Editor’s Note
This article is the latest in the Health Affairs Forefront series, Accountable Care for Population Health, featuring analysis and discussion of how to understand, design, support, and measure patient-centered, cost-efficient care under the umbrella of accountable care. Additional articles will be published throughout 2025. Readers are encouraged to review the Call for Submissions for this series. We are grateful to Arnold Ventures for their support of this work.
As the threat of significant Medicaid cuts loom, the urgency to control costs while maintaining or improving quality in the safety net has never been greater. Value-based payment (VBP) models offer a clear path forward by shifting incentives from volume to value, rewarding providers for improving patient outcomes rather than simply delivering more services. By focusing on preventive care, care coordination, and reducing avoidable hospitalizations, VBP can help control costs while ensuring that patients—especially those in underserved communities—receive high-quality care. Community Health Centers (CHCs), which provide care to more than 31 million people in these communities, are well-positioned to lead this transition.
Despite growing VBP adoption in the health care sector, CHCs have faced significant barriers to fully engaging in these models. Many operate on tight margins, as illustrated by CHC closures in the aftermath of the recent federal funding freeze, and lack the resources needed to invest in the infrastructure necessary for success. Without targeted federal and state policy interventions, CHCs will struggle to transition to VBP, limiting their ability to help control costs while improving care for vulnerable populations. However, with relatively modest investments to support this shift, CHCs can take on a greater role in reducing overall healthcare spending by preventing costly complications, hospitalizations, and emergency visits. By ensuring that CHCs have the resources to succeed in VBP, policymakers can achieve long-term cost savings while strengthening the healthcare safety net.
Policymakers Must Recognize The Lift Associated With CHCs Moving Into VBP
CHCs face unique challenges and financial constraints when moving into VBP that should drive policy considerations. In order to identify the barriers most commonly faced by CHCs considering VBP, we reviewed existing literature on the adoption of VBP models in the primary care sector and spoke with policymakers, representatives from CHCs, Primary Care Associations, Health Center Controlled Networks, provider networks such as independent physician associations led by CHCs, private companies, and other healthcare sector experts.
Some of our key findings include: entering into VBP arrangements and moving toward higher levels of risk requires considerable subject matter expertise (see areas highlighted in the National Association of Community Health Center’s Value Transformation Framework). This work also requires investment and many CHCs, facing limited margins, do not have the resources or ability to adequately assess benefits and risks.
Many CHCs struggle to first evaluate and then implement and manage multiple VBP contracts with different terms related to data and reporting, benchmarking, and quality parameters, and different formulas for calculating medical loss ratios. This administrative overhead detracts from resources that would otherwise be directed to patient care and management.
And, measures used in the Uniform Data System (UDS) and VBP arrangements can differ, creating additional reporting burden and limiting national perspective on VBP activities across health centers. Based on these themes, our recommendations for policymakers are below.
Policies Should Emphasize Transparency, Targeted Investments, And Standardization
Promote Visibility Into VBP Adoption And Performance Among CHCs
In order to support VBP adoption, it is critical to have reliable, broad visibility into VBP trends and performance among CHCs. The Health Resource and Services Administration’s (HRSA’s) Uniform Data System is a mechanism that can be adapted for precisely this purpose.
Under the UDS, CHCs must report demographic, clinical, operational, and financial data, but currently, the UDS does not solicit detailed information on VBP arrangements. This omission limits the ability of policymakers and stakeholders to evaluate how CHCs are financially engaging with and benefiting from these payment reforms. HRSA could, for example, modify Table 9D of the UDS submission, which focuses on patient service revenue, to solicit information on the percentage of health center revenue tied to VBP, the proportion of patients covered under these arrangements, and VBP contract types (e.g., shared savings, total cost of care).
It is also critical to understand how CHCs are performing within VBP arrangements to target policy supports. CHCs submit data on a range of clinical quality measures through the UDS. On the VBP side, there is heterogeneity, but many payers use Healthcare Effectiveness Data and Information Set (HEDIS) measures to assess clinical quality. There are sometimes discrepancies between measures in the UDS and specifications in commonly used measurement sets like HEDIS. For example, both UDS and HEDIS define a measure called Statin Therapy for the Prevention and Treatment of Chronic Disease, but the UDS, which uses a Centers for Medicare and Medicaid Services (CMS) defined measure specification, examines a broader population than HEDIS. HEDIS and UDS also use different measure stewards and definitions for Depression Remission at 12 Months (see HEDIS measure here and UDS measure, defined by CMS, here).
As a part of UDS modernization, HRSA should solicit information on the types of measures commonly used in VBP arrangements in which CHCs participate. With this information, HRSA can assess potential modifications to UDS measures to align with commonly used VBP measures, intentional differences to maintain, or new measures to consider. This information can also encourage payers to select HEDIS measures aligned with the UDS within CHC VBP contracts, thereby streamlining reporting for CHCs and promoting consistent performance expectations.
Provide Dedicated Resources To Help CHCs Enter Into And Reach More Advanced VBP Arrangements
VBP arrangements are meant to incentivize interventions and strategies that ultimately improve care for people and reduce avoidable costs; in order to deliver on this potential, policymakers must channel dedicated funding to CHCs focused on VBP adoption and progression.
