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What is the history of value-based care?

By Nicole DeCoudres, Director of Client Business Management at Arcadia
Value-Based Care

The value-based care payment model was first developed by the American Academy of Pediatrics in 1967. Named The Patient Centered Medical Home (PCMH), it was created for sick children who were seeing lots of disconnected specialists and required care coordination. As time went on, PCMH’s core principles evolved. It resurfaced and became popular again in the late 2000s.

HMOs, another form of value-based care, have been around since the 1930s. But they didn’t take off until 1973 when President Nixon signed the HMO Act. This mandated that employers with at least 25 employees must provide an HMO insurance option. As a result, many people signed up and HMOs skyrocketed in popularity.

During the 80s and 90s, outpatient medical expenses declined due to members signing up for HMOs. But inpatient medical expenses remained high. The Department of Health and Human Services then started Diagnosis-Related Groupings (DRG), another value-based care payment model for inpatient services. It’s based on 467 diagnoses in which the inpatient facilities receive a standard payment for.

By the 1990s, over 50% of patients were enrolled in an HMO. But, some of the HMOs had bad actors and were denying patient care unnecessarily. As a result, patients stopped signing up for HMOs and membership numbers declined.

Then in 2011, President Obama started Accountable Care Organizations (ACOs) for Medicare and Medicaid. These are the shared risk and shared savings payment models that we have today. ACOs are responsible for ensuring patients receive the right care and avoid duplication of services.

Despite value-based care dating back many decades, most of our healthcare system is still based on fee-for-service models. Arcadia’s goal is to deliver insightful data so providers can make the most beneficial decisions for their patients. Learn more about VBC, ACOs and the future of healthcare or subscribe to our YouTube channel for more VBC, data platform and healthcare content.