Coding for value-based care versus fee-for-service

Value-based care (VBC) is rapidly moving from concept to day-to-day reality for physician practices, bringing with it a fundamental shift in how care is delivered, documented and reimbursed. Although the differences between VBC and fee-for-service (FFS) may be largely invisible to patients, the two models rely on entirely different approaches to coding, creating a paradigm shift in practice management.

In a traditional FFS environment, reimbursement is tightly linked to volume. Practices bill Current Procedural Terminology (CPT) codes for each service delivered, making revenue dependent on how many encounters occur and which procedures are performed. International Classification of Diseases, Tenth Revision, Clinical Modification diagnosis codes are used mainly to justify the necessity of those services, but they do not drive payment amounts. In this structure, coding’s primary function is to describe and bill discrete episodes of care.

VBC turns that model on its head. Instead of being paid per service, practices are reimbursed based on each patient’s expected total cost of care, a figure driven by the patient’s medical, social and demographic risks. Central to this system is Hierarchical Condition Category (HCC) coding, which captures chronic conditions and assigns each a risk adjustment factor (RAF). A patient’s cumulative RAF directly influences the reimbursement a practice receives in full-risk or shared-savings arrangements.

Because of this, VBC demands more comprehensive documentation, active condition management and annual recapture of all relevant diagnoses. Each HCC-mapped condition must be monitored, evaluated, assessed and treated, all supported by clear documentation that can withstand Risk Adjustment Data Validation audits. Missing or insufficient documentation can significantly reduce a patient’s risk score and, in turn, practice revenue.

As organizations transition to VBC, success depends on strong internal processes, team-based care, patient accessibility and specialized coding expertise. Although the shift is significant, VBC ultimately aligns reimbursement with whole-person care, rewarding physicians for keeping patients healthier through proactive, coordinated and comprehensive management.

Plante Moran's Tammy Schaeffer, J.D., RN, provides an overview of the coding and mindset differences.