Why Move to a Value-Based Care Model?
How a Value-Based Care Model Works
A value-based care (VBC) model, instead pays providers a fixed rate per patient per month or year. The rate is based on the quality of care provided and the health outcomes that result, not individual tests or procedures. VBC focuses on preventive care, chronic care management, and care coordination between multiple providers with the goal of:
- Delivering better patient experience
- Improving patient outcomes
- Reducing redundant care and billing
- Creating better cost control
Providers are incentivized to improve care and keep costs low because savings are kept and not forfeited.
VBC isn’t new. And while FFS is still the main care model, VBC is growing. And the Centers for Medicare & Medicaid Services (CMS) aims to move all Medicare FFS users and most Medicaid recipients to a value based care model by 2030.
It makes sense for clinics and hospitals to adopt a VBC model for all patients because it leads to better outcomes, cost savings, and alignment with industry trends. Some factors though, such as self-pay affordability, private insurance contracts, and infrastructure needs, may limit the use of VBC in some cases. A focus on transitioning to VBC where possible may be a sound approach for many providers.
CMS aims to move all Medicare FFS users and most Medicaid recipients to a value-based care model by 2030.
How Value-Based Care Model Payments Work
The VBC model uses risk adjustment to set a baseline payment for care based on individual patient health, usage, and care needs. Each patient is assigned a risk score/risk adjustment factor (RAF). Patients with greater healthcare needs are assigned a higher risk score. The higher a patient’s risk score, the more the provider receives to manage their care.
Some VBC-based CMS Innovation Center models also use risk-based arrangements. In these arrangements, providers participating in the model agree to take some financial responsibility for care quality and cost. When providers show lower costs, they get added payments from CMS. The flip side is that if they increase costs, they may pay a penalty.
Payment is based on providers reporting on patient outcomes using their EHR systems. CMS and other payers base reimbursement on predetermined benchmarks. Payment can come as bonuses for meeting quality benchmarks, shared savings when costs stay below set targets, bundled payments for a care episode rather than visits, or a per-patient, per-month flat fee.
The Move Toward Value-Based Care
CMS’s goal in moving Medicare and Medicaid recipients to the VBC model is to lower healthcare costs on taxpayers and the Federal and state governments. And because anywhere from 5 to 61% of people in rural areas nationwide are on Medicare and almost 25% on Medicaid, rural providers want to be prepared over the next four years to provide VBC for at least these portions of their patient bases.2 That means moving to either a pure VBC model or a hybrid VBC and FFS model.
Some private insurers and large self-insured employers also have VBC contracts with providers. These can be called pay-for-performance, bundled payments, or accountable care organization (ACO) contracts. It’s likely as Medicare and Medicaid shifts to a VBC model, other private and self-insured employers will follow and the FFS model diminish.
Participation in ACOs is growing for rural areas. And CMS final rules for 2026 will impact how ACOs operate. CMS will tighten risk corridors, which will mean ACOS take on more risk for patient outcomes and benefit from more efficient, value-based care practices.3
The Benefits of the Value-Base Care Model for Rural Providers and Patients
VBC offers unique benefits for rural healthcare providers and patients. It also helps address some of the challenges of rural healthcare with:
- More consistent fixed rate per patient payments to stabilize revenue, especially as patient volumes change.
- Added financial incentives by paying bonuses or a share of savings when targets are met.
- Better patient outcomes by prioritizing coordinated care for chronic disease management and preventive care.
- Increased access — outcomes don’t have to result from in-person visits, which encourages the use of telehealth for providers and patients.
- Improved insight. A VBC model’s support for data analytics and care management tools helps providers identify high-risk patients and targeted interventions.
- Reduced unnecessary utilization. VBC is designed to reduce ER visits, readmissions, and duplicate care, which can lower costs and decrease strain on resources.
- Added financial assistance from grants and support for technology, training, and care management resources with some programs.
Tips for a Successful Move to the VBC Model
Moving to a VBC model requires different workflows, increased care coordination with other providers, and sometimes new technologies. But there are ways to ensure your hospital, clinic, or practice is set up for success.
- Make sure you have an EHR that lets you risk stratify your population based on each patient’s overall health and demographics.
- Prepare your staff. The AMA, The Health Care Payment Learning & Action Network (HCP LAN), and private VBC enablement firms, like Azalea Health partner Aledade, and training and certificate companies can help.
- Ensure you have staff, partner, and/or technology to provide quality care, meet reporting requirements, and manage a VBC payment model.
- Understand how a potentially small patient population might impact your risk pool and ability to report on quality improvements.
- Make sure you’re set up for coordinated care and that you are part of a Health Information Exchange (HIE) and your patients can connect with needed outside hospitals and specialists.
- Get support. Non-profit and for-profit providers can help. For example, the National Rural Health Resource Center offers the Rural Healthcare Provider Transition Project that helps rural hospitals and clinics prepare for alternative payment and care delivery models. Some insurance companies also offer support and resources.
Sources
1 Institute for Youth in Policy, An Analysis of the Efficacy of Value-Based Care Health Systems, Apr. 27, 2025, Isabella Perez Martinez et al,
2 KFF, Key Facts About Medicare Beneficiaries in Rural Areas, Nancy Ochieng, Alex Cottrill, Juliette Cubanski, Tricia Neuman, Jun. 11, 2025, https://www.kff.org/medicare/key-facts-about-medicare-beneficiaries-in-rural-areas/
3 Centers for Medicare & Medicaid Services (CMS), ACO REACH Model Performance Year 2026 Model Update – Quick Reference, https://www.cms.gov/aco-reach-model-performance-year-2026-model-update-quick-reference
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