Hospitals and health systems are entering a period where value-based care is no longer optional, it’s becoming mandated. The Centers for Medicare & Medicaid Services’ (CMS) Transforming Episode Accountability Model (TEAM) will soon require more than 700 hospitals to take accountability for the cost and quality of surgical episodes. While daunting, this shift underscores a larger truth: hospitals cannot succeed in episodic, risk-based, or longitudinal models without a framework that aligns stakeholders across the ecosystem.
That framework is the Value-Based Enterprise (VBE).
VBEs, introduced through Stark Law and Anti-Kickback exceptions in late 2020, are more than a regulatory vehicle. They are an operating model for collaboration across physicians, hospitals, and post-acute providers. When designed intentionally, VBEs align incentives, create meaningful governance, operational implementation, and accelerate progress toward the very goals CMS is embedding into TEAM and other future models.
Why VBEs Matter Now
Traditional alignment vehicles such as co-management, gainsharing, etc. were built for fee-for-service. They often hit structural limits when applied to true value-based strategies. VBEs, however, allow hospitals and physicians to share accountability for defined populations, services, or episodes without having to create new corporate entities.
For operators, the VBEs matters because they:
- Center physicians as co-architects, rather than end users, of transformation.
- Break down silos between acute, post-acute, and community care.
- Flex across initiatives, from episode models like TEAM to population health programs and specialist integration.
- Provide compliance protection while enabling more innovative incentive design.
- Align incentives while leveraging providers across the continuum of care.
Characteristics of a Successful VBE
From experience building VBEs across the country, several design features consistently determine success:
- Governance that empowers operators and physicians: not just symbolic roles, but real decision-making authority across clinical, operational, and financial domains.
- Physician engagement at the strategic level: physicians aren’t only delivering care; they’re shaping care models, pathways, and compensation structures.
- Clarity of purpose: successful VBEs start with a defined focus (e.g., reduce readmissions, improve transitions of care) for a target population rather than vague goals like “do value-based care better” or “saving money for the hospital system.”
- Integrated data and reporting: operators need real-time insights across settings to manage risk and measure outcomes.
- Layering, not replacing, compliance functions: VBEs don’t necessarily eliminate the need for fair market value and commercial reasonableness to address both Stark and Anti-Kickback regulations; they add a flexible layer for innovation where the focus shifts from valuing inputs to valuing outputs.
VBEs and TEAM: Practical Application for Hospitals
The TEAM model will expose hospitals to two-sided financial risk for five common surgical procedures in an effort to save an estimated $481 million. To succeed, hospitals must:
- Build multi-disciplinary governance that includes surgeons, post-acute partners, compliance, IT, leadership, and operators.
- Use VBEs as the hub to house TEAM initiatives governing episode quality, cost management, and patient transitions.
- Leverage VBEs to align compensation with value by tying physician incentives not to referrals or volume, but to measurable episode outcomes.
- Expand care coordination beyond the four walls: VBEs make it possible to formally engage community partners, SNFs, and home health in ways traditional models cannot.
In short: without a VBE, TEAM risks becoming a compliance exercise; with a VBE, it becomes a strategic accelerator!
Action Steps for Health System Leaders
- Assess Readiness: Audit existing physician alignment models and identify gaps that VBEs can address.
- Engage Physicians Early: Co-design VBE objectives with physicians to drive buy-in and sustainability.
- Engage Executives and Service Line Leaders: VBEs require key decision-makers to expedite decisions and operators are critical to identify daily barriers.
- Prioritize Use Cases: Start with focused initiatives before scaling.
- Invest in Data Infrastructure: Ensure the VBE can capture, share, and act on clinical and financial data.
- Build for Flexibility: Use the VBE to position for TEAM today, but population health and future specialty models tomorrow.
Conclusion: VBEs as the New Operating Model
VBEs are not a magic bullet, golden ticket, or a get out of jail free card. They are, however, the most adaptable structure available to hospitals today to align stakeholders, manage financial risk, and redesign care delivery. With TEAM as a catalyst, VBEs can shift from an underutilized regulatory exception to the enterprise model that redefines hospital-physician alignment for the future.
If you have questions about Value-Based Enterprises, where to begin, or how to implement these models, please contact our team of experts at Pinnacle Healthcare Consulting today!
