With the Trump administration resetting U.S. health policy priorities and the value-based payment model ending its 15th year, the University of Pennsylvania’s Leonard Davis Institute of Health Economics (LDI) hosted a debate between two leading experts over a central question: Has value-based care earned its keep, or is it time to rethink the model?

Part of LDI’s ongoing series of conversations with top policy experts in the health services research field, the November 7 virtual panel featured Farzad Mostashari, MD, MSc, and Andrew Ryan, PhD, in a discussion moderated by LDI Executive Director Rachel M. Werner, MD, PhD. More than 800 leaders in health care, higher education, and government registered for the event.

As she opened the session, Werner noted: “There have been some notable successes in value-based care, along with models that have struggled to deliver meaningful savings or quality gains. But health care spending and costs have continued to rise. With some exceptions, value-based payment has largely not improved access to care or health outcomes for populations with social risk factors, including racial and ethnic minorities, rural populations, and individuals with disabilities.”

“So where does that leave us now?” Werner asked. “The experts we have with us today will help us weigh the pros and cons of value-based payment and its alternatives.”

Fundamentally Different Approach Needed

“These value-based programs have not worked,” said Ryan. “I argue that due to some critical conceptual and theoretical flaws, they cannot bend the cost curve and are imposing significant costs on the system, and we need a fundamentally different approach to address what I view as an affordability crisis in the United States. We need to move away from risk-based contracting where providers are responsible for the total cost of care borne by Medicare beneficiaries.”

Mostashari countered that, “There are a lot of things that have not worked. But the thing that has worked is giving primary care accountability for total cost of care. The Medicare Shared Savings Program is really the crown jewel of value-based care. In 2024, the annual spending growth for the 11 million patients in that program was about 6.8 percent, while for people not in ACOs it was 10 percent. A three-point difference in one year is huge.”

Mostashari is the former National Coordinator for Health IT at the Department of Health and Human Services and the current Chief Executive Officer of Aledade Inc., a company that helps independent primary care doctors form physician-led ACOs that put a heavy emphasis on preventive care. The company supports practices as they reorganize around value-based care, providing software, data tools, and hands-on guidance. It now has more than 2,400 primary care practices in its network serving nearly 3 million patients.

Ryan is Provost’s Professor of Health Services, Policy, and Practice at Brown University and Director of the Center for Advancing Health Policy Through Research. His research focuses on analyzing and evaluating the effects of health care payment reform.

Both have been heavily involved in the study and implementation of the fiscally revolutionary concept that traces its roots back several decades. Their fast-paced debate continued, ranging across a broad series of value-based issues, frequently from very different points of view:

Do ACOs reduce costs and improve quality?

Ryan said ACO cost savings are not real because:
• Fewer sick patients remain in ACOs
• Gaming of well-visits by ACOs brings in healthier patients
• Upcoding of patient illness severity inflates risk scores
• Apparent quality improvements vanish with risk adjustment

Mostashari said ACOs improve care quality and reduce costs because they result in:

• More patients kept healthy and out of the hospital
• Better control of blood pressure
• Better patient-reported access and coordination
• Quality gains that cannot be explained by selection
• Improved chronic disease management

Should health care return to fee-for-service?

Ryan said yes, that fee-for-service is not the villain; inflated pricing is. He strongly advocated retaining and reforming the fee-for-service system with changes including authorizing Medicare to perform cost-effectiveness studies, lower payments to doctors and hospitals, and adjusting coverage rules to reign in low-value technology costs.

Mostashari said no. He pointed out that the fee-for-service system has failed to reward primary care prevention efforts or reduce hospitalization.

Are ACO savings often produced by upcoding and favorable selection of healthier patients?

Ryan: “A recent Cornell study interprets the real savings as actually driven by selection and upcoding. If you look at the unadjusted change in spending for ACOs and non-ACOs, it is quite modest — something on the order of $60 per member per year for the first three years. If you look at the study appendix, you see that sicker patients — people who are disabled, people with end-stage renal disease, and racial and ethnic minorities — are more likely to exit the program.”

Mostashari: “Data for the average risk scores for ACOs versus non-ACOs is darn near close to 1.00. So I do not think there is evidence of risk coding. Patients reported extremely high levels of access to their doctors and care coordination. That is what is driving the savings and quality. Our focus is on access to primary care. Number one is getting access to primary care because that is one of the hardest things in today’s world. Our best-performing ACO in Louisiana had 0 percent savings in its first three years of the program. We worked on blood pressure control, access, care coordination, and care transitions. Now it is the top-savings ACO in the Aledade universe with a 17 percent savings rate. It was ranked the No. 1 ACO out of 400 ACOs for access to primary care and coordination of care by patient surveys. Patients reported extremely high levels of access to their doctors and coordination of care, and that is what is driving the savings.”

Where should policy go from here?

Ryan: “We need to come to grips with the fact that value-based payment is not working or saving money and that it is essential to build the political will to address this affordability crisis. I admit that special interests are averse to fixing the fee schedule — specialists would be paid less, some hospitals would be paid less, along with pharmaceutical companies and the middlemen involved in all the value-based stuff. They would all get less.”

“And, we have fixated on these ideas around improving health through health care payment, saying that is the mechanism we will use to enhance health in our country,” Ryan continued. “We all know how weak that literature is. Maybe it gets providers to document more. Maybe it gets people to perform marginally better on some process measures. But the evidence that financial incentives actually improve health and make people better off is incredibly weak. The solution is to decouple spending growth from ideas about what makes people healthy and try to think of rational, reasonable ways to reduce spending growth in a way that either encourages cost-effective care or is cost neutral. The agenda to improve people’s welfare and health would not happen through the payment system.

Mostashari: “Nothing in paying the right amount for a stroke creates incentives to prevent strokes. Can you imagine a world where just setting the right price somehow creates incentives to keep people from having heart failure, kidney failure, heart attacks, and strokes? What about the fundamental incentives to keep people from getting sick? What is the answer to that if it is not aligning long-term incentives for primary care with total cost of care?”

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