CHCs are federally obligated to serve everyone in their service area regardless of ability to pay. Fulfilling this obligation, however, introduces financial risk for CHCs: they must care for all people whether or not those individuals can pay for all or a portion of services rendered. Recognizing this challenge and the benefits of a stable primary care safety net for rural and other underserved communities, policymakers have developed financial protections for CHCs. Specifically, CHCs receive additional funding through federal “330” grants, can access malpractice liability coverage through Federal Tort Claims Act, and receive cost-based reimbursement in Medicaid under a unique prospective payment system (or alternative payment model that is financially equivalent to the PPS), established in federal law (see § 1902(bb) of the Social Security Act).
Despite these financial supports, CHCs across the country are facing growing financial pressures and are operating on razor-thin margins that could grow thinner with possible Medicaid cuts. Even without potential Medicaid reductions, some experts had predicted that many CHCs would face deficits in the coming years. Additionally, many of the financial supports that CHCs receive are focused on offsetting uncompensated costs of care rather than helping CHCs experiment and innovate. As a result, many CHCs are reluctant to enter into VBP arrangements or enter into arrangements with any downside risk that could otherwise generate significant upside financial gain.
Without dedicated infrastructure support to enter into VBP arrangements and take on additional financial risk, CHCs may either fail to adopt such models or remain at only entry-level risk models that generally do not demonstrate significant quality and cost outcomes. Given that policymakers have recognized the unique role of CHCs through financial protections and have sought to move health care payments into value through a range of federal initiatives, we recommend that CMS invest in helping CHCs transition to value. This move will enable CHCs to innovate while enabling these essential organizations to maintain their obligations to serve everyone.
Dedicated investments are critical for supporting CHCs in the move to value and even modest investments can yield significant long-term cost reductions over time. One approach could be to issue temporary VBP infrastructure payments to CHCs, such as the six-month, temporary add-on payment to the Medicare prospective payment system (PPS) proposed by Advocates for Community Health. Similar actions could be considered at the state level for the Medicaid PPS. This funding would allow individual CHCs to invest in the necessary infrastructure for VBP participation. Another option could involve expanding the Advanced Investment Payment model for accountable care organizations (ACOs) to provide initial fixed payments to CHCs. Such programs could be aligned with strategies that also enable participating entities to move to additional financial risk over time, using models like the Medicare ACO Track 1+ model, which encompasses more expanded upside and more limited downside risk.
Financial supports could also help foster, strengthen, or expand collaborations among CHCs to achieve economies of scale related to infrastructure. For example, startup investments could help CHCs form clinically integrated networks with technical assistance on shared governance, data integration, and contract negotiation. HRSA might adapt awards such as Health Center Controlled Network funding to explicitly prioritize VBP (an elective objective in the Fiscal Year 2025 HCCN Notice of Funding Opportunity) and ensure that award distributions do not disincentivize VBP uses; currently awards are premised upon the number of participating health center organizations while VBP financial opportunities are largely based on numbers of patients served by providers.
Develop A Set Of Standardized VBP Contracting Options And VBP Enablement Quality Improvement Activities
To meaningfully move the needle on VBP adoption, policymakers should take steps to standardize VBP approaches and reduce the administrative burden on individual CHCs. CHC staff we spoke with consistently highlighted the complexity and challenges posed by VBP contracts with varying terms and requirements. Some noted that they did not have in-house legal or contractual expertise that would enable health center staff to review and effectively negotiate VBP opportunities to achieve greater uniformity in financial calculations, attribution, and quality measures across contracts.
Confusion over medical loss ratio (MLR) calculations emerged as another key concern. MLR definitions and methodologies often vary by contract, leading to significant uncertainty about how VBP-related expenses are classified and whether funds allocated for care transitions, medication management, and wellness visit outreach are appropriately credited. This ambiguity complicates financial planning and creates tensions in payer-provider relationships, as health centers struggle to reconcile their spending priorities with contractual obligations.
While these challenges are not unique to health centers, because of the barriers to entering into VBP arrangements, this additional administrative overhead may disincentivize CHCs from entering into such arrangements or taking on additional risk. We recommend that state Medicaid agencies develop standard contracting approaches for CHC VBP arrangements as a jumping off point for payers and providers. For example, in 2016, MassHealth launched a one-year accountable care program for primary care providers including CHCs that included a sample model contract. Additionally, state agencies could offer guidance on how typical VBP enablement activities fit into quality improvement activities within MLR calculations.
Looking Ahead
To support CHCs under VBP models, policymakers should prioritize enhancing visibility into VBP participation and performance. Dedicated funding is also essential, including temporary infrastructure payments or grants to help CHCs build capacity and take on additional financial risk. Standardizing VBP contracting terms can further reduce administrative burdens and streamline payer-provider collaboration.
As policymakers continue to promote VBP across the healthcare sector as a critical tool to contain costs, it is important to recognize the unique challenges CHCs face in this transition. Without targeted investments and especially in light of possible Medicaid reductions, CHCs may struggle to fully engage in VBP, limiting their ability to drive cost savings and improve outcomes. However, with relatively modest infrastructure investments, CHCs can successfully adopt VBP, helping to control long-term healthcare costs while maintaining high-quality, accessible care. Supporting CHCs in this transition is not just about sustaining their mission—it is a strategic investment in a more efficient and effective healthcare system.