What Exactly is Value-Based Care?

Before we talk about value-based healthcare, let’s first get a basic understanding of the current provider-payer-patient relationship. Traditionally, providers (physicians, hospitals, and the like) are reimbursed via a fee-for-service model. It looks something like this:

  • Provider bills for services (an office visit, ordering a lab test, outpatient surgical procedure, admission to a hospital) they perform

  • Payer pays for these services

  • Patients pay a portion per their health plan

Simply put, you pay for what you use. The overwhelming sentiment of providers and payers is that fee-for-service no longer works and value-based care is going to fix the healthcare system.


The fee-for-service model isn’t without flaws. Because profit comes directly from the services performed, healthcare providers may be swayed to perform more and more services, some of which are unnecessary. Have a headache? Let’s get a CT scan. It’s rare a patient will reject a physician’s orders if they deem a service necessary. But this ends up in expensive procedures, most of which could have been avoided.

More services also means a need for sick patients. Providers are not incentivized to keep patients healthy but instead to have sick patients. The more sick patients, the more office visits, labs, and procedures. This doesn’t mean that physicians are practicing in a harmful way, but it may suggest that financial incentives are improperly aligned.


So, what is value-based care and how does it differ from fee-for-service? The core of value-based care is a changing reimbursement model that pays providers based on the quality of care that is provided. There are several variances of this model:

  • Pay for Performance. An extension of fee-for-service, the provider is still primarily paid based on services plus they receive bonuses or penalties based on the quality of care provided. This model was pioneered by Medicare with the Physician Quality Reporting System (PQRS; replaced by the MACRA/MIPS program). Through PQRS, providers received bonuses (or paid penalties) as a percentage of their Medicare billings based on quality measure results. This doesn’t eliminate fee-for-service, but it does hold providers accountable for the quality of care being delivered. Plus it monitors overuse or reduction of unnecessary services by penalizing providers when those actions are not clinically appropriate (such as unnecessary imaging or prescribing antibiotics)

  • Bundled Payments/Capitation. While there are differences between options, the concept of these models is that a payer will pay a provider/hospital/health system one lump sum for a group or bundle of services. It is then up to the health system to deliver the care for those services. The payment never changes based on the amount or type of services actually provided which incentivizes providers to be efficient in their care delivery as they will not be paid more for extra services. This model is common for episodes of care like a knee replacement surgery.

  • Shared Savings. In this model providers can receive an additional payment if actual costs incurred are lower than projected or benchmarked costs. The savings are split between the payer and the provider. Medicare and Medicaid have paved the way with their shared savings program at accountable care organizations (ACOs).

Quality of care is a major component for value-based care and payments to work. In a bundled payments or shared savings model it is critical to measure quality of care being delivered to ensure that necessary services are not bypassed simply to meet spending goals.

Measuring quality of care is nothing new, payers have long been measuring quality based on claims data. Through claims analysis, payers can easily assess when certain procedures have been performed. But claims data only goes so far in helping you measure quality.

For example, if payers are reimbursing for a large group of patients that have diabetes, a claim can tell the payer if a blood sugar A1c test was performed, but it won’t tell you if the patient’s blood sugar value is under control. To effectively measure quality you need clinical data from an EHR. With clinical data, you have access to data like lab results, blood pressure values (no claim is submitted when taking a blood pressure) and social history such as if a patient is a smoker and if they are were they given cessation counseling.  

This is the differentiator when it comes to value-based care: combining clinical quality data with cost and utilization data.


To successfully combine all the cost and quality data, it’s important to enable multiple systems to talk to each other. Data from claims, practice management systems, EHRs, outside labs, and so on need to be integrated to paint a full picture of value. This remains one of the biggest challenges in healthcare today.  

Great strides are being made with initiatives like the new Fast Healthcare Interoperability Resources (FHIR) standard developed by HL7. FHIR is an open and free standards framework designed to ease the burdens of interoperability. Built using standards like XML and JSON with a focus on ease of implementation, FHIR looks to be a key tool in building value-based care and payment systems for healthcare providers and payers.

At HealthLX, we are proud to support FHIR and HL7 initiatives. HealthLX is a Da Vinci stakeholder working with other industry leaders and health IT technical experts to accelerate the adoption of HL7 Fast Healthcare Interoperability Resources (HL7® FHIR®) as the standard to support and integrate value-based care (VBC) data exchange across communities.

Value-based care is a critical component to fixing our healthcare system. Bringing new payment models, combined with quality measurement and population health, using standards to promote interoperability will create great change in providing better patient care.

Our Role in Healthcare Innovation

The way healthcare data is organized today is highly complex and not change ready. There is little to no governance which leads to multiple truths, broken systems, and maintenance and upgrades that can be extremely costly.

Specialization and increasing industry change are forces that continue to contribute to the problems of connecting applications and their data. Whether you are a local or state government, public health organization, healthcare provider or payor, the exchange of clinical information will be critical to meet both regulatory and business viability in the future. Unstable data systems create an environment where both personal security and compliance can easily be breached and we need to avoid this at all costs.

Your future, along with the future of today’s healthcare recipients, depends on choosing the right integration governance solution that efficiently creates and manages intelligent integrations, adequately manages those integrations, and effectively manages and monitors ongoing dataflow.

Doing our part to make a difference in our data-complex world, we developed a revolutionary healthcare product, HealthLX (Healthcare Language Exchange), that was designed with three critically important integration governance capabilities:

  1. Integration connectivity that supports a broad level of service orchestration and data integrity between source and target applications.

  2. Effective HIPAA compliant security between systems supporting enterprise-wide auditability and application service level management.

