Shared Savings vs Value-Based Care vs Pay-for-Performance: What Is the Difference?
Many physicians hear terms like value-based care, shared savings, and pay-for-performance used interchangeably. They are not the same thing — and misunderstanding them can mean leaving money on the table.
Key Takeaways
- Value-Based Care is the overall strategy — not a payment model.
- Pay-for-Performance rewards specific quality measures with bonus payments.
- Shared Savings rewards reducing total healthcare costs while maintaining quality.
- A practice can participate in one, two, or all three simultaneously.
- Understanding which model you are participating in is critical to understanding how you get paid.
Why This Matters
How They Compare
Value-Based Care
Pay-for-Performance
Shared Savings
The Simplest Way to Think About It
Value-Based Care = The Philosophy
Pay-for-Performance = A Bonus Program
Shared Savings = A Financial Partnership
Value-Based Care
Value-based care is not a payment model. It is a healthcare strategy.
The goal is simple: improve patient outcomes while reducing unnecessary healthcare spending. Instead of rewarding volume alone, value-based care rewards quality, efficiency, coordination, and outcomes.
Examples of value-based care in practice:
- Preventive screenings
- Medication adherence programs
- Chronic disease management
- Reduced emergency department utilization
- Reduced avoidable hospital admissions
Most independent practices are already participating in value-based care whether they realize it or not. Medicare Advantage plans, commercial payers, and Medicaid programs increasingly tie reimbursement to quality performance.
Pay-for-Performance
Pay-for-performance (P4P) is usually the easiest model to understand.
The payer identifies specific measures. The practice earns incentives for achieving those measures.
Examples of common P4P measures:
- Breast cancer screening rates
- Diabetes control (HbA1c)
- Blood pressure control
- Medication adherence
- Annual wellness visit completion
What determines success? Meeting measure targets.
Not reducing total cost of care. Not managing utilization. Simply achieving defined quality goals.
Think of it as: If you hit these measures, we pay a bonus.
Shared Savings
Shared savings goes beyond individual quality measures.
The payer establishes an expected cost benchmark for a defined population. If the practice or network delivers care for less than that benchmark while maintaining quality standards, savings are generated. Those savings are then shared between the payer and participating providers.
Examples of what generates shared savings:
- Reduced avoidable admissions
- Better specialist utilization
- Improved care transitions
- Better chronic disease management
- Reduced emergency department utilization
Think of it as: If we improve quality and reduce unnecessary spending, everyone shares in the benefit.
How PHN Supports Independent Practices
Understanding the difference between value-based care, pay-for-performance, and shared savings is one thing. Participating in these programs effectively is another.
PHN helps independent practices identify which programs they are already in, which opportunities they may be missing, and what infrastructure is needed to perform well. That includes quality improvement resources, performance data and analytics, education on program requirements, and hands-on support from specialists who understand how these models work in practice.
For many independent physicians, the challenge is not understanding the concepts — it is having the time and infrastructure to track performance across multiple programs simultaneously. PHN provides that infrastructure while the practice maintains full independence.
Questions to Consider
- Do we know which payment models we are currently participating in?
- Are we leaving incentive opportunities on the table?
- Do we have the data needed to track performance across all programs?
- How much staff time do we spend managing quality reporting?
- Are we prepared for new value-based requirements from payers?
- Do we have trusted expertise to help evaluate program opportunities?
The Bottom Line
Value-based care is the destination. Pay-for-performance is one vehicle. Shared savings is another.
The most successful independent practices understand how all three work together and align their operations, quality programs, and patient engagement efforts accordingly.