4 Value-Based Care Payment Models You Should Know

So, your practice is thinking about making the switch to an outcome-based payment model… now what?

Well, before you dive head-first into Value-Based Care, it’s important to understand the basics of the different payment models so you can set yourself up for success. This article will explore four Value-Based Care payment models—Pay-for-Performance, Bundled Payments, Shared Savings and Risk, and Capitated Payments—so you can confidently decide which is right for your organization and its overall objectives.

A Quick Overview of Value-Based Care

Value-Based Care (VBC) is a payment model that reimburses healthcare providers for improving health outcomes and decreasing spending. VBC’s popularity has steadily grown in recent years, and it’s expected to eventually dethrone Fee-for-Service (FFS) as the dominant model. But for now, most VBC programs still incorporate elements of FFS billing, making it easier for organizations to transition to an outcome-based care model.

Note: Refer to our article on the differences between FFS and VBC for a more detailed look at the two payment models.

1. Pay-for-Performance

Pay-for-Performance (P4P), the most common type of VBC payment model, rewards providers for meeting certain criteria for quality of care and cost-effectiveness. To receive reimbursement, the provider must track performance metrics—such as patient outcomes, patient satisfaction, hospital readmission rates, and mortality—and then report the findings to the payer, who then compares the data to industry standards.

P4P involves minimal risk and is relatively simple to implement, making it a practical choice for organizations looking to try out VBC for the first time. The downside is that payouts under P4P are typically less than with other models and, due to the time it takes to analyze the data, payments are only distributed 1-2 years after care is delivered.

Example: CMS’s Merit-Based Incentive Payment System (MIPS).

2. Bundled Payments

Under a Bundled Payment model, a single lump-sum payment covers all eligible services rendered during a defined episode of care. Providers who exceed the set price are responsible for paying the surplus. This model encourages collaboration by covering multiple providers involved in the episode of care, which ultimately standardizes care protocols.

Example: CMS’s Comprehensive Care for Joint Replacement (CJR) and Bundled Payments for Care Improvement (BPCI).

3. Shared Savings and Risk

With Shared Savings and Risk, healthcare organizations are responsible for the full cost of care for a defined set of patients. If costs are managed well, the organization is rewarded; if costs surpass the designated amount, the organization is penalized. Since Shared Savings and Risk programs have a higher potential for reward and loss, they tend to be more suitable for larger organizations that have the infrastructure and resources in place to mitigate risks.

Accountable Care Organizations (ACOs) commonly use Shared Savings and Risk programs, whereby providers come together to coordinate high-quality care for a specific group of patients and eliminate unnecessary services. Rewards and losses, which are shared amongst providers in the ACO, are dependent on the quality of care delivered and specific spending goals.

Example: Medicare Shared Savings Program (MSSP).

4. Capitated Payments

Under a Capitated Payment model, organizations receive a fixed sum of money up front from the payer that covers the expected cost of a patient’s care over a defined period of time. Those that manage costs below the fixed payment are allowed to keep the excess. A Capitated Payment model is ideal for larger organizations that have the resources needed to handle any risks that arise.

While this model boasts the highest potential for reward of all the models on this list, it also has the highest potential for loss since the provider is burdened with 100% of the risk.

Example: Medicare Advantage and Program of All-Inclusive Care for the Elderly (PACE).

Conclusion

Chronic Care Management is more than a billing opportunity — it’s a powerful framework for delivering smarter, more connected care. As the U.S. healthcare system shifts toward value-based outcomes, CCM stands out as a practical and scalable way to support patients with complex needs while improving financial and clinical results.

With the right technology and workflows in place, your organization can simplify implementation, ensure compliance, and maximize impact — for your team and your patients.

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