Value-Based Care’s Next Challenge: Administration

Value-based care is no longer a pilot program. For most health plans, it is simply how care gets paid. Now the conversation needs to shift from “should we adopt value-based care?” to “can we administer it well enough to deliver on its promise?” Health plans should keep expanding value-based care and alternative payment models (APMs), but only if those models are built to last. They must be financially viable, beneficial for providers and effective at helping members access the right care at the right time.

Value-based care and APMs offer financial incentives to efficiently deliver high-quality care. Knowing members trust their physician, health plans pay providers for the holistic, proactive and coordinated care of patients while measuring the quality of their performance. In short, today’s value-based care and APMs, such as shared savings, pay-for-performance, pay-for-reporting and condition-specific population-based payment, seek to reduce healthcare costs, increase care coordination and quality, and alleviate physician burnout.

Value-Based Care: Adoption

The latest data from CMS estimates approximately 14.3 million Medicare beneficiaries, up 4.4% from 13.7 million the year before, are now enrolled in an accountable care organization, as CMS continues working toward its goal of bringing all 34 million traditional Medicare beneficiaries into value-based arrangements by 2030. The Medicare Shared Savings Program alone now includes more than 700,000 participating providers caring for 12.6 million people with traditional Medicare.

Likewise, Medicaid is embracing value-based care. The Kaiser Family Foundation found that, as of mid-2025, 42 states (plus the District of Columbia) contract with comprehensive, risk-based managed care organizations, and more than 66 million Medicaid enrollees (78% of the program) receive their care through risk-based managed care organizations.

AHIP offers more evidence. Their 2025 study to assess how widely APMs are being adopted represented over 271 million people nationwide, or 87.5% of covered lives across all lines of business, based on 2024 enrollment figures. This study found:

• 44.9% of all healthcare payments across all lines of business were tied to APMs that hold providers accountable for quality and cost of care (Health Care Payment Learning & Action Network Categories 3-4) in calendar year (CY) 2024 compared to 45.2% in CY 2023.
• 28.7% of healthcare payments across all lines of business were tied to APMs with downside risk (Health Care Payment Learning & Action Network Categories 3B-4) in CY 2024 compared to 28.5% in CY 2023.
• 70% of respondents expect APM activity to increase over the next 24 months, citing provider readiness, health plan engagement and health plans’ ability to operationalize such models as key facilitators.

Value-Based Care: Results

We are seeing signs that value-based care is working. Humana’s latest value-based care report shows Medicare Advantage members in value-based care arrangements had 24.3% fewer inpatient admissions than those in Original Medicare in 2024, plus 13.4% fewer emergency department visits and 7.6% fewer hospital admissions than non-value-based Medicare Advantage members—totaling 229,000 fewer unnecessary admissions and 204,000 fewer unnecessary ED visits. Humana’s Medicare Advantage value-based care arrangements saved an estimated $12.8 billion in 2024, or 26.3% in medical costs, compared with Original Medicare.

Elevance reports that value-based care partnerships resulted in significant healthcare quality enhancements and cost reductions, improving medication adherence from 7% to 10% and saving $1,200 per member annually.

Value-Based Care: Obstacles to Greater Adoption

Despite promising results, value-based care faces barriers beyond profitability pressures and reluctance to accept downside risk. One of the biggest obstacles is administration. Many health plans lack a dedicated system of record, relying on disconnected spreadsheets to manage attribution, risk scores, quality results, claims and financial reconciliation. As APMs expand across programs, providers and members, these manual processes struggle to keep pace. A single eligibility change, late claim or an updated quality measure can trigger extensive rework, introducing inconsistent formulas, conflicting versions and uneven application of program rules.

Another unfortunate result of manual processes is that most errors go unnoticed. If they are caught, it is normally only after payments reach providers, requiring clawbacks that strain relationships. Without a traceable record of inputs, assumptions and calculations, plans struggle to explain and defend payments—fueling disputes, delaying resolution and increasing exposure during CMS and state Medicaid audits—undermining trust in value-based arrangements at the very moment plans are trying to scale.

The financial stakes are substantial: of the $2 trillion flowing through APMs annually in the United States, errors affecting just 1% of payment dollars would put $20 billion at risk. Scaling value-based care requires reliable, consistent and auditable payment infrastructure that protects financial integrity, strengthens provider trust and supports growth.

This blog is brought to you by NASCO, and the views expressed are solely those of the sponsor.