What is a value-based enterprise (VBE), and why should health system leaders care?
A VBE is a strategic and contractual framework that aligns physicians and health systems around shared performance goals—typically focused on quality, cost, and patient outcomes. Unlike traditional models that reward volume, VBEs incentivize value creation—think patient access, cost reduction, and clinical efficiencies.
For health system executives, VBEs offer a pathway to engage physicians as partners in driving sustainable performance, improving care delivery, and succeeding in value-based payment environments.
While the term “VBE” is used broadly to describe internal alignment models, it also appears in CMS and OIG regulations as part of value-based exceptions and safe harbors. In these specific regulatory contexts, VBEs are defined as two or more participants collaborating to achieve value-based purposes, such as improving care coordination or reducing costs.
How is a VBE different from other physician alignment models?
VBEs go beyond employment or co-management arrangements. They are designed to support one or more of the following:
- High-performing clinical operations
- Shared success performance-based incentives
- Risk-sharing arrangements with payors
- Shared governance structures
High-functioning VBE physician alignment creates a more agile and accountable enterprise that can adapt to evolving payment models, regulatory expectations, and market pressures.
What is the difference between value-based enterprise (VBE) and value-based reimbursement (VBR)?
While they sound similar, VBE and VBR refer to distinct but complementary concepts in healthcare transformation.
| Concept | Definition | Focus |
|---|---|---|
| Value-Based Reimbursement (VBR) | A payment model in which providers are reimbursed based on quality, outcomes, and cost efficiency, rather than volume | External: Payor-facing contracts and incentives |
| Value-Based Enterprise (VBE) | An internal alignment model that organizes physicians and hospitals around a variety of shared performance goals, one of which can be to succeed in VBR incentives | Internal: Organizational structure and stakeholder alignment |
How do VBE and VBR work together?
VBR sets the rules. Payors define how reimbursement is tied to value—through bundled payments, shared savings, capitation, or quality bonuses.
VBE builds the team. Health systems use VBEs to align physicians, service lines, and leadership around the performance metrics that drive success under VBR.
In short, VBR is the external incentive, and VBE is the internal strategy to capture it.
What are value domains, and how do they guide VBE design?
Value domains are strategic categories that define where and how value is created in a VBE. They help health systems and physicians focus on the areas of greatest impact related to performance and patient outcomes. Common domains include:
- Clinical Quality
- Cost Efficiency
- Patient Experience
- Provider Engagement
- Population Health
Each domain can be tied to specific key performance indicators (KPIs) and incentive structures to promote alignment and accountability.
Value domains in a VBE often reflect the principles of the Triple Aim—enhancing patient experience, improving population health, and reducing per capita cost. These domains are also highly aligned with OIG waiver requirements and other VBE legal requirements when applicable.
What are examples of KPIs used in VBEs?
Health systems and physicians may use a variety of KPIs to measure performance across the different VBE value domains, depending on their goals and operating models. Examples for some common domains include:
| Value Domain | Example KPIs |
|---|---|
| Clinical Quality | Readmission rate reduction, adherence to clinical pathways, HEDIS scores |
| Cost Efficiency | Cost per episode of care, avoidable emergency department visits, generic prescribing rate |
| Patient Experience | CG-CAHPS scores, access metrics, Net Promoter Score |
| Provider Engagement | Governance participation, performance review completion, retention rate |
| Population Health | Risk-adjusted outcomes, preventive screening rates, chronic disease control |
What does success look like in a VBE model?
Success in a VBE is shared. VBEs create a win-win environment where both physicians and hospitals benefit from aligned goals and collaborative decision making.
Success factors and benefits for physicians include:
| Success Factor | Physician Benefit |
|---|---|
| Clinical Autonomy | Retain judgment while contributing to enterprise goals |
| Performance-Based Incentives | Rewarded for quality and efficiency, not just volume; an outcomes focus allows for multiple paths to success |
| Governance Participation | Influence strategy and operations |
| Data Transparency | Access to performance data for improvement |
| Professional Fulfillment | Mission alignment enhances engagement and reduces burnout |
Success factors and benefits for hospitals include:
| Success Factor | Hospital Benefit |
|---|---|
| Improved Quality Metrics | Better outcomes drive incentives and reputation |
| Cost Containment | Reduced variation and utilization lowers cost |
| Physician Loyalty | Engaged physicians stay and refer within the system |
| Network Integrity | Incentives reduce leakage and improve patient care continuity |
| Strategic Agility | Shared governance enables faster decision making |
What are common barriers to implementing a VBE—and how can they be overcome?
