Schuyler File April 17, 2019 6 min read

Reducing Health Care Costs through Value Based Care

Value-based care is understood to be an improved approach to reducing the cost of health care when compared with the current fee-for-service model. This is because value-based care compensates providers for improved patient outcomes instead of compensating them for providing greater amounts of patient services, such as more tests and treatments. However, today’s almost exclusive focus on the price of health care by health plan vendors and brokers/consultants continues to stunt the adoption of value-based care by health plans. One formula for value-based care is Value = Outcomes/Price. To better evaluate the merits of value-based care, human resources professionals need to develop an understanding of the outcomes being delivered to plan participants and demand that their vendors/brokers/consultants provide tools that measure outcomes.value based care

This article will provide a brief overview of the critical components of value-based care and outline practical first steps that a human resource professional can take to better understand the landscape of value-based care.

Outcomes (Quality, Efficiency and Waste Elimination)

The current fee-for-service system utilized by most health plans compensates providers for the number of services provided with little regard for the outcomes achieved by the provider. In a value-based care environment, compensation to a provider is based in part on quality, efficiency and the appropriateness of care delivered to the health plan. What measures of quality, efficiency and appropriateness are important?

  • Quality – Did the medical intervention achieve the desired outcome? When a provider is compensated fully only when the desired outcome is achieved, providers have an incentive to both spend more time with patients to ensure patients provide themselves with the necessary self-care, and intervene prior to costly encounters like re-admissions.
  • Efficiency Did the provider utilize more resources or less resources in treating a condition when compared to other providers treating the same type of condition? Quality is important, but if a provider is utilizing significantly more resources to achieve the same quality as a peer, this can drive up cost for a health plan.
  • Appropriateness – Is a provider delivering appropriate care? Achieving quality outcomes with relatively low resource utilization is easier when a provider is unnecessarily treating healthy patients. The price of unnecessary care is irrelevant if you can eliminate or significantly reduce it.  


There are many different price tools available in the marketplace and price is typically the low-hanging fruit when it comes to value-based care. Increased price transparency is a bonus for health plans. However, many health care economists believe that quality and efficiency have about two to three times more impact on the total cost of treating health conditions. So, while price is important, price-based health care buying can lead to false savings if considered without accounting for quality and efficiency.

If adopting a value-based care approach is not practical for employee relations reasons, a better understanding of the drivers of health care costs is imperative to taming health care spending. To lay the necessary foundation for taming health care spending, consider the following first steps:

  1. Market Reporting – Ask your broker/consultant for a market report on the quality, efficiency and appropriateness of the care delivered by the providers that your plan participants are utilizing.
  2. Claim Data – Collect claim data where health claim data is available (typically self-funded groups and/or plans with 100+ participating employees).
  3. Measure – Measure the claim data generated by your health plan based on quality and efficiency. Your broker/consultant should be able to provide this service, but if they are unable to assist, your carrier or TPA should be able to provide some insight.
  4. Communicate – Communicate your vision to your strategic partners − your TPA, PBM and broker/consultant. Communicate to employees where they might be able to obtain the best outcomes for the conditions that are most prevalent in your population. Remember that any communication to employees should be consistent with the culture of your organization.

To learn more about value-based care, or if your company has questions about managing health plan spending, contact Schuyler File at, or your dedicated HJI | BSG contact. Also, be sure to register for our webinar:  An Introduction to Heath Care Data Analytics.

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Schuyler File

Health Care Consultant