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When the conversation shifts toward value-based care (VBC), hospital systems find themselves in a delicate balancing act. On one hand, VBC strategies compel providers to prioritize preventive, coordinated, and holistic care to improve outcomes and reduce avoidable acute care utilization. On the other, hospital systems are largely embedded in a fee-for-service (FFS) environment, where inpatient admissions and emergency department visits often represent core revenue streams. This begs the question – are value-based care strategies at odds with hospital systems revenue goals?
Value-based care, at first blush, feels more aligned with payer interests than those of a hospital-based health system. Avoidable hospitalizations — many of which stem from poor chronic disease management, fragmented care, or inadequate social support — are costly to payers. Reducing such events is a core target of many VBC arrangements, including bundled payments, accountable care organizations, and condition-specific programs like Medicare’s Enhancing Oncology Model. However, for many hospitals, especially those operating under thin margins, each inpatient admission represents revenue. The fear, then, is that proactive care efforts that reduce admissions might cannibalize income needed to support clinical operations and infrastructure.