In the U.S., we have two clear problems with healthcare: high costs and poor health outcomes. We spend around $5 trillion each year on healthcare—twice as much per person as other large, wealthy countries. Despite how much we’re spending, we lag behind these countries in life expectancy, maternal mortality and hospital admissions for chronic conditions like heart disease. In short, we’re paying too much and getting too little in return.
Many within the healthcare space have looked at how we pay for and deliver healthcare and arrived at a potential solution: value-based care, a healthcare model that focuses on providing high-quality care while managing costs. We’ve made value-based care a key component of our health care delivery strategy at CVS Health, but beyond that, it’s something that I personally hope others within the health care industry implement in some capacity as we work together to build the health care ecosystem that Americans deserve.
The value-based care difference
Traditionally, American health care has operated under a fee-for-service model. Doctors and other healthcare providers are paid for the individual services rendered: like diagnostic tests, surgical operations or appointments with patients. At first glance, this seems like a reasonable approach. But this system has led us to fragmented care and lack of coordination that can compromise patient outcomes. In value-based care, health care providers are reimbursed by payors based on the outcomes their care provides. This means that care teams in a value-based model are incentivized to deliver the best possible outcomes.
In practice, this model places a greater emphasis on keeping patients healthy through preventive care and early interventions. Value-based care promotes personalized care plans and stronger coordination between primary care providers and specialist teams.
Let’s look at a hypothetical patient, we can call him Fred. Fred is the kind of patient I have seen countless times in my years as a practicing physician: a 67-year-old retired teacher who had been navigating his chronic conditions, like diabetes and high blood pressure, through the traditional fee-for-service healthcare system. In this setup, his care was fragmented, with each visit focused solely on addressing immediate symptoms, leading to numerous appointments and tests. Fred often felt like he was on a proverbial treadmill, constantly reacting to health crises without any real progress toward lasting solutions.
Under a value-based care model, Fred’s experience would have been markedly different, with a comprehensive, patient-centered approach prioritizing prevention and long-term health. His care team would take the time to understand Fred's lifestyle, preferences, diet and overall wellness goals, to develop a personalized care plan aligned with his needs. Regular check-ins, both in-person and virtual, would provide Fred with consistent support and guidance. The team would also coordinate with his cardiologist and endocrinologist to monitor his heart health and diabetes management in between office visits and consider factors beyond care that might impact his health outcomes. For instance, if Fred faced transportation challenges, a social worker on the care team could arrange support to ensure he could get to his appointments.
It's clear what type of improvement a system like this would make for individual patients like Fred—but it’s also an improvement for the healthcare system as a whole. By focusing on prevention and early intervention, value-based care can reduce avoidable emergency visits and hospitalizations, which is important considering hospitals account for nearly one-third of American healthcare spending. It’s a win-win: better care for patients and smarter spending for healthcare systems.
Implementing value-based care
The ideas behind value-based care have been around for some time, with conversations about a more results-focused shift from fee-for-service going back to the 1960s. However, the modern value-based care concept can be traced to work done by Michael Porter and Elizabeth Teisberg, published in their 2006 book, “Redefining Healthcare: Creating Value-Based Competition on Results.”
Some of the elements of value-based care were implemented through the Affordable Care Act—including accountable care organizations and the Hospital Readmission Reductions Program—and into some Medicare and Medicaid programs, like the Merit-Based Incentive Payment System.
While the American healthcare system has gradually begun to adopt value-based care, it has not taken the leap and seen what it looks like when it is implemented at scale. As with any innovation, value-based care is not without challenges. First, healthcare practices that enter value-based contracts must be willing to accept financial risk and maintain appropriate staffing for value-based care amid an ongoing provider shortage. Second, care coordination between primary and specialty care is important for better health outcomes, yet operationally challenging, especially without widespread interoperability between electronic health record systems across points of care. Third, the shifting regulatory environment has presented challenges related to incentive structures and administrative and reporting requirements.
These are just a few of the headwinds that impact the adoption of value-based care in the U.S. However, they are worth exploring solutions for to realize the immense benefit that value-based care delivers for people and our healthcare industry.
In my experience, addressing these challenges isn’t just a strategic priority—it’s a practical necessity. At CVS Health, we’re working across Signify Health, Oak Street Health and MinuteClinic to make care more seamless for the people we serve. By focusing on primary care and enabling value-based care, we’re working to meet patients where they are and help prevent avoidable urgent care visits and trips to the emergency room.
The future of healthcare
I’m confident that this work will yield positive results, not just for the patients we serve, but as an example of how value-based care can help solve some of the challenges faced by the American healthcare system. But I also know that, even with the reach of CVS Health, we cannot fix these challenges alone.
Based on my continued conversations with healthcare leaders across the ecosystem, I truly believe that we have the tools, the motivation and the opportunity to improve healthcare for everyone. We each share that same core commitment to improving health outcomes by making high-quality care available, affordable and convenient. Built into the core of value-based care is a commitment to opening lines of communication, and I want to invite any peers and colleagues to engage with us in dialogue about what works, what doesn’t and what you’re learning as you engage in your own explorations of value-based care.
Sree Chaguturu, M.D., is executive vice president and president of healthcare delivery at CVS Health.