Due to decreased funding caused by value based models of payment

The United States spends much more on healthcare per capita than other wealthy countries—$10,384 vs. an average of $5,169, respectively, according to the Peterson-Kaiser Health System Tracker. Yet overall, health outcomes in the U.S. are worse than in other wealthy countries. For instance, the U.S. sadly boasts the highest rates of medical error, disease burden, and death amenable to healthcare. The promising news? Healthcare innovators seeking to address America’s crisis of care cost and quality are increasingly adopting value-based payment models. Which are an important step toward solving the problem.

In contrast to the predominant fee-for-service model, in which payers reimburse providers a fixed fee for each service they provide from an approved list, value-based payment (VBP) models hold providers financially accountable for both the cost and the quality of care they deliver. VBPs reward providers financially for delivering better, more cost-effective care, and can penalize them for failing to do so.

Value-based payment models come in different flavors, varying in the level of provider accountability they entail. The level of payment a provider receives is tied to cost and quality targets, which may be developed and imposed by government agencies such as the Centers for Medicare and Medicaid Services, state health departments, and/or health systems themselves. These targets ensure that providers do not cut costs at the expense of patient outcomes. Examples of quality measures include post-hospitalization readmission rates, provider-to-patient ratios, and percentage of patients receiving preventative care (such as immunizations).