Dr. Dennis Morrison is the Chief Clinical Officer at Eleos and the owner of Morrison Consulting. Previously, he has served as Chief Clinical Officer at Netsmart Technologies, CEO of Centerstone Research Institute (CRI), and CEO of Center for Behavioral Health (CBH).
If you ask 10 behavioral health leaders what they think about value-based care (VBC), you’ll probably get a long pause—and then 10 different responses. That’s because the answer is a complicated one.
On paper, VBC sounds exactly like what our field has always wanted: A payment model that rewards us for helping people get better, not just for showing up and documenting the session. But in practice, it’s a bit more nuanced than that.
Behavioral health concerns aren’t as straightforward as a broken leg you can see on an X-ray, put in a cast, and consider healed in six weeks or so. For many of the people we serve, there’s no clear moment when treatment is finished. So does value-based care really make sense in behavioral health—or are we trying to force a square peg into a round hole?
Spoiler alert: The short answer is that yes, it makes sense. But only if we’re honest about where it fits, where it doesn’t (for now or for good), and what it will take to get it right.
How We Can Define Value
A useful starting point is the basic equation:
Value = Quality ÷ Cost.
We’ve known how to calculate cost for years. What makes things challenging in behavioral health is defining and measuring quality.
To understand why all this matters, it helps to look at the three dominant payment models:
- Fee-for-Service (FFS): “Do more, make more.”
The more sessions you deliver, the more revenue you generate. Basically, you get paid for what you do, not what your patients achieve (i.e., outcomes). - Managed Care / Capitation: “Do less, make more.”
You receive a fixed amount for a population. Whatever you don’t spend on care becomes margin, so the incentive is to minimize utilization (ideally without harming people). - Value-Based Care: “Do better, make more.”
You’re rewarded (read: paid) for positive outcomes instead of the quantity of services provided.
The promise of value-based care is that it finally ties payment to what we say we value: Helping people get better. The challenge is agreeing on what “better” looks like, how to measure it, and whether it makes sense for the conditions we treat.
Why VBC is More Complicated in Behavioral Health
There’s a persistent myth that behavioral health is “not really a science,” making it too ambiguous for value-based care.
I’ve even had people tell me therapy is basically the same as talking to your bartender or your hairdresser.
As most of us in the field know, the truth is quite the opposite. For many common mental health problems, we have more data on treatment effectiveness than we do for a lot of medical procedures. Tools like the PHQ-9 and GAD-7, for instance, are designed to measure symptoms and assess the severity of depression and anxiety.
But here’s where things diverge. Medical problems are often more visible, and the treatments more tangible. You can test for strep throat and know within days whether the antibiotics worked. You can track A1C levels or blood glucose when managing diabetes. In many cases, you can point to a specific metric or moment when something is “fixed” or clearly improving.
Behavioral health doesn’t always work that way. Some conditions behave more like strep throat—time-limited, predictable, and measurable. Others resemble diabetes—lifelong, managed, and harder to measure improvement.
That’s why the real challenge in defining quality isn’t behavioral vs. medical care. It’s the difference in how we can measure improvement across acute conditions, chronic conditions, and substance use disorders (SUD).
1. Acute Behavioral Health
Acute care on the medical side of things is pretty cut-and-dried. Think back to my earlier example of a broken leg: You can see it on an X-ray, you know how to treat it, and you can reasonably determine when it will heal based on historical data.
Similarly, there are mental health issues where you should reasonably expect clients to get better and not need therapy forever—things like mild to moderate depression or common anxiety disorders. We have strong evidence-based techniques and clear expectations around these diagnoses, like 10-15 sessions of cognitive behavior therapy (CBT) to resolve panic disorder.
This is where I see behavioral health working well from a value-based perspective. Like a SMART goal, the episode and treatment are time-bound. The outcomes are measurable. You can structure value-based contracts around that.
2. Chronic Mental Health Conditions
Where the quality side of things gets a little murky is in chronic conditions. Much like hypertension or diabetes, there are mental health conditions like schizophrenia and bipolar disorder, for which there is no cure. The goal for all chronic problems is maintenance and improved functioning, not “fixing” the problem. Treatment is not time-limited—you’re never really “done.”
In this context, quality isn’t determined by when the symptoms are gone. For chronic mental illnesses, it’s things like staying housed, staying out of emergency rooms or inpatient facilities, maintaining relationships, staying employed, etc.
You can build value-based models around chronic behavioral health, but the timeframe is long, and annual contracts struggle to capture lifetime value. That makes chronic care much tougher to plug into traditional VBC metrics… for now.
But the future may look very different.
The growing integration of primary care and behavioral health creates a more complete picture of a person’s health and allows teams to coordinate around shared outcomes. Perhaps not too surprising is that care coordination for people with chronic mental illnesses is often focused on concurrent chronic medical illnesses like heart disease, hypertension, diabetes, and metabolic syndrome. At the same time, breakthroughs in genomics, digital therapeutics (DTx), digital phenotyping, neurological interventions, and AI technologies hold real promise for more targeted, personalized treatment.
