Successful value-based care initiatives have proven they can deliver better care for patients at lower costs and can be attractive to individual physicians, clinicians, and delivery systems. As a result, policymakers have set goals to expand provider participation in these initiatives.

Participating in value-based care initiatives requires an investment on the part of providers due to transition costs. Fixed start-up costs, a multi-year lag between start-up and earnings, and the possibility of failure make investing in a transition to value-based care a risk-reward proposition for providers. Providers have successfully adopted “build,” “buy,” and “partner” strategies to navigate the transition, realize better outcomes, and produce overall savings.

Understanding the size and nature of transition costs is a key question for policymakers aiming to promote value-based care. While previous analyses have estimated the cost of transitioning to value-based care, this white paper provides a qualitative description of the three main types of transition costs: care delivery costs, start-up administrative costs, and financial costs…

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