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Blog | Jan 31, 2022 | Article

What is Value-Based Care: Benefits, Types & More

By agilon health staff

Value-based care is a healthcare delivery model that rewards physicians based on patient outcomes. It incentivizes physicians to focus on the quality of service they provide each patient instead of the quantity. The value-based care model is proactive rather than reactive, with the goal of improving patient wellness and preventing health problems before they start.

Controlling costs while improving the quality of care is a top priority for health policy leaders and there is a growing shift from the traditional fee-for-service (FFS) model to value-based care (VBC). In this post, we will explain how value-based care works and how it can benefit primary care physicians, payers, patients, suppliers, and society.

At agilon health, we partner with primary care physician (PCP) groups – who are trusted experts in their communities – to empower them to move to a total-care model that provides more holistic, value-based care solutions to their senior patients. It’s an urgent need, with more than 10,000 new seniors entering Medicare daily.

But what exactly is VBC?

Generic share graphic of Value Based Care.


Much of the focus on value-based care is that it changes physician compensation from fee-for-service (FFS) – a model driven by the quantity of visits – to one that rewards based on outcomes. It might include a monthly stipend for ongoing preventative care of chronically ill patients, or a bonus for keeping seniors out of the expensive hospital setting. A great example is the increase in health screenings in value-based care, estimated to be between 8% and 20% higher than in FFS models.

Value-based care is about wellness rather than illness and about prevention rather than reacting to health crises. When a physician helps diabetic patients maintain their blood sugar and avoid a hyperglycemic visit to the hospital, that’s invaluable to the patient and an outcome the PCP can be compensated for. That’s an example of value-based care solutions.


To illustrate how value-based healthcare works, let’s look at a couple of real-world examples featuring agilon partner physicians and their patients. These cases show how a multidisciplinary care team works together to better manage chronic conditions and improve the patient experience.

  • Improved health and patient satisfaction: Gurneet Kohli, MD MBA, one of our physician partners at Premier Family Physicians in Austin, Texas, describes how our partnership helped him prevent hospitalization for one of his senior patients with chronic pancreatitis and improve patient satisfaction. Watch video.
  • Enhanced patient outcomes: Dr. Catherine Holmes, one of our physician partners at Starling Physicians in Hartford, Connecticut, reveals how value-based care enabled her to provide patient-centered care to one of her senior patients with Type 2 diabetes mellitus who was experiencing severe ulcers on his legs and how this treatment kept him out of the hospital and improved his health outcomes. Watch video.

As the shift from the traditional fee-for-service model to value-based care continues, understanding the differences between the two is instructive.

Traditionally, providers and healthcare organizations are reimbursed for services by insurance companies in a FFS model. Providers bill insurance companies or government agencies for each test, medical procedure, consultation, and treatment provided every time a patient goes to the doctor or is hospitalized. Reimbursement rates are established for each service. Under the FFS model, physicians are rewarded for the number of patients they see and the number of services they provide, no matter the outcome.

In a value-based care model, the quality of the outcome for each patient is the focus rather than the quantity of patients cared for. Healthcare providers are reimbursed according to the quality of the care they provide and in how well they prevent illness and promote health.


There are a variety of payment models in value-based care, including accountable care organizations (ACOs), bundled payments, and medical homes. We’ll look at how each model works and its benefits.

Value-Based Care Model How It Works Benefits
Accountable Care Organizations (ACO) Network of physicians, hospitals and providers that give quality, coordinated care Eliminates redundant care
Focuses on disease prevention
Bundled Payments Collective form of care where a group of providers is reimbursed in a lump sum Providers are incentivized to coordinate care
Patient-Centered Medical Homes A team of physicians and personnel manage a patient’s primary care Providers and medical personnel coordinate the entire patient experience

Accountable Care Organizations (ACOs)

An accountable care organization (ACO) is a network of physicians, hospitals, and other providers that delivers high-quality care to Medicare patients. The program was designed by the Centers for Medicare & Medicaid Services to help providers ensure that patients receive the right care at the right time. ACOs seek to prevent unnecessary and redundant services while at the same time reducing medical errors.

In an ACO, each member of the team shares both risk and reward and receives incentives to improve quality of care and patient outcomes while lowering costs. This differs significantly from the fee-for-service model in which individual providers are incentivized to see more patients and request more tests in order to get paid more—regardless of patient outcomes.

Providers participate voluntarily in an ACO and share the savings if the ACO is able to deliver high-quality care and reduce healthcare costs. There is some risk, however. If an ACO is unable to reduce the cost of patient care, there will be no savings to share. In some cases, providers may have to repay Medicare for not delivering value-based care.

