Skip to main content
The Keckley Report

The Big Shift from Volume to Value

By September 29, 2014March 1st, 2023No Comments

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article. 

Tomorrow, the Navigant Center for Healthcare Research and Policy Analysis will release “The Future of Accountable Care Organizations,” the first in a series of Issue Briefs that addresses the theme of “provider sponsored risk.”

In the healthcare policy community, there’s broad consensus that the fee for service payment system is inherently flawed, encouraging over utilization and unnecessary care. In its place, many have promoted the transfer of performance risk to providers i.e., paying for value in lieu of volume. Accountable care organizations (ACOs) are one vehicle through which medical groups, hospitals and other providers are organized to contract with employers, Medicaid, Medicare and private health plans on an at-risk basis. Others, like bundled payments, full capitation, and patient centered medical homes are also being tried. The transition from volume to value is a major shift. The process will be messy, but in my view, it’s here to stay. Here’s why:

  1. Health costs are going up (again): Per the Office of the Actuary report earlier this month, overall health spending is expected to increase at least 6% per year for the next decade.(1) That means costs for employers, government plans, and individuals will soar. Strategies to reduce costs, among many, include risk sharing arrangements with providers.(2) Foreseeing the trend, more than 700 “ACOs” have been organized by hospitals and physicians to tiptoe into these risk sharing arrangements.(3) Some have been successful; for most, it’s too soon to know. But notably, all justify the effort on the presumption that the big shift is here to stay.
  2. Payers have robust tools to monitor provider behaviors in risk sharing arrangements: Investors have made big bets on tools that allow individuals and employers to compare costs and treatment plans that work best. Health insurers are investing in solutions to become formidable informediaries for cost and quality data. Publicly-accessible data about quality and safety in hospitals, physician utilization patterns and others are increasingly accessible to biostatisticians, health services researchers, actuaries and other professionals to develop sophisticated profiles of provider behaviors. So risk sharing arrangements between payers and providers are likely to disallow providers to “game” the system by cherry-picking patient populations or withholding care when appropriate.
  3. The regulatory climate is supportive of the big shift: The Affordable Care Act (ACA) is the over-arching policy framework that sets the tone for acceleration of the volume to value shift. It does so through two major mechanisms: funding for pilot and demonstration programs like Medicare Shared Savings, Patient Centered Medical Homes, Bundled Payment Care Initiatives and others, and expansion of  data transparency to de-mystify pricing, costs, outcomes, treatment options and other information necessary to a better-informed market. In companion with the ACA, state Medicaid directors are applying the volume to value shift in promoting “Medicaid Managed Care” and CMS is applying the shift systematically in its administration of Medicare contracts with providers. So risk sharing arrangements with providers is consistent with the health policies in states and at the federal government levels.
  4. Consumers are inclined to support the big shift: Most consumers support paying for performance across a number of professions. They are increasingly sensitive to health costs, and wired via social media and mobile technologies to receive cues from informediaries about healthcare costs and quality. It is plausible to believe consumers will support the shift from volume to value in healthcare as they have in other areas of their lives.

The shift from volume to value in healthcare is complicated but inevitable. Accountable care organizations are one of several models reflecting the willingness of providers to accept performance risk, and the engagement of payers to contract accordingly.

It’s a big, fundamental shift; it’s not a fad. And it will re-define the relationships between providers, payers and consumers.


(1) “National Health Expenditure Projections 2013-2023,” CMS Office of the Actuary, September 16, 2014
(2) Forecast Summary, “The State of the Value-Based Reimbursement and the Transition from Volume to Value in 2014,” McKesson Health Solutions 2014
(3) Leavitt Partners,

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

© 2014 Navigant Consulting, Inc.