  3. Monitoring and management of dataflow at the transaction level for enhanced visibility for system-wide performance measurement.

Creating Integrations: HealthLX leverages modern integration best practices and Open-Source technologies to create intelligent connectors that interface source data and external APIs. As a result, creating new integrations is easy and repeatable.

Managing Integrations: Existing connections need to adapt over time to changes in data sources, API’s and functional applications. Because connections are mapped inside the HealthLX integration hub, updating and changing integrations is easier to accomplish.

Managing Dataflow: HealthLX’s management dashboard provides an audit trail of every transaction that passes through it and flags failed transactions providing high levels of security and compliance.


HIMSS 2016 and the state of Interoperability

Another enormous HIMSS event came and went. To those that frequent these trade shows, there's always a challenge to cover the floor because of size. This year we walked our miles with the Apple Health App capturing our steps. Reviewing my phone now, I posted nearly 15,000 steps a day at the event. Yay for me! Now what do I do with this information? Therein lies the underlying reality of Healthcare in 2016. I wonder if this same question has been asked for many years except now there's just more data available. In a small way there is a good analogy here.. I saw this same thing at HIMSS16. There is an inevitable chasm our healthcare economy sees between new data and what we should do with it. But, I digress...this post isn't about this new data,'s about how it has value and who will care about this new information in the future so I can help others care for me. Enter in one of the buzziest words of the past few years and the loudest buzz of this year 'Interoperability.' Interoperability has been around for years. So, what happened this year that is different than the past years? Is heightened volume this year a barometer of sorts for the industry truly thinking innovation-like across systems? I think the answer to these questions is 'yes,' but requires some tangible, realistic truths about the momentum before we get excited. So, here's some metadata.

  1. The Office of National Coordination (ONC) announced a plan to accelerate the FHIR standards by way of engaging the private sector in a contest of sorts. Details here.

  2. There was a 'industry-wide interoperability' pledge. Not just any loosey-goosey commitment, but a statement that became a chorus around stated direction for interoperability 'standards.' Could it be?

  3. The Sequoia ProjectCarequalityIHEFHIR continue to provide hope that standards around interoperability's technical challenges are moving forward.

On these three topics, some added insight...

Karen DeSalvo's session on Tuesday, March 1, was a leading indicator that the ONC and the harmonizing effort around the ONC Interoperability Roadmap released last year is proving to be a common theme for the interoperability movement. At a high level, the vision of the Roadmap is a future state that empowers the consumer by putting the patient as the essential target metric to determine what interoperability success will be. The players to meet this consumer-centered future are going to need encouragement politically, financially and ethically. Without these external forces, the industry will continue to languish because of these Triple-Aim purpose or raison d'etre. Notwithstanding, applause should be given to the ONC for providing a means for moving forward. In and of itself, this has not happened with broad adoption across the players within the Healthcare industry. Well done, Ms. DeSalvo.

Another development that was announced at the beginning of the conference by Sylvia Burwell, Secretary of Health and Human Services, was the 'pledge' by the private sector to provide broad adoption of Interoperability across systems. The big three EMR systems that were referenced during her Keynote opening remarks were Cerner, Epic and Meditech, with other leading vendors that have recently followed for the pledge. I couldn't recall where there existed an almost counter-intuitive theme that corralled proprietary vendors to commit to a cooperative effort in how to share data before. Could this be a turning point in the healthcare industry? I was part of the standards movement in the 90s for the retail industry supporting cross-platform standards. I recall the same issue existed then between proprietary POS platforms. Back in the day, IBM, NCR and others eventually joined hands to have backoffice systems talk to each other. Voila, this became the birth of computer-managed inventory and massive foundational improvements in the Supply Chain for retail. There is a natural and inevitable transition happening with EMR application vendors as well. So, everyone...let's define the rules to play nice together. Wait...let's start by making a pledge to define the rules to play nice together. Check that one off the list. Let's see where this goes.

While at the show, my preference is to work the dark alleys or slow-moving corners of the event. Who's in the first row and hardest to get to? Where's the back of the show? That's where I go. So, what did I find this year? Save for the HL7 booth, which was centrally located at the show, the other 'standards' bodies were on the fringe or in hidden poorly lit corridors. I suspect this is due partly because they don't have the gazillions of dollars that other large brands have to market their wares. Instead, they are the collaborative nice people hoping that their ideas are heard and agreed to by those heavy hitters in the main thoroughfares of the show floor. I wonder...who is more interested in a community agreement about how to share information? The big dogs, or the crafty smaller groups. I would submit, the clever, quiet ones who have the smaller lecture settings but pack in the brightest minds to overcome policy, workflow and technology challenges. I witnessed an interoperability prototype conducted at the Sequoia Project booth. The demonstration was a live health data sharing exercise using carequality members. Systems touched included eClinicalWorks, Epic, NextGen and Surescripts. Essentially. the demo collected pertinent information from each of these systems in real-time; or as best a closed-loop demo can illustrate. The fact that each of these system connections was moving data, enriching payloads and collaborating with credentialed and secure connectivity was the value of the demo. Were there oohs and ahhs in the audience? No, not really...but for those contributing minds, there were smirks of achievement that gave all of us another glimmer of hope that solutions are on their way.

There was certainly more at the show than I was able to cover. But, for me, I've learned that its best to unleash the bloodhound in each of us to track down our passions. Mine is trying to glue ugly systems together. Why? As a human race, we can't advance without talking to each other clearly and timely. So, until next year, HIMSS...thanks for keeping the 'interoperability' theme front and center in this industry.