Value-based healthcare, the disruption we need

There is a rampant misconception that Value-Based Healthcare is all about reducing costs.

For reprentational purpose

HYDERABAD: Across the world, healthcare continues to be a widely debated issue because, despite the increase in healthcare expenditures and the best efforts of well-meaning physicians and medical professionals, people continue to grapple with rising costs and uneven quality of care.

India too is not excluded from this trend, in fact, the shortcomings of its healthcare system were more than evident during the brutal second wave of the Covid-19 pandemic. However, this pandemic-induced disruption has presented us with an opportunity to introduce small steps of change.

India’s healthcare ecosystem continues to rely heavily on the fee-for-service FFS model; what if it were to look at newer models of healthcare such as the increasingly talked about value-based healthcare model? Would it help? And what are the salient features of such as model? Dr Suman Katragadda, Founder & CEO of, Heaps.ai shares an insight.

Understanding Value-Based Healthcare vis-a-vis the Fee for Service Model

Simply put, the FFS model means that doctors/hospitals/healthcare providers are paid based on the number of services performed. This means that there is an intrinsic incentivisation of quantity over quality. From a patient’s perspective, this kind of model almost always leads to a conflict of interest because the focus is not on providing the best possible outcome.

Value-based healthcare (VBHC) sits diagonally opposite to the FFS model because it advocates for a system wherein healthcare providers are incentivised in addition to their normal reimbursement rate as per the quality of care that is provided to a patient. Under the VBHC system, doctors and hospitals are made to focus on improving patients’ health outcomes.

There is a rampant misconception that VBHC is all about reducing costs. This is not correct, in fact, the word “value” in VBHC stands for the value that is delivered to a patient by achieving improved health outcomes.

Although there are several types of sub-models under VBHC such as Bundled Payment, Shared Risk and Shared Savings, Capitation Model and Pay-for-Performance model. The overarching benefits and goals of the VBHC system are common.

• The cost factor: The VBHC model prioritises patient recovery and puts better health outcomes as a top priority. Hence, over time, with such as approach, patients are likely to require fewer medical visits leading to decreased spending on major health-related incidents.
• Better for payers: Under a VBHC model, the risk is spread more evenly. And the goal of optimal patient outcomes most likely translates to a vast healthy population; this means fewer repeat insurance claims and decreased strain on insurance companies.
• Healthcare providers stand to gain: Last but not the least; VBHC is also a winning model for healthcare providers because, for hospitals, the monetary benefit is the incentivisation of outcomes. By participating in the VBHC model, hospitals will be forced to pivot to achieving greater efficiencies in terms of adopting technology-enabled systems.

A value-based healthcare system is, thus, a win-win scenario for all stakeholders in the healthcare ecosystem. Such a model would ensure that the country’s healthcare system actually values good patient outcomes. This transformation, however, is in its nascent stage and it will still take a few years for a complete shift in mindset across the healthcare value chain, including patients who might find the concept of value-based healthcare alien.

VBHC provides a route away from the current supply-driven healthcare model toward a more holistic approach that maximises value for patients. In fact, according to a PWC report, if implemented as envisaged, in five years, the VBHC model could help to save nearly 9 lakh lives and reduce healthcare costs by around Rs 4,000 billion.

Hence, India must explore every avenue available to embark on the road to transition and usher in a new era for healthcare.