Value-Based Care and Its Impact on Prior Authorization

Value-Based Care (VBC)

Value-based care (VBC) is increasingly at the center of conversations about the future of U.S. health care. At its core, VBC represents a shift away from the traditional fee-for-service (FFS) model, which rewards providers based on the number of services delivered. Value in health care is the measured improvement in a patient’s health outcomes for the cost of achieving that improvement, and VBC seeks to create more value for patients by improving outcomes rather than simply cutting costs [1].

This shift has been driven by both policy and practice. Programs such as Accountable Care Organizations and bundled payment models encourage providers to share financial risk while being rewarded for meeting quality and efficiency benchmarks. Federal commitments, including the 2015 HHS goal to move Medicare away from FFS, helped accelerate adoption. By 2018, more than a third of U.S. health care dollars flowed through some form of value-based payment [2], a number that has only continued to grow.

What makes VBC a hot topic today is the convergence of several forces. Rising drug costs are prompting payers and policymakers to demand greater accountability for value. Health systems are under pressure to demonstrate not only clinical quality but also equity in outcomes across patient populations. At the same time, payers are scrutinizing utilization more closely than ever, fueling debates about the right balance between cost control and patient access.

Prior authorization (PA)

Prior authorization is a utilization management tool used by payers to ensure safe, evidence-based, and cost-effective care under FFS. Insurers require approval before certain high-cost or specialty services and medications are provided, aiming to curb unnecessary spending. PA has long been “used by insurers to restrain overuse of and unnecessary spending on drugs and services,” and it can be effective in reducing utilization [3]. However, in practice, PA imposes significant burdens on the health care system: it is “frequently time-intensive, requiring phone calls and faxes by clinicians and other staff” [3], delays needed treatments, and frustrates patients and doctors. Studies have documented these effects – for example, when a new PA requirement was imposed on Medicare patients receiving chronic cancer therapy, the odds of treatment discontinuation jumped dramatically, and refills were delayed by over a week [4]. Collectively, prior authorization – while controlling costs – often encumbers multiple stakeholders: patients face barriers to timely care, physicians spend hours on forms, and even payers bear the complexity of managing detailed PA policies [2][3].

Shift to value-based care

The shift to VBC has profound implications for prior authorization. Under VBC contracts, providers bear more responsibility for total cost and quality of care, and payer–provider incentives become more aligned. Value-based payment “intends to incent appropriate and guideline-concordant use of new therapies,” which is exactly one of the goals of traditional PA [2]. In other words, by rewarding providers for effective, evidence-based care, VBC may itself encourage the judicious prescribing and use of treatments that PA has long enforced. Several analyses argue that VBC could allow a reimagining of utilization management. As more dollars flow through VBC models, there is an opportunity to make utilization management “more collaborative, value-increasing,” rather than purely administrative [2] like prior authorization documentation. In this new paradigm, prior authorization could be streamlined, shared, or even waived for high-performing providers. In fact, leading health system and payer coalitions have proposed relaxing or removing PA requirements for clinicians participating in advanced VBC arrangements [2].

Strategies under value-based contracts

Experts and pilot programs have outlined specific ways to integrate PA into VBC or to reduce its burden.

Selective waivers under population-based contracts: One approach is for payers to identify a set of low-risk, high-cost services (drugs, procedures, imaging) for which PA can be waived if providers are part of a VBC agreement. For instance, a value-based contract between Blue Cross Blue Shield of Minnesota and the Mayo Clinic included both financial risk-sharing terms and the removal of PA for certain rare conditions and therapies (e.g., proton beam therapy for selected pediatric cancers) [2]. In exchange, Mayo assumes downside financial risk if costs exceed targets. Similarly, state Medicaid agencies have begun offering PA flexibilities to ACOs that accept risk, promising to “bypass” prior authorization for providers who meet agreed quality and cost benchmarks. In effect, providers that prove they deliver evidence-based, cost-effective care earn PA “gold cards” and can treat without prior approvals, while payers retain PA for outliers or unfamiliar scenarios.

Bundled authorization for episodes of care: Another proposed model is to bundle PA requests around an entire episode (e.g., a surgical hospitalization or a course of chemotherapy) instead of approving each component separately. In this model, a single PA could cover all anticipated services in the episode if the provider agrees to meet defined quality and cost targets. This could work for cardiac or orthopedic bundles, where providers know all the related tests, procedures, and durable equipment needed. Clinicians would submit one comprehensive request (perhaps triggered by a diagnosis code or care pathway) rather than multiple discrete authorizations [2]. This simplifies the process and fits well with how VBC encourages providers to coordinate full episodes of care.

Value-based pharmaceutical contracts: VBC can also directly influence drug authorizations. In value-based drug pricing, a manufacturer makes payment partly contingent on outcomes. One example: Oklahoma Medicaid struck a value-based agreement for the antibiotic oritavancin. Previously, oritavancin required PA because it was expensive; under the new model, it became a first-line therapy without PA. The manufacturer (Melinta) agreed that if real-world use of oritavancin did not deliver the promised hospital-sparing benefits, it would rebate the state for the excess costs [2]. In other words, PA was effectively built into the contract terms, and the formal PA requirement was dropped. A similar arrangement exists for ticagrelor (an anticoagulant) between UPMC Health Plan and AstraZeneca, where the drug is first-line post-heart-attack and adherence triggers outcome payments. These examples show that value-based agreements can replace PA with financial “if-it-fails-we-pay-back” safeguards, trusting providers to use therapies upfront.

