Value-Based Care: Sluggish Adoption or an Unrealistic Utopia?

Another episode of Digital Health Inside Out (DHIO) just dropped!

May 27, 2025

Welcome to AI Health Uncut, a brutally honest newsletter on AI, innovation, and the state of the healthcare market. If you’d like to sign up to receive issues over email, you can do so here.

I’m excited to share another episode of Digital Health Inside Out (DHIO). Please check it out and subscribe! Our goal is to dive into the most pressing digital health topics through heated discussions and occasional debates—where I somehow always end up as the instigator 😉.

To get a taste of what this podcast is all about, here are some of our recent episodes:

➡️ Why Most Medical AI Is Garbage—And Why No One Cares

➡️ Did VC Bros Destroy Digital Health

➡️ Why the Hell Do We Need 126 Medical AI Scribes?

Today, my co-host Alex Koshykov and I are thrilled to share a brand-new episode of the Digital Health Inside Out (DHIO) podcast. This time, we’re debating Value-Based Care (VBC) and its crucial intersection with digital health. Joining us for this discussion is a stellar panel of experts:

Arvind Cavale, MD, Clinical Assistant Professor of Endocrinology at University of New England College of Osteopathic Medicine

Mendel Erlenwein, Founder and CEO of CareCo

Sally Lewis, MD, Professor of Value in Health Management at Swansea University

TL;DR of the key points and quotes:

U.S. Healthcare: Broken or Brilliantly Rigged?
Value-Based Care: Savior or Just Marketing Buzz?
Patients Don’t Know and Don’t Care about Your “Value”
Hospitals Don’t Want Empty Beds—Ever
Doctors Are Stuck in the Stone Age
Metrics for Value-Based Care are a Mess. We’re Failing Our Patients.
ChenMed and Oak Street: Value-Based Heroes or Overrated Hype?
Doctors: Risk Your Career or Stay Miserable
Scale or Fail: Why Value-Based Care Can’t Grow
Philosophical Talk Won’t Save Healthcare
Final Truth: Healthcare’s Ownership Problem

U.S. Healthcare: Broken or Brilliantly Rigged?

Alex Koshykov:
[0:34] “A lot of us gonna agree that a lot of things in the U.S. healthcare system are broken, and many people think that value-based care is the answer to fix the system.”
Arvind Cavale:
[9:36] “The system is not broken at all. System is working exactly how it was designed and how it has been modified over the years.”

Value-Based Care: Savior or Just Marketing Buzz?

Mendel Erlenwein:
[4:07] “So there’s obviously a million ways that you can define it. I look at value based care in its most simplistic way as aligning financial incentives with patient outcomes. To me, that’s pretty much the one line that sums it up.”
Sally Lewis:
[6:31] “So I would agree with Mendel that it is about aligning outcomes and costs and about how we make sure that we get the most out of the resources that we put into healthcare.”
Sally Lewis:
[7:28] “I think the other really critical thing about value based healthcare wherever you are in the world is to think about it as a whole pathway of care, a whole system. So true value comes when we think about a whole pathway from prevention through early diagnosis optimizing intervention and follow-up care and on into really good palliative care if that’s part of it because that helps us understand how we deploy our workforce how we use digital technologies to support those pathways of care.”
Arvind Cavale:
[8:32] “The example [Mendel] describes does not apply to U.S. healthcare, unfortunately. And the reason that worked beautifully in a water cooler is because there was a buyer and a seller and the user was a buyer. And in healthcare there are multiple middle parties, not just a third party. There’s a third and a fourth and a fifth party. The financial incentives are divided amongst the parties and so the the deliverer of care has a very little incentive to optimize care, whereas the receiver of care has very little incentive to optimize his or her own care or her own self-care, and all the other parties in the middle have a very high incentive to actually keep costs high and incentives low.”

Patients Don’t Know and Don’t Care about Your “Value”

Sergei Polevikov:
[13:27] “75% of patients in the U.S. are on their employers insurance plans. So why the hell would they switch [on their own]?”
Mendel Erlenwein:
[14:52] “I would say that 9.7 out of 10 patients don’t even know what value based care is, nor why would they? They have no idea what that even means. If you went up to a patient, you said, ‘Hey, would you like to switch from fee-for-service to value-based care?’ They would just say, ‘Dude, I’m trying to get lunch. I don’t know what you’re talking about.’”
Alex Koshykov:
[19:53] “Me as a patient - I want to stay out of the hospital as much as possible and that’s not incentive of a health system because in the fee-for-service model they want me to come to the hospital as as much as possible.”

Hospitals Don’t Want Empty Beds—Ever

Alex Koshykov:
[28:26] “My understanding is that health care systems are not incentivized at all, and most of them are not incentivized to switch to value-based care model.”
Arvind Cavale:
[41:37] “If I’m running a hospital, I want my beds to be occupied. I don’t want empty beds because I still have to staff my wards, you know, my critical care septic units. I’m not going to save money by not hiring nurses or aids. So I’d rather have the beds full.”

Doctors Are Stuck in the Stone Age

Arvind Cavale:
[34:41] “Your doctor doesn’t understand the methods of using technology to benefit the patient as well as benefit their practice at the same time. It’s just a lack of knowledge.”

Metrics for Value-Based Care are a Mess. We’re Failing Our Patients.

