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Value-based healthcare: what value means for payers
Value-based healthcare weighs the outcomes that matter to patients against their cost. Its origin, the four value pillars and how payers use it.
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Value-based healthcare judges care by the outcomes that matter to patients, set against what those outcomes cost. A 2025 concept analysis puts it in one line: outcomes that matter to patients, divided by cost. For a payer, the change is from rewarding the volume of care to rewarding its value.
However, there is no single definition of value in this setting, as the European Commission's expert panel on investing in health points out. Debate often treats value as health outcomes relative to money spent. Yet what counts as valuable can differ between patients, clinicians, providers, policymakers and industry.
The term's origin and the panel's four value pillars give a common footing for that conversation. So does a clear view of how patients report their own outcomes, and of how payers put the idea to work.
Where value-based healthcare comes from
A 2020 discourse analysis in BMC Health Services Research traces the core principles to one book. That book is Redefining Health Care, published in 2006 by Michael Porter and Elizabeth Teisberg. In their account, value consists of what matters most to patients. It is the health status they achieve, and the price they must pay for it.
In this reading, value arises at the level of a medical condition, over the full cycle of care. The same work also asks providers to measure and report outcome data on each medical condition they treat. It asks for payment to follow suit as well, with bundled payments that cover full cycles, or episodes, of care.
The 2025 concept analysis appeared in the Journal of Nursing Management. It notes that writers use the terms value-based care and value-based healthcare interchangeably, with no difference in their attributes. By its definition, the concept centres on delivering the outcomes that are most meaningful while optimising costs. It also makes clear that this goes beyond cost reduction alone.
Its analysis settles on three defining attributes.
- The monetary value of the health service.
- The quality of care.
- Patient-centred care.
The four pillars of value-based healthcare in the European expert panel's view
The European Commission's Expert Panel on effective ways of investing in Health takes a wider view. It looks beyond value as a purely monetary matter of cost-effectiveness. Instead, it proposes a concept built on four value pillars.
- Personal value: appropriate care to achieve each patient's personal goals.
- Technical value: the best possible outcomes with the resources available.
- Allocative value: an equitable distribution of resources across all patient groups.
- Societal value: the contribution of healthcare to social participation and connectedness.
Behind the pillars sits a practical aim. In the panel's words, it becomes essential to switch resources from lower value to higher value healthcare.
In addition, the panel defines unwarranted variation as variation in the use of healthcare services that patient illness or patient goals cannot explain.
Measuring the outcomes that matter to patients
The Australian Commission on Safety and Quality in Health Care sees patient-reported outcome measures as support for value-based care. In other words, these measures capture health outcomes from the patient's perspective.
Known as PROMs, they are questionnaires on aspects of a patient's health. For example, they ask about symptoms, daily functioning and quality of life. Patients usually complete them on two or more occasions, so that the results show change over time. They typically answer on rating scales.
The Commission sets out two broad kinds. Generic PROMs measure aspects of health that most patients share, so they work across health conditions, treatments and populations. By contrast, condition-specific PROMs ask about one health condition and its treatments.
Patient-reported experience measures, or PREMs, are a different tool, however. In the Commission's terms, PREMs measure a patient's experience when receiving care, while PROMs measure the outcomes.
PROMs also serve more than one purpose. According to the Commission, they can compare the effects of different treatments and identify variation among healthcare providers. Beyond that, they can support population surveillance and inform policy.
How payers put value-based healthcare to work
The 2020 discourse analysis looked at how bodies in the Netherlands write about value-based health care. It drew on official publications by the bodies that monitor and influence the quality of care there. In those, it found four discourses, each with its own view of the concept's main purpose.
One of them is the governance discourse. Here the concept works as a mechanism to steer and incentivise care providers towards better outcomes and lower costs. In this view, external parties such as government agencies and insurance companies can and should incentivise providers. For that purpose, financial incentives and payment structures such as bundled payments are its tools.
Likewise, the 2025 concept analysis links value to payment. It names reimbursement models that reward value over volume as a condition for leaving fee-for-service behind. Bundled payments are among its examples. In its account, they encourage cost control because they tie reimbursement to entire episodes of care, not to individual services.
Another condition it names is comprehensive healthcare data, which makes it possible to measure and analyse outcomes and costs. It also counts payers among the stakeholders whose engagement the change needs, alongside patients, providers, managers and policymakers.
Richnovex connects insurers to healthcare service providers and to the technology between them, as its work with insurers sets out. It does so through system integration and the practical work of adoption: workflows, specifications, implementation, staff training and performance monitoring.
Value-based healthcare rests on measured outcomes
Value-based healthcare weighs the outcomes that matter to patients against the cost of achieving them. The 2025 concept analysis names two of the conditions it needs. The first is comprehensive data on outcomes and costs. The second is a payment model that rewards value over volume.
Sources
- Steinmann G and others, Redefining value: a discourse analysis on value-based health care, BMC Health Services Research (2020): doi.org/10.1186/s12913-020-05614-7
- Kehyayan V and others, Toward a clearer understanding of value-based healthcare: a concept analysis (2025): doi.org/10.1155/jonm/8186530
- European Commission, Defining value in 'value-based healthcare', opinion in brief (2019): the opinion in brief
- Australian Commission on Safety and Quality in Health Care, Patient-reported outcomes: patient-reported outcomes
