How to make value-based care work better

Value-based care works when physicians lead and take real accountability.

This is the fifth piece in a multi-part series in the Boston Globe, where I lay out solutions that can help curb healthcare spending in America. Read Part 1, Part 2 and Part 3 and Part 4 in this series on my Substack.

For this piece I’m pleased to be joined by my colleague Dr. Tom Tsai, associate professor of health policy and management at Harvard T.H. Chan School of Public Health and co-director of the Healthcare Quality and Outcomes Lab at Harvard School of Public Health.

Please feel free to weigh in.

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When a colleague, a primary care physician in North Carolina, joined a new kind of medical practice a few years ago, she wasn’t looking to reinvent how she practiced medicine. But what she found surprised her. Her previous practice looked like most primary care in America: a treadmill of 15-minute appointments, minimal support staff, and patients who fell through the cracks between visits. Today her patients have care coordinators who call them between appointments and catch problems before they become crises. Her highest-risk patients — the ones who used to cycle in and out of the emergency department — are healthier and are staying out of the hospital.

Her experience points to a promising idea that has been at the center of health care reform for more than a decade: Instead of paying doctors and hospitals for every test and procedure they perform, pay them for keeping patients healthy. In this model, called value-based care, doctors and hospitals are paid based on the health outcomes they achieve and the overall cost of caring for their patients, rather than simply for the volume of tests and procedures they order. Do that, the theory goes, and you align everyone’s incentives — doctors, hospitals, insurers, and patients — around what actually matters.

The idea is sound. The results, so far, have fallen short. The Congressional Budget Office found that the federal government’s major payment-reform programs — a central tool for implementing value-based care — cost $5.4 billion more than they saved between 2011 and 2020. These value-based care programs have not yet bent the cost curve.

But buried in the data is an encouraging sign: The programs that have actually worked share a common feature. They are often physician-led, and they hold doctors genuinely accountable for the total cost and quality of their patients’ care. When primary care teams are given both the tools and the real financial responsibility to manage health, they deliver better results — for patients and for the system.

Why hasn’t that spread more broadly? There are two main reasons.

First, the doctors doing the work often see little of the savings they generate. Consulting companies and management firms that run these programs can capture 40 cents of every dollar saved — money that should be going to front-line care. Second, these programs often don’t cover the sickest and most vulnerable patients who need coordinated care the most.

Despite these limitations, accountable care can work. In 2022, Medicare’s flagship program resulted in savings of nearly $2 billion, with the biggest gains coming consistently from physician-led, primary care-centered organizations.

Still, given the comparatively small savings of value-based care, the temptation is to abandon this effort. That would be a mistake. Instead, health care officials need to get serious about making these programs better.

It begins by raising the stakes. Most value-based programs have been structured so that providers — doctors or hospitals — receive a bonus if they save money but face no penalty if costs run over. Programs with no downside risk are programs without real accountability. And without real accountability, the incentive to fundamentally change how care is delivered simply isn’t there. The Trump administration has taken a meaningful step here, eliminating these half-measures and launching new programs with longer contracts — up to 10 years — that give practices the time to invest in the kind of care coordination our colleague mentioned above has seen in her practice. Research shows it works: Programs with longer track records and stronger accountability have consistently delivered bigger savings.

It also means having more specialists lead many value-based care programs. Focusing on primary care is important, but it alone cannot bend the cost curve. Cardiologists, orthopedic surgeons, oncologists, radiologists — these and other specialists account for the majority of what Medicare spends, and for too long they have operated entirely outside any accountability for cost or outcomes.

New programs from the Centers for Medicare & Medicaid Services are beginning to change that, requiring specialists in areas like heart failure and chronic back pain to share in the financial consequences of their decisions, reducing payment to those who exceed spending targets. That’s the right direction.

The next step is extending it much further — where payers like CMS or private insurers set a target payment for a whole episode of care (like a joint replacement) so that every provider (in this case, the surgeon, the hospital, etc.) has an incentive to manage costs efficiently. Experts have estimated that bringing specialists into this accountability framework could save as much as $100 billion a year. That potential has barely been tapped.

Longer value-based care contracts between payers and providers also allow something that short-term thinking punishes: investing in patients’ long-term health. A doctor who prescribes an effective obesity medication today — one that could prevent diabetes, heart disease, and joint problems years from now — shouldn’t be penalized because the savings show up after the contract ends. Smarter payment design would reward exactly that kind of forward-looking care.

The ultimate goal is accountability — with hospitals, specialists, and primary care doctors all responsible for the total cost of a patient’s care while paying attention to good health outcomes. Maryland has been running an experiment along these lines for a decade, and sets a budget for how much money can be spent overall by hospitals in the upcoming year. The results show that even hospital systems can operate under spending constraints without sacrificing the quality of care. Cost discipline and good medicine are not in conflict. When every player is accountable, the incentives align much better.

None of this is easy. Moving to longer contracts and greater accountability will create anxiety among providers, particularly smaller practices and safety-net organizations serving low-income communities. Strong risk adjustment and guardrails against excessive volatility are essential.

But the status quo is not an option. Nearly one in five dollars is spent on health care. We cannot afford reforms that produce only incremental gains when Medicare’s trust fund may be depleted over the next 10 years.

Our colleague’s patients are healthier, and they’re staying out of the hospital. That’s not just better for them. It’s better for all of us. The question is whether we’re willing to build a system where far more patients can say the same.