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Blog | Apr 12, 2023

How Does Value-Based Care Lower Costs?

By agilon health staff

It’s common knowledge that health care costs in the United States escalate exponentially. In 2020, the U.S. spent $4.1 trillion on health care, an increase of 9.7% over 2019. With increased focus among health policy leaders on controlling costs while improving the quality of care, there is a growing shift from the traditional fee-for-service (FFS) model to value-based care (VBC). We’ll look at how VBC can lower costs while improving outcomes and patient satisfaction.

What is Value-Based Pricing in Healthcare?

Under the FFS model, physicians are rewarded for volume. They are compensated for the number of patients they see and the number of services they provide, no matter the outcome. Unfortunately, this model incentivizes physicians to prioritize quantity over quality, potentially resulting in negative consequences for both patients and healthcare providers. These include:

  • There is little or no incentive to deliver efficient care or prevent unnecessary care.
  • Patient care may suffer due to potential inefficiencies and lack of communication with other providers.
  • Patients can face high out-of-pocket costs and may need to pay for services up front and submit to insurance providers for reimbursement.

Value-based care rewards physicians based on patient outcomes. It incentivizes physicians to focus on the quality of service they give to each patient instead of the quantity.

How Exactly Does Value-Based Care Save Money?

Value-based care focuses on preventative health, better management of chronic conditions, and outpatient care that reduces emergency room visits and hospitalizations. This translates into healthier patients overall, which reduces admissions and readmissions to hospitals, and results in lower out-of-pocket costs for patients and usage costs for payors. Let’s look at five metrics that are essential to VBC success.

1. Effectiveness and efficiency.

With value-based care, it’s important to ensure patients receive the right care at the right time and that providers take the correct steps to deliver it. Doing this can result in better outcomes and help eliminate costly readmissions.

2. Timeliness.

Providing prompt treatment and reducing barriers to care are essential to improving the quality of care as well as increasing patient satisfaction. Timely care can also prevent complications, which often lead to expensive hospital stays.

3. Safety.

Patient safety is of paramount importance. Safety metrics align with the goal of VBC to increase the quality of care while lowering costs.

4. Patient focus.

Patient-centered care, a hallmark of VBC, happens when physicians are empowered to spend the necessary time with each patient to make sure their needs are met. This results in better communication, a more fulfilling patient experience, and oftentimes, better patient compliance, which can ultimately reduce costs.

5. Equitability.

Traditionally, underserved communities have experienced barriers to medical care, in addition to social and economic challenges. Value-based care helps vulnerable populations by providing a support network that lessens health risks, promotes wellness, and controls costs.

How Do Doctors Benefit from Value-Based Care?

With VBC, physicians work collaboratively to treat patients efficiently, using a variety of care models, including:

  • Accountable Care Organizations (ACO). This is a network of physicians, hospitals, and providers that give quality, coordinated care. ACOs eliminate redundant care and focus on disease prevention.
  • Bundled Payments. This is a collective form of care where a group of providers is reimbursed in a lump sum. With bundled payments, providers are incentivized to coordinate care.
  • Patient-Centered Medical Homes. In this primary care model, a team of physicians and personnel manage a patient’s primary care. The main benefit is providers and medical personnel coming together to coordinate the patient experience, end to end.

Physicians who partner with agilon health benefit from a full-risk capitation, total-care model. agilon contracts with insurers in all regions it serves, making agilon the primary risk-taking entity responsible for the care that its physician networks provide to Medicare Advantage patients. That means physicians can count on a stable monthly payment based on the expected care patients will receive. Higher payments are made for patients who have more complex medical histories.

Explore Your Options for Transitioning to VBC with agilon

The agilon Total Care Model was created by physicians for physicians to improve outcomes, reduce costs, and help primary care providers, serving senior patients, grow their practices and provide better care.

Learn how agilon has the tools and roadmaps to seamlessly help physicians move to a new care model and stay profitable all while treating patients both economically and successfully.

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