Bundled Payments

In the bundled payment model, also known as an episode-based payment, providers are collectively reimbursed for the costs to treat a specific condition. For example, if a patient undergoes surgery, CMS will combine the set payment to the hospital, surgeon, and anesthesiologist, instead of paying each separately.

The benefits of this payment model for providers include improved coordination among multiple caregivers and a simplified billing process, but there is also some assumed risk. If providers can reduce the cost of services below the bundled payment price, they keep the savings. However, if the costs are higher, providers may face a financial loss.

Patient-centered Medical Homes

The patient-centered medical home (PCMH) is a care delivery model that coordinates patient care through the PCP, who directs the entire clinical care team. In this model, primary, specialty, and acute care are integrated, which promotes multidisciplinary cooperation and helps patients develop one-on-one relationships with their care providers.

With PCMHs, providers share patient electronic medical records and can see test results and procedures performed by other clinicians on the team. The goal is twofold: to put crucial patient information at a provider’s fingertips and to reduce redundant care and the associated costs.


At agilon health, we know that the benefits of a value-based healthcare system are many and extend to patients, providers, payers, suppliers, and society at large.

The Benefits of Value-Based Care
Patients Providers Payers Suppliers Society
Better Outcomes Improved Care Efficiencies Improved Cost Control Prices Aligned With Patient Outcomes Better Overall Health
Lower Costs Greater Patient Satisfaction Less Risk Less Money Spent on Healthcare


With value-based care, patients spend less money to achieve better health. Central to VBC is improving healthcare quality for patients and preventing problems before they start. With this focus on prevention, patients generally require fewer doctor’s visits, medical tests, and procedures. They also spend less on prescription medicine.

Healthy patients help cuts costs for everyone. In a VBC program, someone with diabetes, for example, would work with an integrated team of physicians to stick to a healthy diet, develop an exercise plan and keep blood sugar under control.


When the focus is on prevention rather than chronic disease management and on value rather than volume, the quality of healthcare improves, resulting in increased patient satisfaction.

With VBC, physicians work as a team to treat patients efficiently, focusing on improving and maintaining their health. Patient-centered care plans can also result in better outcomes and help patients avoid costly procedures or a hospital stay.


The benefits of value-based care aren’t seen only with providers and patients. Suppliers also benefit from VBC by being able to align their prices, products and services with positive patient outcomes and reduced costs. This is important as expenditures for prescription drugs continues to rise. Many in the healthcare industry are asking manufacturers to tie the prices of drugs to their actual value to patients.

As more and more providers switch from FFS models to VBC, the supply chain will continue to evolve to meet the needs of both the healthcare industry and patients.


Perhaps the biggest benefit of value-based care is that it contributes to society becoming healthier while reducing overall healthcare spending.  This is particularly significant as healthcare expenditures in the U.S. account for nearly 18% of Gross Domestic Product (GDP). Because less money is spent helping patients manage chronic conditions, costly hospitalizations, and medical emergencies, value-based care can significantly reduce overall spending while improving the quality of care.


At agilon health, we believe the key to value-based care is putting the PCP at the center, so they can serve as the quarterback of care for their senior patients. That means monitoring for more than traditional health concerns – it also means paying attention to social determinants of health. A patient with an unsafe home environment or on a limited budget may find it difficult to adhere to physician advice. But when the PCP is able to coordinate having a social worker visit their home to help address those issues, the patient’s health improves.

Many PCP practices are able to use their transformation to VBC to provide better services to their senior patients, all with the goal of improved care. We’ve seen agilon health partners establish extensivist clinics that lessen ER visits and allow patients to be cared for at home. Or they hire a complex care manager to keep in touch with chronically ill patients between visits and promote adherence to recommended care.


Efficient VBC uses data and a population health approach to provide better care, lower costs, and reduce the need for unnecessary services. The power of data analytics can illustrate trends to guide decision-making, identify high-risk patients, and monitor for areas of improvement. That’s value-based care.

With the advantage of technology, practices focused on value-based care have an easier time recording patient health data and managing positive outcomes. In addition, most VBC practices also use electronic health records that can connect them to specialists, therapists, social workers and more, providing a more transparent view of patient health.

In short, a robust technology infrastructure underpins any good value-based care model and is central to its effective operation.


Fee-for-service models are exhausting PCPs with their quantity demands and making it difficult for the economics of a community-based practice to work. Yet, these primary care physicians have a unique relationship with their patients – many of whom they’ve seen for decades – and a central role to play in providing value-based care. There is no one who knows their senior patients better.


Navigating the changing landscape of payment models can be complicated, especially when caring for senior patients. Learn more about how agilon health can make it easier to focus on providing care and developing your practice.

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