The Evolution of Value-Based Care in Long-Term and Home-Based Services: Opportunities, Challenges, and the Future
Understanding the Complex Regulatory Landscape of Long-Term and Community-Based Care
Long-term and community-based care (LTC and HCBS) operates in one of the most complex regulatory environments in healthcare. The extent of oversight depends largely on how services are funded, or the payor. Payors range from personal funds to private insurance, out-of-pocket payments, and—most significantly—government programs like Medicare and Medicaid.
Government payors introduce multiple layers of regulation. Medicare, an entitlement program for adults over 65, has a federal minimum standard that all states must follow, though some states choose to add additional layers of regulation. Medicaid, in contrast, is state-administered with federal guidelines but allows for greater customization, leading to significant variability in regulations between states. Some states apply broad regulatory oversight to all long-term care services, while others regulate only those covered under Medicaid waiver programs.
Complicating matters further, regulations vary between home-based care and congregate settings (e.g., nursing homes, assisted living). Congregate care settings are often more heavily regulated due to their historical role as the dominant model of long-term care. As home- and community-based services expand, regulatory frameworks continue to evolve, but they often lag behind the shifting landscape of care.
The Rise of Value-Based Care (VBC) in Medicare and Medicaid
To address inefficiencies and escalating costs in the U.S. healthcare system, policymakers have increasingly shifted toward Value-Based Care (VBC). Unlike the traditional fee-for-service (FFS) model, which rewards providers for volume rather than outcomes, VBC ties payment to quality, efficiency, and patient-centered results.
The Timeline of VBC Implementation
2008-2010: Early Foundations – CMS launched early pay-for-performance models in hospital and Medicare Advantage settings.
2012: Accountable Care Organizations (ACOs) – The Medicare Shared Savings Program (MSSP) introduced ACOs, groups of providers responsible for both cost and quality outcomes.
2015: MACRA Legislation – The Medicare Access and CHIP Reauthorization Act (MACRA) created the Quality Payment Program (QPP), including the Merit-Based Incentive Payment System (MIPS) and Alternative Payment Models (APMs).
Present Day: Medicaid Expansion – Many states now require Medicaid Managed Care Organizations (MCOs) to adopt VBC principles, linking reimbursement to performance.
Why Shift to Value-Based Care?
Unsustainable Costs – Fee-for-service payments incentivized excessive utilization, straining Medicare and Medicaid budgets.
Fragmented Care Delivery – Patients, particularly those with chronic conditions, often received disjointed care, leading to inefficiencies and poor health outcomes.
Political and Policy Momentum – Legislative efforts, such as the Affordable Care Act (ACA) and MACRA, reinforced the movement toward outcome-driven healthcare.
Applying VBC to Long-Term and Home-Based Care
VBC is well-suited to hospital and physician-based care, but its application to LTC and HCBS has been slow, complex, and uneven. Unlike acute care, where success can be measured by recovery rates and hospital readmissions, LTC and HCBS focus on chronic conditions, functional maintenance, and quality of life—metrics that are harder to quantify.
Medicare’s Role in LTC and HCBS VBC
Skilled Nursing Facility Value-Based Purchasing (SNF VBP) Program – Ties Medicare payments to hospital readmission rates.
Home Health Value-Based Purchasing (HHVBP) Model – Expanding nationally, this model links payments to patient outcomes and functional improvement.
Bundled Payments for Care Improvement (BPCI) – Encourages cost-effective post-acute care by providing a single payment for an entire episode (e.g., hospital stay + rehab).
Limitations: Medicare primarily funds short-term post-acute care (rehab, home health), not ongoing long-term services, limiting its influence on VBC in LTC and HCBS.
Medicaid’s Role incorporating value-based systems into LTC and HCBS
Medicaid Managed Care & HCBS VBC Contracts – Many states require MCOs to integrate pay-for-performance measures into HCBS.
Section 1115 and 1915(c) Waivers – Some states use waivers to develop VBC models for HCBS, experimenting with capitated payments for home care agencies.
Challenges:
HCBS Variability – Unlike hospital care, HCBS services are highly individualized, making standardized VBC measures difficult to apply.
Data & Reporting Gaps – Many small home care agencies lack electronic health records (EHRs) and administrative capacity to track quality metrics.
Underfunding & Workforce Strain – Medicaid HCBS reimbursement rates are often too low to support the investment required for VBC adoption.
Barriers to Implementing VBC in LTC and HCBS
Defining Value in Chronic & Supportive Care
Unlike in hospital settings, success in LTC/HCBS is not always about improvement—sometimes, stability is the best outcome. Current VBC models struggle to account for this.
Administrative Burden on Small Providers
Many home care agencies operate on thin margins and lack the technical infrastructure to participate in VBC effectively.
Financial Risk vs. Low Medicaid Reimbursement
VBC often requires providers to take on financial risk, which is difficult when Medicaid rates barely cover operating costs.
The Future of VBC in LTC and HCBS
Despite these challenges, solutions are emerging to better align VBC with person-centered, long-term care:
Shifting Metrics to Focus on Quality of Life
States like Minnesota and Oregon are exploring functional stability and patient satisfaction as key performance indicators rather than hospital-based metrics.
Risk Adjustment for Social Determinants of Health (SDOH)
Some VBC models are beginning to account for non-medical factors, such as food security, caregiver support, and transportation access.
Investing in HCBS Infrastructure
States must support providers with better EHR adoption, higher wages for direct care workers, and more flexible payment structures to make VBC viable in HCBS.
Can VBC Work in Long-Term and Home-Based Care?
Yes—but it must be adapted to fit the realities of LTC and HCBS. Instead of applying hospital-centric models, future VBC initiatives must:
✔ Prioritize quality of life, not just medical outcomes
✔ Recognize workforce limitations and pay structure issues
✔ Invest in data infrastructure for home-based providers
VBC has the potential to drive meaningful change in LTC and HCBS, but only if it acknowledges the unique nature of long-term care and provides the right tools, funding, and flexibility for providers to succeed.
