Volume to Value

The Shift from Volume-based Care to Value-based Care

For years fee-for-service (FFS) has been the norm for U.S. healthcare. Under this model, patients and their payors reimbursed hospitals and providers on a per visit basis. So the number and complexity of visits/encounters (volume) determined revenue, regardless of the patient outcomes.

Over the past few years, CMS has created numerous projects to support this model.  One is “pay for performance”. In this model, CMS withholds percentage of revenue for all services in a category from all providers, and then returns money to the top performing providers in a budget-neutral manner (or as I like to describe it, “non-payment for non-performance”).

Another model involves “never events.”  CMS no longer pays hospitals for services that should never happen in the first place, such as:

  • Surgery to remove retained sponges and other instruments left behind.
  • Amputation of the wrong limb (or other wrong-site surgery)

A third are readmission penalties.  This year almost half of the hospitals in the U.S. have Medicare funds reduced by up to 3% if they had more patients return to the hospital within 30 days of discharge than their peers.

And finally, bundled payments.  This year CMS is paying a single fee to some hospitals and orthopedic surgeons for knee and hip replacement operations. This single fee forces the hospital and surgeon to work together to manage the total cost of care.

These moves to “value” force hospitals and providers to pay more attention to data and create opportunities in the field of clinical business intelligence, advanced analytics and machine learning algorithms.  These changes further encourage the move to digital healthcare records.

My Summary Analysis of the Shift from Volume to Value


  • CMS and the industry is providing several small tests of change to move us into incentives for better outcomes.

The BAD:

  • Seems like overall healthcare policies are changing quickly and placing huge burdens on healthcare providers in a short period of time.[1]



[1][1] When you add up MU, ICD-10, PPACA, ACO’s, MACRA and PAMA in the past 8 years, there has been a lot of CMS prescribed change that may have slowed some opportunities for innovation. It is more difficult to innovate when we are constantly reacting to changing regulations and payment models.

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