The behavioral health industry is undergoing a fundamental transformation, moving beyond the traditional fee-for-service model toward value-based care. At the heart of this shift are two closely intertwined concepts: value-based care and parity. Each drives the other forward, but both also present significant value-based care challenges behavioral health providers and patients must navigate. Understanding where things stand today—and what’s needed to move forward—is essential for providers, payers, patients, and policymakers alike.
Understanding the Interconnectedness of Value-Based Care and Parity
Value-based care is a healthcare delivery model that incentivizes providers based on patient outcomes rather than the volume of services rendered. Parity, on the other hand, is the principle that behavioral health services should be reimbursed at levels comparable to physical health services. These two concepts are deeply connected because true value-based care in behavioral health cannot be achieved without reimbursement parity. Without fair compensation, providers lack the resources to invest in quality improvements, outcome tracking, and the necessary infrastructure to support value-based models. This creates some of the most persistent value-based care challenges behavioral health organizations face.
Lauren Conaboy, vice president of national policy at Centerstone, a multi-state behavioral health and human services nonprofit, explained the challenge during a panel discussion at VALUE 2024 in Miami:
“Whether it’s parity, whether it’s the history of not getting electronic health record incentives … that have put behavioral health behind the medical side, we need to level up to a point where the industry has a more fiscally healthy starting point and foundation to move into the value-based care world, whether that’s parity, or whether that’s other policy mechanisms.”
This fiscal foundation is crucial because, without it, providers and patients bear the brunt of the transition’s costs, with little assurance of fair reimbursement or return on investment. Addressing the value-based care challenges behavioral health providers face is essential to build that foundation.
The Funding Gap: A Barrier to Progress
A 2019 Milliman study revealed the extent of the reimbursement disparity between physical and behavioral health providers. On average, physical health providers are paid 17% to 24% more for office visits than their behavioral health counterparts, based on the Medicare Physician Fee Schedule. This funding gap undermines the financial viability of behavioral health practices, limiting their ability to invest in electronic health records, outcome measurement tools, and other innovations that value-based care models demand. Such financial constraints are at the core of value-based care challenges behavioral health organizations must overcome.
Federal regulators have recognized the importance of parity. The Biden administration is expected to release final rules on parity enforcement in 2024, aiming to move the law from theory to practice. However, the extended proposal period for these rules ended over 170 days ago, and progress has stalled, leaving providers in a limbo.
Meanwhile, several legal cases have surfaced challenging payer practices alleged to violate parity principles or related federal laws. Though parity laws themselves do not provide a direct mechanism for suing health plans, courts are increasingly testing ways to hold payers accountable for discriminatory treatment in coverage. This evolving legal landscape reflects the complexity and urgency of enforcing parity and alleviating ongoing value-based care challenges behavioral health stakeholders encounter.
Bragg Hemme, behavioral health co-chair at the law firm Polsinelli, explained the systemic tension:
“We’re in this space where we’re focused on how to decrease care costs by denying care. That’s not working in the courts of law; it’s not working from a parity standpoint. I assume it’s not working from a provider standpoint or family standpoint.”
Until this tension is resolved, both innovation and fairness will remain elusive, perpetuating the value-based care challenges behavioral health providers and patients must endure.
The Real-World Impact on Providers and Patients
The practical effects of these systemic issues are keenly felt by behavioral health providers, many of whom operate on razor-thin margins. Carrie Singer, CEO of Quince Orchard Psychotherapy, a Maryland-based outpatient mental health provider with over 40 clinicians, highlighted the unfair financial pressures on practices:
“It didn’t feel fair to put the onus on the patient and on the practice when the margins are already razor thin. There is no cash flow to invest in these tools, hoping that later on we might qualify for some kind of incentive-based payment.”
Investing in the technology and services needed to track patient outcomes or implement measurement-based care requires significant upfront capital—capital many providers simply do not have. This challenge is a major part of the value-based care challenges behavioral health providers struggle with.
Singer emphasized a key principle:
“If payers want the outcomes, they should facilitate outcome delivery.”
Yet, despite the availability of billing codes acknowledging measurement-based care, providers often find these codes ineffective in generating meaningful payments. Centerstone’s experience is illustrative:
In a pilot study funded by a federal grant, Centerstone billed 550 claims with add-on codes for measurement-based care. Only 5% were paid, and those payments ranged from just $1 to $5 per claim.
Lauren Conaboy noted bluntly:
“From our perspective, there’s not a business case. Our multi-state status allows us to leverage federal grants to finance this. We are going into it and we’re saying the business case, for us, is the mission—that we want to deliver the highest quality of care possible to our patients.”
For many providers, mission-driven care is not enough to sustain costly innovations without aligned incentives and investment. This gap exemplifies the ongoing value-based care challenges behavioral health organizations face in shifting their payment and care delivery models.
The Stakes for Startups and Innovation
Startups and early-stage behavioral health companies face even greater hurdles. Time is a critical resource, and the prolonged industry uncertainty around value-based care contracts can be fatal for new entrants struggling with value-based care challenges behavioral health providers face every day.
Julia Bernstein, COO of Brightside Health, a virtual mental health company, described the challenges startups face:
“For an early-stage company, time is money. You’re on the backfoot trying to work through what the claims data are so that I can make a case for a performance-based contract.”
She called for payers and industry associations to take responsibility for streamlining and standardizing the process to help providers more easily navigate contracting for value-based care. Without such leadership, startups risk being caught in a complex, slow-moving system that stifles innovation before it can scale—one of the toughest value-based care challenges behavioral health innovators must surmount.
What Needs to Happen Next
The path forward demands coordinated action across the healthcare ecosystem:
- Payers and Governments Must Invest: The financial and technological infrastructure required for behavioral health to fully participate in value-based care cannot be shouldered by providers alone. Payers and governments must commit significant capital and create incentives that align with long-term outcomes to overcome entrenched value-based care challenges behavioral health systems currently face.
- Enforce Parity in Practice, Not Just Law: Finalizing and enforcing strong parity rules is essential. Legal mechanisms must support accountability, ensuring that behavioral health services receive fair treatment comparable to physical health.
- Support for Providers: Direct support for providers—especially smaller and startup organizations—is critical to ensure they can afford to invest in outcome measurement and technology upgrades without risking financial viability.
- Streamline Value-Based Care Contracting: Standardization of data, claims processes, and contracting procedures will reduce barriers and help providers transition smoothly to value-based payment models.
- Focus on Patient-Centered Outcomes: At the core, efforts must remain focused on improving patient outcomes and access to quality care, recognizing that behavioral health is a vital component of overall health.
Conclusion
Value-based care and parity are inseparable pillars necessary for advancing behavioral health beyond the constraints of fee-for-service. Achieving both requires not only legal and regulatory progress but also a significant financial commitment from payers and governments. Providers and patients should not continue to bear the disproportionate burden of transformation. Instead, the entire industry must collaborate to build a fiscally sustainable, innovative, and equitable system that truly supports behavioral health care quality and access for all.
The stakes are high—and so is the opportunity to create a system where behavioral health finally receives the parity and value-based incentives it deserves, while overcoming the persistent value-based care challenges behavioral health providers and patients currently face.
