How value-based payment models are reshaping physician practices — and what comes next

For the longest time, physician practices have operated on a fee-for-service model that pays for visits, tests and procedures. We’re finally seeing a shift toward more value-based care models that base compensation on the quality of care and a patient’s longevity of health, a shift that I believe is better for all parties involved.

The U.S. Centers for Medicare & Medicaid Services (CMS) has outlined a goal to move all traditional Medicare and most Medicaid beneficiaries into an accountable care relationship by 2030. This will hold physicians and clinicians accountable for the quality of care they provide and mitigate unnecessary costs. This is the essence of value-based care. But making these shifts isn’t easy, considering reimbursement strains, staffing shortages and growing administrative burdens.

How are today’s payment models changing care delivery?

Traditional fee-for-service models still dominate health care; they directly reimburse providers for services like office visits, diagnostic tests and procedures. Recently, however, we’re seeing a shift toward more value-based programs that encourage more efficient use of resources and emphasize high-quality patient outcomes.

The Merit-based Incentive Program (MIPS) is one of these value-based programs, essentially utilizing a scoring system for physicians that factors in care quality, patient cost, technology usage and physician efforts. MIPS is overseen by CMS through the Quality Payment Program and adjusts Medicare payment based on performance in categories such as quality, performance improvement activities and promoting interoperability.

From there, the physician or practice gets a score that Medicare uses to determine how much they’re reimbursed. The higher the score, the more money they get back.

Alternative payment models are also designed to move away from paying per visit and instead focus on the patient’s overall outcome and cost of care. Often, this looks like a group of doctors receiving one flat fee to manage a patient’s care for a full year. If the patient is healthy and their costs are down by the end of the year, then these doctors can earn bonuses. High-value, high-quality, effective care is the key driver. If costs get too high, they could lose money.

This framework really prioritizes overall quality of care and efficiency rather than the total services billed. Although these initiatives are outcome-focused, they do come with additional reporting requirements that can feel daunting. Right now, we’re seeing documentation as a key reporting requirement, which places strain on the clinicians’ ever-increasing workload, making the administrative burden a significant challenge.

Why are physicians feeling more financial pressure, even with value-based care?

In theory, value-based care should incentivize physicians to improve patient outcomes. However, many independent practices struggle with shrinking margins. The American Medical Association (AMA) found that physician payment has declined 33% in inflation-adjusted terms since 2001.

At the same time, care teams are being asked to invest in better reporting programs, updated compliance systems and staff training to effectively participate in these payment models. Many practices are trying to modernize their care delivery to meet these needs, while their main source of reimbursement hasn’t kept pace with staffing, technology, overhead, supplies or compliance with existing regulations. It is this mismatch of clinicians being paid less and then being asked to spend more that is driving much of the financial pressure in value-based care.

Although value-based care is the goal, it does come with a cost of entry. A practice might need to update its electronic health record (EHR), train its staff on specific requirements and coding, implement quality reporting workflows or update other technologies before it can actually participate.

Interoperability is one of the reportable requirements in these payment programs. A Commonwealth Fund study on primary care participation in value-based care found that the biggest barriers clinicians face are financial restraints, workforce shortages and performance measurements that don’t always reflect the reality of primary care.

Even when these practices are able to meet the program's needs and get started, they still have to meet ongoing quality measures, care gaps, risk scores, referrals, patient outreach efforts and documentation requirements. All of these changes can force a practice to completely upend its current operating models, which can be expensive and time-consuming.

How do regulatory complexity and documentation demands factor in?

This is where I see the most immediate strain. There are layers of regulatory requirements that clinicians need to stay current with, including coding accuracy, quality reporting, audit readiness and more. Meanwhile, they are trying to do the primary function of their job: provide high-quality care for the patient populations they serve.

A recent study conducted by the AMA found that 22.5% of physicians spend at least eight hours outside of normal working hours on EHR or administrative tasks. I’ve seen more and more providers frustrated with the disconnect between expectations and reality when it comes to their roles. Most of them came into health care to help people, and excessive paperwork hinders that ability.

Are private payers adding to the complexity?

