As health systems face significant financial challenges, it may seem like the wrong time to pursue value-based care. However, an effective value-based care strategy can address several critical challenges: improving access, enhancing physician alignment, providing additional revenue, and reducing physician enterprise losses.  

Some health systems have clinically integrated networks (CINs) that have not reached their full potential. Other health systems have dabbled in value-based care models with inconsistent commitment or uneven success. The benefits of re-invigorating these efforts are more than just surplus revenue on contracts—they are potentially transformative.  

Improving Access 

Access continues to be a challenge for many health systems. Value-based care initiatives can free up capacity for both inpatient beds and specialist physicians and reduce wasteful and low-margin admissions and visits.  

With a better care model, health systems can manage low-acuity Medicare and Medicaid medical cases outside of the hospital. This creates space for higher-acuity and commercially insured patients, both with significantly higher margins.

In a capacity-constrained environment, health systems must fill their beds wisely, and value-based care approaches help achieve that objective.  

In a well-functioning CIN, a health system engages private practice and employed physicians to redesign the care model to deliver better care that works smoothly for both patients and providers. Physicians treating similar populations can collaborate to standardize care and address pain points—often without significant cost.  

For example: 

  • Improving care management of frail or complex patients to avoid emergency department visits and admissions or readmissions visits and admissions or readmissions 
  • Developing processes and pathways to more efficiently discharge patients and reduce lengths of stay 
  • Ensuring high-quality referrals to specialists by supporting primary care physicians in managing stable but complex chronically ill patients, and clarifying appropriate referral timing and the necessary diagnostic workups to complete beforehand 

Enhanced Physician Alignment  

A high-functioning CIN is a cost-effective approach to building closer relationships with private practices, helping them succeed, and ensuring their loyalty. It offers small practices the best of both worlds: being part of something bigger while retaining their independence. Some CINs also offer better fee-for-service rates than private practices can get on their own.  

CIN physicians benefit from the better care model that they helped to develop. Physicians are further motivated to keep their patients’ care in one health system, one with a smoother care path, thereby reducing splitting behavior and leakage to competitor health systems. 

A CIN offers independent physicians a simpler way to participate in value-based care contracts and, if successful, enjoy the financial rewards of those contracts. Incentive payments can be meaningful to small practices. Furthermore, to boost the value-based care bonuses that they may earn, physicians are incentivized to keep their activity within their CIN’s health system. 

CINs may offer other services to decrease practice overhead, such as management services organization (MSO) models, Merit-based Incentive Payment System reporting and support, and electronic medical record connectivity. The latter in particular benefits the CIN by easing the referral process from these independent providers to other CIN physicians, reducing health system leakage. 

A New Revenue Stream 

With the squeeze on fee-for-service rates, value-based contracting is becoming the only viable way to achieve margin in Medicare and Medicaid. If health systems do not pursue value-based contracts, they are leaving money on the table. The dollars can be significant, especially if the provider can bear some downside risk.  

 A VMG Health analysis found that, of the Medicare Shared Savings Program accountable care organizations that generated savings in 2024, the median shared savings revenue as a percentage of total medical spend was 3.1%. That’s a significant revenue boost in a business where a 2% operating margin is considered decent.  

Furthermore, as the Centers for Medicare & Medicaid Services has moved forward with value-based programs like TEAM and AHEAD regardless of the party in power, long-term financial success will increasingly require strong value-based care capabilities.  

Reducing Physician Enterprise Losses 

In helping physicians remain independent, a CIN can offer a way for its health system sponsor to reduce costs on their physician enterprise. Physician employment is costly for health systems. While it may be important to employ some physicians, most health systems do not want to bear the cost of employing their whole medical staff, with  averaging over $160,000 per employed physician.  

A high-functioning CIN that delivers real value to its physician members can also protect the health system.

With the continuous encroachment of value-based enablement companies and for-profit physician practice managers, health systems should be concerned about losing their independent practices to these entities.

The referral volume of physicians that are “picked off” can shift quickly to competitors. To secure their volume now and into the future, health systems need their private practices happy in a model that works well for them. Many physicians do not want to join private equity–backed companies, but they need a better option. By offering a high-functioning CIN and being the source of physicians’ satisfaction and success in private practice, health systems can breathe a bit more easily. 

Resolve to Act 

Health systems may feel safer hunkering down to weather the current financial crisis, but that will likely prolong and exacerbate the challenge. Instead, health systems would be wise to take bold action. Given the multiple benefits described above, re-energizing or forming a CIN and pushing ahead on value-based care is likely the better strategy for the current moment and future success. Winston Churchill said it best: “Never let a good crisis go to waste.” 

 

Success in value-based care starts with a clear understanding of your market and capabilities. Partner with VMG Health to create a value-based care strategy that’s right for your organization.  

References

Medical Group Management Association, Financials and Operations Survey: 2025 Report based on 2024 Data. Reported for Multispecialty groups with both primary and specialty care, Hospital/IDS owned