Implementing a VBE is a transformational opportunity, but it’s not without its challenges. Success requires navigating cultural, operational, and regulatory complexities with intention and clarity. Below is a summary of common barriers and practical strategies to address them:
| Barrier | Description | Recommended Strategies |
|---|---|---|
| Cultural Resistance | Physicians may be skeptical of new models, especially if past efforts lacked transparency or felt transactional. |
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| Data Limitations | Organizations may lack infrastructure to measure and share performance data in a timely, actionable way. |
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| Compliance Complexity | VBEs must comply with Stark Law, the Anti-Kickback Statute (AKS), and other regulations. |
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| Operational Fragmentation | VBEs require coordination across finance, clinical operations, legal, IT, and physician leadership. |
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| Misaligned Incentives | Incentives that are too complex or disconnected from physician priorities won’t drive engagement. |
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| Lack of Strategic Clarity | Without a clear vision, VBEs can feel disconnected from overall organizational goals or strategy. |
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Overcoming these barriers requires building trust, clarity, and momentum. When addressed proactively, these challenges become catalysts for stronger alignment and lasting impact.
What is the potential return on investment (ROI) for health systems implementing a VBE model?
VBEs are more than a compliance strategy—they’re a performance improvement engine. When designed and executed effectively, VBEs can deliver measurable returns across financial, operational, and strategic dimensions.
Examples of potential financial ROI across different value domains include:
| Value Domain | Example ROI Outcomes |
|---|---|
| Clinical Quality | Reduced readmissions ($700–$3,000 per case),1 improved HEDIS scores |
| Cost Efficiency | Lower cost per episode, reduced emergency department visits ($500–$1,200 per visit)2 |
| Patient Experience | Higher HCAHPS scores (which impact Value-Based Purchasing payments), reduced leakage, increased downstream revenue |
| Provider Engagement | Reduced turnover ($250,000+ per physician),3 improved productivity |
| Population Health | Reduced inpatient utilization, improved risk adjustment scores |
VBEs can also deliver strategic ROI related to access and network integrity. For example, a VBE alignment approach that incorporates systems of care can create value when it comes to referrals from primary care physician to a specialist, as referring physicians have a greater understanding and expectation about how their patients will be cared for. As this process is repeated, it helps build trust and loyalty within the network. A systems of care approach can also help improve patient access through an established triage and prioritization process based on patient needs. When well executed, this can reduce network leakage and support better patient care.
Generating ROI is about empowering and aligning physicians to unlock the full potential of those they serve. To do so, a common VBE approach is to utilize systems of care as the framework and clinical protocols as the playbook. This is a powerful combination for delivering high-value care, because it enables consistent quality, cost control through reduced variation, and physician engagement by providing a formal role in the totality of care delivery. Together, this helps drive improved outcomes and efficiency.
Is the VBE model just paying physicians to help achieve the Triple or Quadruple Aim?
This is a fair question, and it gets to the heart of why VBEs are more than just incentive programs. The Triple Aim—in short, better care, better health, and lower cost—has long served as a guiding principle for CMS innovation models. More recently, the Quadruple Aim has emerged, adding a fourth dimension: improving the experience of the providers themselves. VBEs are operating models that reward aligned behavior, which does align with Triple Aim/Quadruple Aim principles. This is no surprise, as CMS has established a long-term goal to have every Medicare beneficiary aligned to a value-based care model by 2030.
This directional signal to the market reflects a systemic pivot away from fee-for-service and toward outcomes-based reimbursement. For physician enterprises and health systems, this means that value-based alignment is no longer experimental; it is becoming the default operating environment. Organizations that proactively structure their physician arrangements to support this transition will be better positioned to access enhanced reimbursement, mitigate compliance risk, and demonstrate measurable impact across cost, quality, and experience. Accomplishing these objectives without the use of VBE alignment is challenging.
So, when we explore the business rationale associated with VBE alignment, it’s important to ground the conversation in frameworks that have shaped how CMS and other stakeholders evaluate success. CMS has embedded these aims into the design of programs like accountable care organizations (ACOs), bundled payments, and primary care transformation models. The agency’s support is evident not only in its payment methodologies but also in the regulatory flexibilities it offers to organizations pursuing these goals.
