Moving from paying for volume to paying for value is a journey, not a switch. The LAN payment framework offers a shared map of the steps, and a realistic sense of what each one asks of providers and payers.
Almost every conversation about value-based care eventually runs into the same obstacle: the underlying payment system. As long as organizations are paid a fee for each service they deliver, the math rewards doing more, not doing better. Reform, then, is largely a question of how money changes hands. The challenge is that there is no single “value-based” payment model, but a spectrum of arrangements that shift accountability gradually from the payer to the provider.
A shared map
To make that spectrum legible, the Health Care Payment Learning and Action Network (LAN), a CMS-supported effort, sorts payment models into four broad categories. The framework is a guidepost rather than a rulebook: real contracts often blend features of several categories, so models are classified by their most advanced element rather than their average. Used carefully, it lets payers, states, and provider groups talk about where an arrangement actually sits, and where it might go next.
The four steps
Category 1: fee-for-service with no link to quality. The traditional starting point: fee schedules, percentage-of-charges payments, and hospital DRGs. Payment reflects activity and nothing else.
Category 2: fee-for-service linked to quality. Still volume-based at the core, but with adjustments layered on top: foundational payments that fund care managers and health IT, incentives to report quality data, and pay-for-performance bonuses or penalties tied to defined targets. These nudge behavior without changing the fundamental incentive.
Category 3: alternative models built on a fee-for-service chassis. Here the incentives get sharper. Shared-savings arrangements let providers keep part of the savings they generate; more advanced versions add downside risk, putting providers on the hook when costs exceed a budget. Well-designed contracts let strong quality performance soften potential losses, signaling that savings cannot come at the expense of care.
Category 4: population-based payment. The model breaks free of fee-for-service entirely. Providers receive a prospective, often per-member payment to cover a condition, a service line, or a whole population’s needs, with quality adjusting future payments up or down. At its most integrated, finance and delivery sit inside one organization, aligning incentives that elsewhere pull against each other.
Why the journey is gradual
Each step up this ladder demands more of an organization: better data, real care management, the actuarial and financial capacity to bear risk, and the governance to act on all three. Pushing a provider into downside risk before it can manage a population is a recipe for failure that discredits the whole enterprise. The most durable reforms meet organizations where they are and build the capabilities that make the next step survivable. The framework’s value is not that it ranks models, but that it makes the path, and the readiness each stage requires, explicit.