Value Based Healthcare: Challenges, Trends and Future

Value Based Healthcare: Challenges, Trends and Future

Value-based healthcare (VBHC) is a framework for transforming health care systems by re-orienting them around achieving value for patients. VBHC puts value for patients, that is, outcomes that matter to patients, at the centre of health care redesign. According to the study by Harvard Business School, a value-based health care system incorporates five elements:

  • care is organised around medical conditions
  • outcomes and cost are measured for every patient
  • reimbursement is aligned with value
  • systems are integrated
  • IT is designed to support all these elements.

Taking a closer look at the third element around reimbursement, to achieve VBHC, providers must be incentivised to deliver the outcomes that matter to patients, at the lowest costs. Research suggests that bundled payments or episode-based payment systems are the best models for motivating providers to deliver maximum value. Bundled payments cover all the treatments and tests needed within a full cycle of care for an acute medical condition – from diagnosis to rehabilitation. In effect, this payment scheme rewards the better care and collaboration, whereas fee-for-service rewards the volume of services and reinforces fragmentation of care. However, the reimbursement models that are dominant today primarily focus on covering the expenses associated with a test of procedure, such as fee-for-service, as opposed to those that put incentivise VBHC. Capitation is also a value-based payment model, however within this framework providers carry all the risk, whereas bundled payment systems are more risk adjusted and better aligned with value for patients.


There are a number of challenges to making values-based reimbursement and VBHC a reality. One primary question that must be answered is what outcomes and values are important to citizens, health systems and society. A related known challenge lies in the fact that what is valued here is often not based on an objective assessment. Once defined, these values and outcomes must be measured in a smart way, so that reimbursement systems – among other systems and decisions – can be based on this data. The rise of patient-reported outcome measures (PROMs) goes some way to incorporating patient-defined values into health care reporting and thus could be used as a basis for reimbursement. However, PROMs are still an early stage – measures can be highly subjective or involve lengthy questionnaires – and thus the application of PROMs requires refinement before it can be fully utilised. As well as measuring the right outcomes, other important considerations for the achievement of values-based reimbursement include implementing proper costing and IT solutions that support billing of bundled payments.

Values-based reimbursement is predicted to benefit patients, providers and payers. Whilst patients will receive effective care to suit their needs, providers can earn a positive margin for efficiently treating patients; and payers (whether governments, private insurers, private individuals or else) will reduce their spending.


Healthcare is expected to undergo a significant transformation as value-based care becomes the norm. The concept of value-based reimbursements may gradually, though unevenly, become the norm in many countries.

Collaborations between plans and providers as well as companies supporting value-based healthcare need to produce significant investments in the opportunity to empower clinicians to make change. Entrepreneurs in the field of value-based healthcare will need to build new tools and technologies in order to achieve true transformation by leveraging the insights gained.

The implementation of this model must include innovative workflows that incorporate the priorities of health plans and providers, as well as innovative technologies that contribute to provider success at the point of care. One of possible keys to success may be in merging the needs of health plans and of healthcare providers with adoption of the right technology to automate activities that lead to effective and sustainable solutions at scale.

While the practical employment of value-based approaches is likely to remain determined by national political practices, cultural beliefs and prior developments, several global trends are emerging that may shape the future of value-based healthcare.

As a result of the recent world health epidemic, providers of care that rely on fee-for-service funding were left vulnerable to volatility and changes in demand. The providers who invested in value-based care have been able to weather both the influenza pandemic and the economic downturn better because they had a consistent source of revenue despite low utilisation rates. Therefore, more value-based care may be expected to be offered in the future.

Additionally, the COVID-19 pandemic has also sparked transformational changes in national healthcare systems which are seeking to provide quality patient care in lower cost settings and reshape the way patient care is managed. It seems that telehealth is here to stay. Aside from offering providers a viable option to manage patient care and see a return on investment for services that are traditionally outside the scope of reimbursement under fee-for-service arrangements, those who have embraced digital health for the sake of weathering the pandemic will also be able to capitalise on this investment as a way to manage patient care.

A growing trend is a focus on Social Determinants of Health. It is becoming more and more important for players in the value-based care space to address social determinants of health. It has become increasingly apparent that the role that non-medical factors play in patient health is becoming more and more recognised by both providers and payers. If these issues can be addressed-such as transportation, food, housing, and so on-providers and payers are likely to see significant improvements in patients’ health and outcomes while keeping medical costs to a minimum. This trend is likely to grow as players continue to look for creative ways to manage patient care through value-based arrangements.

The value-based care concept has been adopted in many countries, including some EU members and the United States, as it provides new opportunities for alignment with providers and for incentivising activities that promote value-based goals previously were not available to us. The sweeping efforts in health data interoperability, sharing and exchange to ensure that patients and providers have access to health information further reduce structural barriers to value-based care.

The central question that defines the future of VBHC is how to measure value, real or proxy measurements or weighting of health outcomes for patients are required. Though no final answers have been arrived upon in this field, the ever-increasing volume of health data and the computational abilities to process and to analyse structured and unstructured health data promote the spread of VHBC adoptions in various formats. Alignment of perceptions on health outcomes by all healthcare stakeholders (governments, corporations, startups, patients, medical professionals) is required in order to achieve an overall consensus on what and how to measure.

Employment of artificial intelligence increases significantly human ability to navigate in the pool of health data. AI is already in use to interpret medical images in radiology, as well as for early detection in oncology. We may expect further developments in the latter area, to integrate AI into public health, and then take it further, into prevention. These data insights are likely to health outcomes and to reduce related costs.

Research by Patrick Henry Gallen and Leo Petersen-Khmelnitski

Contact our experts to learn how we can help your organisation