For executives evaluating VBEs, this alignment with federal priorities isn’t incidental; it is foundational to the business rationale to adopt their use. Deployment of VBE alignment models is a practical attachment to the regulatory landscape that is highly aligned toward CMS’ march toward material value-based reimbursement. In short, using VBEs to drive physician alignment is a part of the tool set CMS is offering to help the industry evolve away from its historically dominant orientation of paying for volume.
Therefore, while VBEs are designed to support the goals of the Triple Aim and/or the Quadruple Aim, they do so through structured alignment, not just compensation. VBEs create a formal framework that:
- Defines shared performance goals across clinical quality, cost efficiency, patient experience, and provider engagement.
- Establishes governance and accountability mechanisms that go beyond employment or co-management.
- Supports compliance with CMS and OIG definitions of VBEs when needed, without making regulatory waivers the sole rationale.
- Enables strategic agility by aligning incentives with enterprisewide priorities, not just payor metrics.
VBEs are not just about paying physicians to “do the right thing.” They’re about building a resilient, high-performing enterprise where physicians are empowered, engaged, and accountable for outcomes that matter. To the extent it appears these are Triple Aim/Quadruple Aim programs, it is because of their alignment to CMS’ goals and regulatory structure.
How does a VBE help manage Stark Law and Anti-Kickback Statute (AKS) risk?
A VBE physician alignment strategy has the potential to offer a powerful tool for managing regulatory risk under both the Stark Law and the AKS. While not a legal opinion, our experience is that high-functioning VBE alignment structures help reduce overall regulatory risk and enable organizations to move at the pace of healthcare.
Here are two examples of compliance benefits we have observed:
Flexibility Beyond Traditional Fair Market Value (FMV) Constraints
Traditional physician arrangements require compensation to be set in advance for at least one year and to reflect FMV for personally performed services. In contrast, VBE arrangements that qualify for the Stark Law’s downside risk value-based exception can potentially allow for:
- Dynamic Payment Structures: Compensation terms can be changed prospectively to reflect the real-time operations needs of the parties, such as a change in clinical best practices. While retrospective changes are prohibited, this flexibility enables more responsive alignment with clinical and operational priorities.
- Exclusion From FMV Analysis: Under the Stark Law’s downside risk exception, qualifying payments made to physicians participating in a VBE may be excluded from traditional FMV analysis. Structuring payments to a physician for VBE-appropriate work is a strategic approach to reducing FMV risk. Remember, every claim submitted to a governmental payor has the implicit certification that compensation to the provider does not exceed FMV.
Emphasis on Value, Not Volume
While VBEs do not require payments to be strictly tied to personally performed services, they must be related to the physician’s role in achieving value-based goals. This allows organizations to incentivize broader contributions—such as care coordination, quality improvement, and cost containment—without triggering concerns about volume-based inducements.
That said, there are still compliance requirements associated with VBEs. For example, no arrangements can be designed to pay for referrals or stint care. What we have observed, however, is that under an effective governance and operating structure, compliance with the value-based arrangement requirements feels more like traditional oversight than an arcane exercise completed by outside professionals.
Finally, we would note that the AKS does not include a provision that mirrors the Stark Law’s downside risk value-based exception. Therefore, there is not an AKS natural safe harbor for VBEs. However, there is a safe harbor for employees, which can include physicians. For independent physicians, a separate AKS compliance analysis is recommended. Forvis Mazars does not provide legal advice, and we recommend a qualified healthcare attorney be closely involved with the development of VBEs.
How can Forvis Mazars help with VBEs?
As health systems navigate the evolving landscape and look for opportunities to improve physician enterprise performance, the VBE model offers a powerful framework for aligning physicians and hospitals around shared goals. VBEs are both a structural innovation and a strategic imperative for organizations seeking to improve outcomes, contain costs, and strengthen patient access. By focusing on value domains, measurable KPIs, and collaborative governance, VBEs help create the conditions for sustainable performance and mutual success.
Our professionals at Forvis Mazars have extensive experience with physician alignment and VBEs. We assist health systems with performance improvement assessments, stakeholder engagement, incentive design, KPI development, compliance support, implementation planning, and change management. If you have questions about VBEs or would like assistance turning alignment into impact, please reach out to our team today.