Value-based care is designed to address the most pressing problems facing the healthcare system today: growing costs combined with poor patient outcomes.
Healthcare spending in the United States is soaring to unprecedented heights, straining both the economy and individual budgets. In 2023, total health expenditures reached nearly $5 trillion, representing 17.6% of the nation’s Gross Domestic Product (GDP). And it’s not getting better. The Centers for Medicare and Medicaid Services (CMS) Office of the Actuary predicts healthcare expenditure will outpace the growth of GDP over the next eight years at least, and represent more than one-fifth of GDP by 2033.
Despite the tremendous investment, health outcomes in the U.S. lag significantly behind those of other high-income countries who spend two to four times less on healthcare. The Commonwealth Fund reports that, when compared to countries like Australia, Canada, Japan, Norway and others, the U.S. has the lowest life expectancy at birth, the highest mortality rates from preventable or treatable conditions, the highest rates of maternal and infant deaths, and have one of the highest suicide rates.
This stark imbalance between costs and results has policymakers, clinicians and patients aligned in frustration. Value-based care stands out as a different model that can drive affordability and efficacy to benefit everyone.
Value-based care can be difficult to understand, so we are outlining the key definitions and components to the model that we at Yuvo Health view as a promising step in extending healthcare to everyone in need.
What is value-based care?
Value-based care is an alternative payment model (APM) that focuses on paying healthcare providers for delivering effective, evidence-based care that improves patient outcomes, rather than for the volume of interventions.
Traditional fee-for-service (FFS) compensates providers based on the volume of services they provide. More services and interventions lead to higher compensation. As Yuvo Health co-founder and CEO Cesar Herrera describes it:
“Providers, unfortunately, are incentivized to treat people that are sick… We want to incentivize providers for keeping people healthy; to ensure that they don't have to go to the ER, to ensure that we catch their breast cancer early so that they don't have to go through 10 years of chemotherapy just to relapse.”
Compensation in value-based care is tied to achieving better health results, cost-efficiency, and equity in care delivery.
Today, fully VBC models, without any FFS component, are relatively rare. Instead, many contracts use hybrid approaches that retain some FFS reimbursement while incorporating value-based incentives such as shared savings, pay-for-performance bonuses, or two-sided risk arrangements.
How is compensation calculated in value-based care?
There are multiple opportunities for providers to earn revenue in value-based care, including pay for performance incentives, sharing with payers in the savings generated across their network, and capitation models, which are rare, and pay providers a fixed amount per patient to cover all care during a defined period.
Performance is calculated using standard metrics like HEDIS (Healthcare Effectiveness Data and Information Set). These metrics track things like how often patients receive recommended preventive care (such as cancer screenings, vaccines, and blood pressure checks) and how well chronic conditions, like diabetes or asthma, are managed. Other key measures include hospital readmission rates, patient satisfaction scores from surveys like HCAHPS, and rates of hospital-acquired infections.
Payers and providers (often organized into Accountable Care Organizations or Independent Physician Associations) agree to measurable targets in their contract. Proper risk adjustment is therefore incredibly important to ensure fair compensation based on patient complexity and health status.
Upside and downside risk in value-based care
In value-based care, the upside potential to earn additional revenue is directly tied to the downside risk of potentially shouldering additional costs if losses are incurred.
Upside risk
Upside risk means there’s a chance to earn extra revenue. In upside risk arrangements (also called one-sided risk), providers who keep their spending below set limits while meeting quality goals get to keep part of the savings between the projected cost and the actual cost.
If spending goes over the target, providers don’t share in any savings but also don’t have to pay back any extra money. This makes upside risk a good way to start with value-based care and develop experience. However, the amount providers can earn in upside risk arrangements tends to be relatively small. In many ways, it’s a “lower risk, lower reward” arrangement, so the financial benefits are limited over time.
Downside risk
Downside risk refers to the possibility of financial losses. In a downside, or two-sided risk arrangement, the stakes increase. The risk does not always fall directly on the provider. For example, Yuvo Health acts as the risk-bearing entity for community health centers.
Providers earn a share of the savings if they meet both quality and cost goals, often receiving a larger percentage of those savings compared to upside-only contracts. However, if spending exceeds set limits, providers must pay back a portion of the overspending to the payer. The greater the risk taken, the greater the potential reward.
Studies show that average clinical results tend to improve and total healthcare costs usually drop when providers take on more financial risk. For example, full-risk models have been linked to a 15.6% relative decrease in avoidable hospitalizations, compared to a 4.2% reduction across all hospitalizations. Other payment models expand on this idea with bundled payments — fixed fees for a set of services during a specific care episode like a routine knee replacement or uncomplicated childbirth — or full capitation, where providers receive a fixed amount to cover all care for a population over a set period.