Target PA relief first to high-value contexts

Across these models, a common principle is to target PA relief first to high-value contexts. Analysts advise starting with services where evidence is clear and risk of overuse is low (so waiving PA poses little downside). High-cost, predictable therapies (like cancer drugs or clearly indicated procedures) are candidates. By contrast, the most expensive and complex services might still need some PA checks in the short term. A gradual, data-driven expansion of waivers can build confidence, as providers meet quality metrics, payers can remove more PA requirements. In all cases, collaboration is key – many experts call for joint governance (clinicians on PA boards), shared guidelines, and transparent criteria to replace the old opaque PA rules [2][5]. For example, the Minnesota/Mayo contract created a “collaborative governing board to streamline PA rules” and continually revise which items need authorization [2].

Potential benefits

• Proponents argue that VBC-led reforms to PA could reduce administrative burden while preserving patient safety.
• By aligning incentives, providers become gatekeepers for appropriate care, reducing the need for payers to intervene.
• Clinicians may face fewer phone calls and quicker decisions for patients, potentially improving care continuity.

Indeed, the authors of the prior-authorization learning collaborative conclude that such strategies “may increase appropriate use of therapies while reducing administrative burden on clinicians and improving patient care” [5]. By focusing PA efforts where they add most value and eliminating redundant checks elsewhere, the health system can invest more in care coordination and prevention.

Implementation considerations

It’s important to note that shifting to VBC does not magically eliminate all PA processes. Health systems and ACOs assuming risk will often need to build their own internal utilization management capabilities. Organizations entering VBC may have to “stand up […] their own utilization management programs” to monitor appropriate use, which requires new infrastructure, data analytics, and clinical committees [2]. Smaller practices may struggle with this transition. Additionally, any PA waivers should still be accompanied by safeguards: for instance, “gold-carding” (exempting providers from PA) typically requires that they have a track record of evidence-based practice [3]. Payers also retain a role in safety – even under VBC, it may make sense to keep PA for extremely high-risk drugs or when new, untested treatments emerge.

Need to shift mindset

Finally, all parties will need to shift their mindset. PA in a VBC world should be collaborative and data-driven, not adversarial. The goal becomes ensuring high-quality care collectively, rather than stopping every discretionary service at the door. VBC should lead stakeholders to “rethink prior authorization” – making it transparent, collegial (with physician-to-physician review), and integrated into clinical workflows (e.g., embedded in the EHR) [2][5]. In essence, prior authorization under VBC evolves from a blunt cost-control lever into a shared clinical safety net, used judiciously and in partnership.

Conclusion

In summary, value-based care is an outcomes-driven payment philosophy that rewards providers for quality and efficiency rather than volume. Prior authorizations, a staple of fee-for-service cost control, will likely be recalibrated under VBC. In many value-based contracts, providers themselves have an incentive to follow guidelines, reducing the need for external checks. Early VBC initiatives show that carefully relaxing PA for providers who meet performance goals can streamline care without sacrificing value [2][3]. As adoption of VBC grows, we can expect more experimental models – such as bundled PAs and value-based drug contracts – that trade administrative burden for aligned risk-sharing. Ultimately, the shift aims to preserve appropriate use of care while easing the prior-authorization bottleneck, benefiting patients, clinicians, and payers alike [2][5].

In this evolving environment, the role of professionals trained in prior authorization best practices, such as those holding the PACS (Prior Authorization Certified Specialist) credential, becomes increasingly important. Their expertise ensures that evolving PA models continue to balance appropriate utilization, compliance, and patient access, supporting the broader goals of value-based care. These professionals are also experts and may help practices achieve value-based care goals or Gold programs. Ultimately, the shift aims to preserve appropriate use of care while easing the prior-authorization bottleneck, benefiting patients, clinicians, and payers alike.

References

[1] Teisberg E, Wallace S, O’Hara S. Defining and Implementing Value-Based Health Care: A Strategic Framework. Academic Medicine. 2020;95(5):682-685.

[2] Psotka MA, Singletary EA, Bleser WK, et al. Streamlining and Reimagining Prior Authorization Under Value-Based Contracts: A Call to Action From the Value in Healthcare Initiative’s Prior Authorization Learning Collaborative. Circulation: Cardiovascular Quality and Outcomes. 2020;13(7):e006564.

[3] Kyle MA, Song Z. The Consequences and Future of Prior-Authorization Reform. New England Journal of Medicine. 2023;389:e53.

[4] Kyle MA, Keating NL. Prior Authorization and Association With Delayed or Discontinued Prescription Fills. Journal of Clinical Oncology. 2024;42(8):951-960.

[5] Psotka MA, et al. Value in Healthcare Initiative’s Prior Authorization Learning Collaborative. Circulation: Cardiovascular Quality and Outcomes. 2020;13(7):e006564.