As these innovations mature, we may be able to define improvement in chronic mental health conditions with far more clarity and consistency than we can today. Measurement tools will become more standardized. Data will flow more easily across care teams. And quality metrics for chronic behavioral health will hopefully evolve toward more holistic indicators of stability, function, and quality of life. With improved integration of primary and behavioral health, we will likely see the focus shift from chronic mental illness to chronic illness.
In other words, care for chronic behavioral health problems may never be “time-limited,” but our ability to measure meaningful change is poised to get much stronger.
3. Substance Use Disorders (SUD)
SUD is a kind of crossover between acute and chronic behavioral health conditions. Detox or getting sober is more of an acute event, but changing one’s lifestyle is a never-ending process.
This combination of acute and chronic problems leads to misidentifying what “success” looks like. For instance, if you build a VBC model for SUD and your only outcome metric is “completed detox,” you’re measuring the first step of recovery, not the outcome that matters in the long term.
Effective value-based models for SUD need to instead look at:
- Sustained abstinence or reduced use/risk,
- Engagement in ongoing care, and
- Housing, employment, and other functional markers.
Again, not impossible—but more complex than tracking whether a broken leg has healed.
When the Data Works, So Does VBC
These differences are exactly why measuring quality across behavioral health can feel messy. But there are scenarios where value-based care works really well.
When I ran a mental health center, we had a very active research function. We did some of the early work showing that you could implement evidence-based treatments in community mental health settings for a variety of behavioral health problems, including anxiety and depression, with long-lasting results.
We got so good at treating panic disorders that we approached one of our payers and said, essentially, “Send us all your panic disorder clients. If they don’t get better, don’t pay us.”
Our plan was to set a case rate for an episode of treatment for panic disorder based on our known success rate of 80% and the length of treatment of 12 sessions. That rate would cover the lost revenue of the 20% that did not respond to treatment. This was in the year 2000 when we proposed this, and it was a very early example of value-based care. The payer ultimately couldn’t accept that arrangement because their funding model didn’t allow it, but we were ready to take on that risk. Why? Because we had the data to back it up.
That’s the beauty—and risk—of a value-based model. It’s fundamentally different from fee-for-service, where you’re getting paid for trying, not for outcomes. With VBC, you’re instead asking to be paid for results, and you’re explicitly accepting the risk that you won’t always deliver them.
No treatment is 100% effective, but if you know how much it will cost to deliver the service and you know the percentage of people who will respond to the treatment, it’s not too difficult to build a value-based care model for that population.
Mixed Contracts as a Practical Path Forward
At this point, a reasonable question is: If value-based care fits some conditions better than others, do we have to choose one model for everything?
No, certainly not.
Most payers will let you carve out specific populations for different payment models. Here are some examples:
- Value-based or capitated contracts for a defined set of diagnoses. These are acute problems that most likely can be treated in a prescribed timeframe. We know what the evidence says, we know how long treatment typically takes, and we can measure improvement reliably.
- Even for chronic conditions, there is an opportunity for value-based contracting. A patient is always going to have diabetes, just like a client is always going to have schizophrenia. But in both cases, “success” is sometimes measured in things that do NOT happen. Preventing repeated visits to the emergency department or avoiding hospitalizations are both clinically and financially desirable outcomes. These can only happen if the chronic problem is being well-managed.
For those diagnostic groups not conducive to value-based contracts, fee-for-service is still an option. That’s where mixed contracts shine. You place value-based bets where the evidence is strongest and use other models where the picture is less clear.
Why We Aren’t “There” Yet (Even Though VBC Makes Sense)
If you’ve been in healthcare for a while, you’ve probably been hearing some version of “we’re moving to value-based care” for a decade or more. And yet, here we are—still talking about it.
Despite the slow movement, the tide is turning. According to The State and Science of Value-Based Care 2025, more than 60% of organizations have increased their participation in value-based programs.
That tells me payers are pushing, and providers are positioning themselves for what comes next. But, from my perspective, there are four big reasons why behavioral health has been slower to shift.
1. The problem isn’t that we can’t measure quality. It’s that we haven’t agreed on what to measure.
It may be more difficult to measure outcomes in behavioral health than in primary care, but it’s not impossible. What we lack is agreement on standard measures.
For example, we have a plethora of depression and anxiety measures, but we don’t have a consensus on what is the “right” one to tell us when somebody is no longer depressed. We haven’t standardized what counts as quality across conditions and payers—making it hard to build contracts around it.
One development that will help us close that gap is the ongoing integration of primary and behavioral healthcare. We already know that when these systems work together, outcomes improve and costs go down. As integration accelerates, so will our ability to define quality using shared frameworks instead of isolated ones.
2. From my experience, behavioral health leaders tend to be risk-averse.
Moving from FFS to VBC means you’re no longer guaranteed revenue—and that can be scary for behavioral health leaders. There is a higher level of accountability in VBC because you may not get paid if outcomes aren’t met.