Value-based care for community health centers
With an emphasis on low-cost and whole-person, preventative care, value-based care presents a uniquely fitting opportunity for community health centers (CHCs). Health centers often provide behavioral health, dental care, and specialty care services in addition to primary care and do so at 24% lower costs compared to other providers. They deliver primary care to more than 10% of the U.S. population, but account for only 1% of total healthcare spending.
Value-based care doesn’t just present a unique opportunity for community health centers, it’s becoming increasingly imperative for CHCs to explore alternative sources of revenue in the wake of Medicaid cuts codified in HR.1 (commonly referred to as “One Big Beautiful Bill”). With tens of millions of patients losing their Medicaid eligibility or experiencing insurance gaps due to administrative barriers, health centers will be left assuming the costs for more uncompensated care. As it stands today, CHCs have access to a very small portion of Medicaid funding (an estimated 3%). Value-based care can open up a wider portion of that funding.
Related: How CHCs can build a sustainable path in the wake of H.R.1 (“One Big Beautiful Bill”)
In practice, however, the transition from fully fee-for-service to incorporating value-based care has proven very difficult for health centers. There are multiple challenges that get in the way, including:
Regulatory barriers
CHCs are prohibited by regulations from participating directly in value-based care models that involve taking on financial risk. Because they can not take on that risk themselves, they cannot engage in the more advantageous downside risk VBC contracts that have higher revenue-earning potential.
Data and technology gaps
Transitioning to VBC requires near real-time data analytics and infrastructure to track utilization, deliver comprehensive insight into patients’ health, accurately perform risk adjustment, and optimize quality performance, which many CHCs find prohibitively expensive and complicated to build or maintain.
Lack of funding
Health centers operate on very narrow margins, lacking the reserves needed to invest upfront in technology and staff needed to succeed in value-based care. If they do achieve shared savings, that revenue frequently does not reach the health center until 18 months or more later. Additionally, the potential downside risk in many VBC models deters CHCs because their tight budgets cannot afford the risk.
These are the challenges Yuvo Health solves for so community health centers can gain the advantage in value-based care.
Yuvo Health’s role: Opening the door to value-based care for community health centers
Yuvo Health addresses these challenges by acting as the risk-bearing entity on behalf of CHCs, absorbing the financial risk and providing the necessary technology, data infrastructure, and population health team to support partners. This enables CHCs to participate in value-based care successfully without jeopardizing their financial or operational stability.
With this hands-on support, CHCs are succeeding in value-based care: earning more revenue, reducing costs and improving care quality. Together, Yuvo Health and health center partners achieved shared savings in just the first year of contracting.
“With early success in earning shared savings, Yuvo is already proving that CHCs can garner additional resources for their vital mission — and be crucial partners in a value-based care network."
- David A. Chokshi, MD, Former Health Commissioner of NYC, Independent Board Member, Yuvo Health
Related: Yuvo Health Annual Report 2025: A path forward for community health centers
Value-based care continues to build momentum
Now is the time to act. While the politics around healthcare in the U.S. remain heated, there is a wide consensus at both the federal and state levels that value-based care presents a promising opportunity to reduce costs while improving quality. Abe Sutton, Director of the Center for Medicare and Medicaid Innovation and Deputy Administrator for the Centers for Medicare & Medicaid Services explicitly mentions “Improve Administration of Value-based Payment Programs” as a key component of the Center for Medicare and Medicaid Innovation’s strategy at the beginning of the Trump administration.
CMS has set a goal to have 100% of Medicare beneficiaries in a value-based care relationship by 2030. And as of January 2025, they were more than halfway to that goal, at 53.4%.
Value-based care is continuing to grow among commercial arrangements as well. National Association of Accountable ACOs and health tech company Innovaccer surveyed 168 executive and clinical leaders at health systems, accountable care organizations, specialty providers and federally qualified health centers among whom more than 60% say they expect their organization to receive higher revenue from value-based care arrangements in 2025 than they did in 2024. Close to one-third say 25% of their revenue is tied to VBC contracts already.
The U.S. health system is unequivocally moving toward more value-based arrangements and with the right support and resources, community health centers are uniquely positioned to thrive in this transition. At Yuvo Health, we’re thrilled to partner with CHCs to help realize this potential so they can extend their care to everyone in need in their communities.
“We know that this is where Medicaid is going. Value-based care is the future of healthcare, and we want to be leading the way instead of following behind.”
- Darci Weissbrot, Director of Operations/Compliance, Advantage Care Health Centers
Want to get started? Download our free checklist for preparing for success with value-based care.
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