Fee-for-service vs. value-based care: Comparing health outcomes, patient and physician experiences, and other key metrics

Patient health outcomes

Better patient outcomes

• 70% fewer 30-day all-cause hospital readmissions
• 24% fewer preventable inpatient admissions
• 59% fewer preventable acute hospitalizations
• 21% lower rates of high-risk medication use

Worse patient outcomes

• 3.6 times higher rates of 30-day readmissions compared to value-based care model
• 1.6 times higher rates of potentially avoidable hospitalizations

Patient experience

Patient-centered care model leads to greater patient satisfaction

• More time spent with primary care provider (PCP) with longer appointment times
• More preventive screenings (between 3% and 11% higher compared to FFS)
• Emphasis on improving health with lifestyle changes and taking preventive measures
• Patients contacted and seen quickly after hospital discharge—goal is to minimize risk of readmission

Potentially worse patient experience, less time spent with PCP

• Emphasis on procedures and treatments (due to clinician compensation structure)
• Fewer interactions with primary care provider (75% of non-value-based care patients saw their PCP at least once in 2023 vs. 85% of value-based care patients)

Care coordination and quality of care

Integrated model with PCP coordinating care

• Greater collaboration across specialists
• Improved transitions of care
• Focus on disease prevention and holistic management of chronic conditions

Fragmented delivery of care

• Absence of active care management, care coordination and communication among providers
• Lack of coordination may have negative consequences for beneficiaries, such as potential for harmful drug interactions

Healthcare utilization

Lower utilization driven by fewer inpatient visits

• One year after enrolling, MA members in VBC plans have 17% lower utilization relative to FFS members
• Less admissions and ER visits: 32.1% fewer inpatient admissions for VBC and 11.6% fewer ER visits than non-VBC MA³

Higher utilization

• No incentive to avoid hospitalization
• Inpatient care appears to be a main driver for higher utilization rate
• Beneficiaries who enroll at age 65 have 35% higher utilization in the two years following enrollment⁴

Healthcare expenditure

Lower healthcare expenditures and total cost of care

• Overall healthcare costs (in terms of total health expenditures) are 12% lower under VBC compared to FFS
• Less money spent on hospitalizations, medical emergencies and helping patients manage chronic diseases
• Focus on preventive care means fewer medical tests and procedures
• Lower out-of-pocket expenses (yearly limit on payment for out-of-pocket services)

Greater healthcare expenditures and total cost of care

• Greater reliance on costly inpatient and emergency doctor care
• Lack of emphasis on preventive care linked to more tests and procedures
• No yearly limit on out-of-pocket expenses

Physician experience

Model incentivizes care teams working together

• More time for patient engagement and providing quality care when focus is on value instead of volume
• Greater PCP focus on disease prevention
• Prevention-based care means less time spent on chronic disease management
• More rewarding for physicians, who can spend more time engaging with patients, including complex care patients

Quantitatively driven: Focus on number of patients and procedures

• Physicians are incentivized to provide more treatment because payment is based on quantity—rather than quality—of care

Physician compensation structure

Compensation linked to patient outcomes and clinician performance

• Incentive to keep patients healthy, and to keep medical conditions under control
• Allows physicians to practice patient-centered care

Compensation tied to number of patients seen and procedures performed

• Incentive to provide care only when patients are sick—lack of preventive care
• Lack of alignment between quality of care, patient outcomes and physician compensation