That’s uncomfortable—especially if:
- Your data is fragmented or unreliable,
- You can’t confidently forecast performance, or
- You don’t have a good way to monitor or measure quality.
Leaders are understandably cautious about taking on financial risk when their systems and data aren’t ready.
3. Technology and data infrastructure still lag behind.
Even when leaders want to pursue value-based care, most organizations simply don’t have the systems needed to support it. Fee-for-service can get by with the basics—an EHR, a billing system, and notes that meet minimum documentation requirements.
VBC is different. It depends on the ability to track whether people are getting better, what it costs you to deliver care—and to do so consistently, reliably, and at scale.
You have to measure “stuff.” At the very least, you must know what it costs you to deliver a unit of service. This is important for FFS contracts, but it is absolutely necessary for risk-based contracts like capitation, case rates, and value-based contracts. Activity-Based Costing (ABC) is arguably the most common way of measuring the cost of care, but there are other methods as well.
To succeed in VBC, organizations need:
- Clean, structured clinical documentation,
- A way to routinely collect measurement data,
- A place for that data to live,
- Business intelligence tools to analyze trends, and
- Care teams who know how to use that data day-to-day.
AI tools like Eleos can certainly help with the documentation aspect by:
- Helping clinicians produce more compliant notes:
- Producing cleaner, more structured notes that align with payer expectations;
- Reducing the administrative load, giving clinicians more time and presence in session;
- Capturing session-level insights like key themes, progress discussed, and use of evidence-based techniques; and
- Providing consistent language that helps demonstrate quality when payers audit care.
- Helping quality improvement and auditing staff:
- Auditing 100% of notes for compliance;
- Identifying those with the highest probability of risk; and
- Allowing QI professionals to focus on the highest risk notes based on six indicators.
All of that helps improve care quality and client outcomes.
And organizations know it. Nearly 50% of providers report investing in data analytics (and AI specifically) to prepare for more advanced value-based models. The shift isn’t theoretical anymore—leaders are actively building the capabilities they know they’ll need in the future.
Learn more about how Eleos can support your organization’s journey toward value-based care.
4. Clinicians weren’t trained for this—and the workflow shift is significant.
Even with the right data systems, value-based care hinges on clinicians who can use data effectively. That’s a big ask in a field where most providers weren’t trained to manage caseloads this way—and they’re already stretched thin with heavy administrative burdens.
For decades, FFS shaped clinician habits. An old (if flawed) rule of thumb was, “You know when someone is done with therapy when they stop coming.”
In VBC, that isn’t enough. Clinicians need to:
- Set clear, evidence-based expectations for treatment,
- Track progress session by session,
- Know when to step care up or down, and
- Discharge based on improvement—not attendance.
That requires new skills, new workflows, and new mindsets. Without that shift—and without leadership reinforcing it—clinicians can’t confidently manage outcomes or operate within a VBC model. And without clinician readiness, even the best measurement tools or contracts won’t move the needle.
Why Behavioral Health Can’t Opt Out of the VBC Conversation
Some years, everything feels like business as usual—contracts renew, funding looks stable, and it’s easy to keep doing what you’ve always done.
Other years… not so smooth. And let’s just say H.R.1 (aka OBBBA) has given everyone a reason to take a fresh look at their revenue strategy.
As I’ve discussed a few times on the No Notes podcast, this is the time to think creatively about how you do your business.
A contract you declined two years ago may now be the opportunity your organization needs to diversify or stabilize revenue. And sometimes, payers come to you—but only organizations prepared for VBC will be ready to say yes.
What Leaders Can Do Now to Prepare
Whether you adopt value-based care because it’s strategically smart or because a crisis forces your hand, the organizations that succeed will be the ones who have laid the groundwork.
That means strengthening the capabilities VBC depends on:
- Measurement-informed care. Routinely collect data using standardized measures—not because payers demand it (though they will), but because it sharpens clinical decision-making, improves care quality, and prepares you for the future.
- Data infrastructure you can trust. Invest in tools that help your team produce clean, structured documentation while generating data that leaders can measure and act on.
- Clinicians who are equipped to use data. Most weren’t trained for data-driven caseload management. They’ll need support, coaching, and tools that make tracking progress feel natural, not burdensome.
- Care coordination across disciplines. Especially for people with complex needs—co-occurring disorders, unstable housing, chronic illness—value depends on care that doesn’t happen in silos. The integration of primary care and behavioral health is already underway and will continue to be valuable in the future.
- A willingness to think differently about risk. VBC requires being prepared, informed, and willing to bet on the quality you deliver when the data supports it. Stratify risk based on populations, diagnosis, and other factors.
Value-based care can work in behavioral health—but it won’t happen overnight.
We need to start building the data-driven infrastructure to support it and prepare our teams to practice differently. The sooner organizations begin that work, the better positioned they’ll be—no matter what lies ahead.
For more on my thoughts about the future of behavioral health, download my executive report.
