Value-Based Care, Part 1: A Lucrative Business Strategy Disguised as Health Policy

On August 28, 2025, the Centers for Medicare and Medicaid Services (CMS) announced that the Medicare Shared Savings Program (MSSP) “achieved the highest rates of shared savings since the inception of the program” for Performance Year 2024.¹ Like death and taxes, Aledade promptly issued a triumphant press release announcing that their “accountable care organizations (ACOs) saved Medicare over $1 billion in 2024,” similar to their press releases in 2024, 2023, 2022 and 2021.²  

Aledade’s press releases invariably report returning hundreds of millions to taxpayers, but I would bet all Aledade’s savings that, like me, you have never received a check from Aledade or CMS or the IRS for that amazing performance. More importantly, the press releases reveal the amount of “savings” that were “shared” with Aledade’s practices: $120M in 2020, $167M in 2021, $204M in 2022, $278M in 2023 and (gasp) $775M in 2024. 

These results bring three things to mind: 

First, good for the primary care physicians who earned shared savings payments. For an industry that proclaims that primary care is the lynchpin of health and wellness, it is curious that primary care physicians must “earn” bonus compensation through shared savings programs to bridge these enormous compensation gaps.  

Second, as I have written over and over and over, value-based care is a lucrative, if simple, business model for those who know how to run the play: 

1. Aggregate at least 10K Medicare “attributed” lives in a discrete geographic area;  
2. Hire a good actuary;  
3. Employ or affiliate with primary care physicians who know how to deliver – and document – “advanced” primary care for their Medicare panel, i.e. appropriate utilization of the appropriate care at the lowest-cost site to reduce hospital admissions in the “attributed” population;  
4. Monitor referrals every single day; and
5. Distribute savings to physician partners after receiving them.

Many others run the play at least as well as Aledade, though they are more modest – and perhaps wiser – about trumpeting their success. In fact, one might even think that MSSP ACOs are “easy money” given the most recent results: 

“Out of 476 ACOs, 75% of ACOs, representing 80% of the 10.3 million assigned beneficiaries, are earning performance payments totaling $4.1 billion, and Medicare saved $2.4 billion relative to benchmarks. PY 2024 had the highest share of ACOs receiving performance payments and the highest amount of savings for ACOs and Medicare since the inception of the Shared Savings Program.”³  

Third, the “relative” MSSP “savings” accruing to CMS, if not to taxpayers, are like a raindrop on the ocean, as this graph reveals:


The idea that MSSP ACOs are “easy money” is strengthened by their performance in comparison to CMS’s other “value-based care” initiatives, most of which generate modest to massive losses. 

Value-based care does not create value for the ultimate payer, whether the employer or the Federal government, but simply allows that ultimate payer to cap its financial exposure. Why? Value-based care participants focus on minimizing cost after negotiating the revenue pool from the ultimate payer to maximize marginal income on their share of the available funds, aka “subcapitation.”  Even when, like MSSP, value-based care “works” and creates “shared savings,” there are two parties who don’t participate: the Medicare beneficiary and the taxpayer.  

As a result, value-based care never delivers maximal cost-effectiveness for the ultimate payer, which the British call “value for money,” a concept enshrined in The NHS Constitution for England:  

“6. The NHS is committed to providing best value for taxpayers’ money 

It is committed to providing the most effective, fair and sustainable use of finite resources. Public funds for healthcare will be devoted solely to the benefit of the people that the NHS serves.”⁴

Notably, neither MSSP nor other CMS Innovation Center initiatives are “devoted solely to the benefit of the people” that CMS serves, and Aledade’s press releases make clear that Medicare beneficiaries are at best third-party beneficiaries of an extraordinarily profitable business relationship between the Federal government and MSSP ACOs.

As such, the most recent results of MSSP are completely unsurprising, which is why I have investments in three value-based care companies. However, unlike stakeholders promoting value-based care as a solution to America’s healthcare crisis, I don’t confuse a good business model with good policy, and the notion that value-based care can bend the healthcare cost curve is obviously illogical and tangibly false. Proponents of value-based care as effective health policy recall Upton Sinclair's statement that “it is difficult to get a man to understand something, when his salary depends on his not understanding it.” 

In the words of Linkin Park, “time is a valuable thing,” yet health economy stakeholders continue to “watch the time go right out the window” promoting patently fallacious ideas to “innovate” and “transform” healthcare. “Things aren’t the way they were before,” and health economy stakeholders ignoring the most powerful idea in the U.S. economy – delivering value for money – do so at their own peril. 

Next week in Part 2, I will explore that peril in more detail.