Sally Lewis:
[47:51] “Capturing outcomes properly, especially patient-reported outcomes as part of care, is extremely hard. You can’t do it as a data collection exercise for a payment mechanism, I can tell you that now, because the patients will go ‘Uh-uh, you’ve got to embed it. It’s got to be meaningful. It’s got to be a tool of care first.’”
Sally Lewis:
[42:59] “In an ideal world, we want to know how patients are doing, right? We want to know what their clinical outcomes are. It could be, whether a tumor has gone, or it could be the diabetes management that Arvind was talking about earlier - is absolutely perfect and on point. Those are clinical outcomes. And then ideally we want to know patient outcomes as well - which is a lot more about the symptom burden that patients have from their illness, or it might be about global quality of life as well, and these things are also important measures as the sort of administrative data that we see from hospitals.”

Sally Lewis:
[45:49] “I’m arguing that we should be transparent and if we’re not transparent, we’re failing our patients, whether you know, and people don’t like that. But it is true: we’re failing our patients.”
Sergei Polevikov:
[46:56] ”It could be quite challenging how to even measure success of value-based care. The outcome could be gamed: if it’s one particular measure, then you concentrate on this one, and kind of disregard everything else. If you have multi-morbid patient, it’s not just one disease, it’s a whole bunch of factors, including social factors. It’s challenging.”

ChenMed and Oak Street: Value-Based Heroes or Overrated Hype?

Mendel Erlenwein:
[49:50] “I like Oak Street. I know they, you know, they sold to CVS, but I think Oak Street was a great and is still a great company. I’m sure there’s been some culture shift, and things have changed since, but I think that the model that took them from zero until sale was very positive.”
Mendel Erlenwein:
[51:20] “Obviously you’ve got ChenMed does a great job as well. They’ve also gone through quite a bit of shakeup, and I had the opportunity of hanging out a bunch with Dr. Gordon Chen and also went down there in Florida and got to tour that operation.”
Mendel Erlenwein:
[51:37] “What’s always surprising to me is when you look at the successful ones it doesn't actually seem like rocket science. It’s like - just focus on prevention, focus on communication, focus on care coordination, focus on engagement, try to focus on like ‘Hey is this patient happy are they getting what they need?’ instead of like all the jammering on about different models.”
Alex Koshykov:
[53:10] “I went to check the reviews [of ChenMed] on Reddit, and looks like they have really big problems with clinicians because the turnout is huge. And in one of the reviews they say that ‘The type of patients you see depend on the location. South Florida clinics have a healthier clients compared to poor rural areas. But the goals are the same everywhere. Bonuses are hard to obtain. You have to hit multiple targets, and the most challenging one is hospital admissions.’”

Doctors: Risk Your Career or Stay Miserable

Arvind Cavale:
[1:02:19] “Many years ago - 2007, 2008, 2009 - I basically canceled all my insurance contracts, kept only one or two. I lost only about maybe 25% of my patients, and the rest of them became cash paying patients, which till today they are still my patients.”
Mendel Erlenwein:
[1:03:46] “You actually run the numbers and it’s like you got 250 patients paying you $2,000 a year, you’re making 500 grand. You know, it’s like that’s doable. And you know what? For your typical person that’s paying deductibles and co-pays all year anyway. Is $2,000 over the year that hard to find? You don’t have to be the richest person. It’s quite a fascinating model.”
Sergei Polevikov:
[1:02:51] “[Value-based care] is the right thing to do. It’s just a lot of risk that perhaps not many people realize.”

Scale or Fail: Why Value-Based Care Can’t Grow

Sergei Polevikov:
[38:40] “I believe that value-based care would only work financially when we have scale. Right now we don’t have scale.”

Arvind Cavale:
[1:11:02] “The value is somewhere else - not in the health system segment. That’s why the size in healthcare is inversely proportional to value. The larger the size the less value service they provide to the patients.”

Alex Koshykov:
[1:11:22] “The majority of Americans are using the services of larger health systems [because they have no choice]. Right. So that’s my question. If we’re talking about value based care adoption across the country, it remains unrealistic utopia because most of the Americans who use services of bigger health systems, they will never get to the point of receiving that value-based care.”

Philosophical Talk Won’t Save Healthcare

Sally Lewis:
[1:12:09] “In a way, for me value-based healthcare has become a philosophical pursuit. You know, what is healthcare? What’s it for? What are we willing to pay for health care as a nation? What’s the ceiling? Is the sky the limit? As we develop new technologies, new treatment there’s growing needs in our population, you know - what’s the ceiling? Do we care about equity? Uh oh, I’m not allowed to say that word anymore in the U.S., am I?”

Mendel Erlenwein:
[1:17:37] “I fully appreciate all the complexity because there’s this beautiful intersection between AI and value-based care that both when married appropriately, I think that if you really get down to it, the fundamentals of value-based care are obviously correct.”
Mendel Erlenwein:
[1:18:22] “The administrative burden, and the level of automation and augmentation that we’ll see with proper use of tools like GenAI is probably the biggest answer in a fundamental shift as far as making alleviating a lot of those burdens and hopefully just leaving the fruit, so to speak, which is better patient care. I really am hopeful. I don’t think it’s going to be the only answer, but I am hopeful that over these next couple years we will see a transformation in the burden that I think is just a giant rock that’s sitting on top of this hot air balloon that’s trying to rise. So for that reason, I’m optimistic.”

Final Truth: Healthcare’s Ownership Problem

Mendel Erlenwein:
[1:16:57] “Healthcare is kind of like imagine you bought a piece of real estate that I want you to insure, but the real estate gets to decide who owns it. So you go and you buy a piece of real estate, but every year the real estate decides that someone else could own it. And then I come to you and I say ‘I want you to put a bunch of money into the plumbing, the roofing, and the foundation.’ And you’re like ‘Well, next year the real estate might decide that Alex owns it and not me. So why would I put all that money into it?’ And that’s really how it’s like.”

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