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Why Employers Should Care About Value-Based Care

In the last five years, doctors and scientists have come up with a way to create body parts using a 3D printer, reprogrammed human immune cells to fight cancer, and discovered the first new class of antibiotics in more than a generation.


Yet in that same span of time, the vast majority of health care services in the United States have been paid for in much the same way they were 50 years ago.

Traditionally, doctors and other health care providers have charged fees based on the number and type of procedures they provide. This “fee-for-service” model means that providers can charge more fees if they perform more procedures or tests.

However, employers who provide health insurance are interested in paying a doctor to make their employees healthier, which may not necessarily require multiple expensive procedures or dozens of tests. For their part, employees—and indeed, everyone who participates in the health care system—also want more quality care rather than just more procedures.

Enter value-based care, a term for an approach designed to pay health care providers not for the volume of specific tests or procedures performed, but for making sick people healthier and keeping healthy people well. One of the most prominent examples of the value-based approach is called bundled payments, which pays a health care provider a lump sum to provide an overall course of treatment for a condition.

Health insurers use bundled payments to pay some hospitals for knee, hip and spine procedures. Instead of paying piecemeal for each of the many procedures that go into a total knee replacement, for example, the hospital receives a single sum for completing the surgery and managing the patient’s recovery.

Not only are patient outcomes better, with fewer patients readmitted to the hospital for complications following their surgeries, but costs are also significantly reduced. According to UnitedHealthcare, participating employers have saved an average of more than $10,000 per surgery, and employees undergoing the joint replacement can save up to $1,000 in out-of-pocket costs when they use an in-network facility that takes bundled payments.

The value-based care model is not only beneficial to people who need major services such as joint replacements. Value-based care also provides physicians and hospitals with financial incentives to make sure healthy people stay that way.

In fact, some studies have shown the value-based model increases the number of people who receive screenings for breast and colon cancer, the number of pregnant women who receive prenatal care, and even the number of children who receive regular pediatric preventive care. Such care keeps people healthy, while also saving on the costs associated with major health problems that could arise without screenings or preventive doctor visits.

The advantages of the value-based care model, especially for employers trying to manage healthcare costs and employees who want high-quality and affordable treatment, suggest that the popularity of the model will only increase in the future. For both groups, the potential for value-based care to change the way health care is delivered makes it as potentially groundbreaking as 3D printing or new cell therapies.