a scale of zero to 10 (full transformation­).

According to PA, a transition to value-based care brings widespread, tangible benefits to organizations and patients. Of the 207 organizations that made some progress to VBC in the past 12 months, 75% saw a general improvement in clinical outcomes, and 65% saw a reduction in care-related complications.

The 82 Leaders saw even greater benefits, with 55% saying patient readmission rates have reduced (compared to 44% of Followers), and 51% saying instances requiring emergency care decreased (versus 34% of Followers).

The Dell Medical School at the University of Texas at Austin, for example, used the VBC approach in its orthopedic department to reduce wait times from 14 months to same-week appointments. By targeting outcomes before they took action, the department shielded many patients from unnecessary surgery.

The central part of VBC is realigning incentives and reshaping payment structures, focusing on giving patients quality treatment that improves health outcomes, instead of doing as many treatments as possible to make more money. As a result, nearly half of Leaders (49%) have seen their costs go down in the past year.


Switching to VBC is a complex process, necessitating changes to strategy, culture, and what organizations measure. It means changing a whole lot of what the organization does, including pricing structure and the realignment of care units.

Respondents said regulation was the most common factor slowing down a switchover to VBC (36%), with fee-for-service still dominating the regulatory framework.

Persistent fee-for-service payment arrangements are also impeding change, with a quarter saying they were a top factor slowing progress. With fees tied to each piece of care given, providers are incentivized by the entrenched system to create more complex care to rake in more money. As with most good policy, the key part us realigning incentives to achieve desired outcomes (in this case, lower costs and better patient health and satisfaction).

PA’s report recommends four guiding principles to help organizations make VBC a reality: take the plunge, organize care around patients, harness the right technology, and get to grips with data.

Take the plunge

When faced with a big task, you sometimes need to smart small and then scale up fast. Thirty-one percent said a lack of knowledge on how to move from strategy to implementation was blocking VBC adoption. Obviously, this is an area where consulting firms can help organizations in their transformation journey.

The county of Bedfordshire, UK, started small by redesigning its musculoskeletal services contracts around outcomes, aiming to tackle rising costs and wait times. In its fourth year, the system has saved £13 million even though referrals have increased 8%. Unnecessary treatment and costs were reduced, while 86% of physiotherapy patients reported better health-related quality of life.

Leaders are more likely to say patients are satisfied

Organize around patients

VBC means a reorganization of systems around the needs of the patient, necessitating shifts in perspective and culture. Switching medical provision to teams and units that integrate the full cycle of care together is another key element. The integrated practice units (IPUs) are a group of wards that care for patients with similar clinical needs.

A switch to patient-focus drives benefits that patients can see. Sixty-seven percent of Leaders said patients were more satisfied with their care in the past year, versus 39% of Followers; 70% of Leaders said patients reported a better quality of life than a year ago, compared to 46% of Followers.

Harness technology

Technological advances are critical elements in (hopefully) reducing healthcare costs and improving outcomes. Machine learning will perhaps someday supplant human interpretation of medical imaging, while telehealth can allow doctors to see more patients than they could in-person.

The survey found that Leaders get more value form their technology, with 72% saying they’re successfully generating insights from technology, versus 42% of Followers.

Using IT for better communication – exchanging info accurately and instantaneously – can lead to fewer prescription errors and duplicate tests, and shorter waiting times.

Leaders are using patient-focused data more widely

Get a grip on data

Value-based care means rethinking data at organizations, since the approach doesn’t work without a high degree of insight into the patient population. Most electronic medical record systems aren’t currently up to snuff, according to the PA report.

Joining up datasets is one approach, with the Whole Systems Integrated Care database in London aiming to bring together data from disparate local health services, emergency departments, and clinics.

Another important avenue is Dark Data, which captures data from all parts of the operation; while the individual data points don’t mean much in isolation, the unseen connections can be analyzed to give deep insight to target care more effectively. The data can also drive predictive analysis to forecast clinical need and target resources.

Sourcing more data, does, however, necessitate strong data standards and creating a narrative that reassures patients, according to the report.

Related: PA Consulting recommends Agile method for business success