Yes; however, in some cases, private payers get to individually define, measure and reward value a little differently. The AMA notes that value-based arrangements now include a wide spectrum of agreements across government payers, commercial health plans, physician practices, accountable care organizations and other entities.

For a physician practice, this can look like having one patient tied to a Medicare quality program, another on a commercial shared-savings arrangement and a third still following a fee-for-service model. Each contract may have different reporting deadlines, quality measures, attribution rules, documentation expectations and payment timelines.

It’s this lack of alignment that creates administrative burdens. CMS is working to combat this by emphasizing multipayer alignment to meet common health care delivery goals and patient outcomes. This includes alignment on billing, payment, reporting metrics and clinical documentation for all parties to follow.

How is this affecting workforce stability?

Research shows that administrative burden remains a leading cause of physician burnout. Proper training and infrastructure must be in place so that health care professionals can feel confident navigating documentation and compliance. Another way to do so is by making role responsibilities clear, keeping everyone on the same page.

Organizations that invest in continuous education and make role requirements clear to all are reporting fewer instances of burnout.

What’s working right now to help practices navigate these challenges?

There are several strategies that I’ve seen make a true impact.

Targeted training

The first is targeted training. There’s been significant headway when health care professionals are given role-specific, scenario-based training that addresses real concerns in daily workloads. When staff have a clear understanding of the documentation and compliance requirements for their roles, systems can move much more efficiently than when they receive generic education meant for a variety of backgrounds.

This can look like making sure front desk staff understand insurance nuances, patient communication and the referral process. Medical assistants might need training on closing care gaps or flagging misinformation before a physician even enters the room. It’s also important that billing and compliance teams have a clear line of sight in payer rules, audit risk and denial trends.

Embedded compliance

Second, successful organizations are those with stronger compliance naturally embedded in daily tasks. A practice might build prompts into the EHR for annual wellness visits or follow-ups, create standardized documentation templates or set up a weekly review of denied claims and any missing data.

When it’s a part of the everyday workflow, it’s easier to stay on top of compliance requirements, properly prepare for audits and avoid hefty penalties. The goal is to catch these issues as they arise, before they are flagged during an audit.

Workflow optimization

The third point organizations need to consider is workflow optimization. Small operational changes, especially ones that leverage EHR systems to their fullest extent, can significantly reduce administrative burden. This can be as simple as using previsit planning to identify care gaps before appointments, optimizing the EHR for common documentation needs or implementing team-based inbox management so administrative tasks are shared more evenly across the care team.

What changes are still needed at the policy level?

Currently, health care providers are dealing with administrative needs that don’t align with their day-to-day realities at work. Policy makers need a better understanding of what physicians are actually dealing with to inform policy structure. Program requirements should work with existing health care workflows, not add to them. Reporting requirements need to be simpler and easier to follow. The last thing there should be is another daunting task hanging over an already burdened industry.

Another piece of the puzzle is stabilizing Medicare reimbursement. Clarity on what physicians can expect will significantly help with workflow and overall process.

An example of how policy makers are working to address reimbursement challenges is the Medicare Patient Access and Practice Stabilization Act of 2025 (H.R. 879), currently under committee review. This proposed legislation aims to partially close reimbursement gaps by increasing Medicare payments to physicians and other practitioners for services delivered between April 1 and Dec. 31, 2025. The bill was introduced in response to scheduled Medicare payment reductions and is intended to provide short-term financial stabilization amid rising operational costs, including staffing, facility expenses, equipment, compliance and technology investments.

This speaks to a larger issue of how physicians need a more predictable payment environment to meet changing needs and still adequately care for their patients.

Where is this all heading?

Unfortunately, reimbursement complexity isn’t going away any time soon. It will likely continue to evolve, and we will get to a point where workforce sustainability becomes a key part of policy discussions. Physician practices that will thrive during these changes are those that emphasize training, compliance and workforce preparation as a business strategy rather than mundane administrative tasks.

Payment models might be what shape the system, but it’s the people navigating them who ultimately determine whether payment models work.

Felicia Sadler, MJ, BSN, RN, CPHQ, LSSBB, is vice president, quality, at Relias, where she partners with health care organizations to implement workforce enablement solutions that promote operational excellence, resilience and clinician well-being.