Redesigning Value-Based Payment Models to Support Substance Use Treatment Systems

Although value-based payment models are increasingly prevalent across physical health systems, there is limited experience and understanding of how they apply to substance use disorder (SUD) and other behavioral health systems. As SUD systems have largely been excluded from value-based designs, existing metrics that determine value for SUD are skewed toward medical and hospital system outcomes, such as emergency department visits and hospital readmissions. As a result, these metrics overlook the foundational financial, operational, and clinical functions that SUD agencies need to thrive in today's health landscape. To bridge this gap, the Los Angeles County Department of Public Health's Substance Abuse Prevention and Control (SAPC) Bureau - which is responsible for the specialty SUD treatment system for the region's 3.5 million Medicaid beneficiaries - launched its value-based strategy in July 2023. In doing so, SAPC became what the authors believe is the first publicly funded SUD system in California to design and move to a value-based payment model. This model combines tiered base rates with additional value-based incentive payments to facilitate quality-focused investments, growth, and sustainability. This article covers the design, implementation, and first 2 years of this planned 5-phase, 10-year program. As an evolving model, this early phase represents the beginning of the value-based continuum, in which payment is tied to higher-value care delivery, core infrastructure development, and network stabilization. After 2 years of implementation, data indicate notable progress across several areas, including increased access to care and availability of medications for addiction treatment (MAT), as well as growth in the SUD workforce. Since the launch of this value-based model, the number of unique clients served has increased by 7.3%, from 33,275 in fiscal year (FY) 2023 to 35,723 in FY 2025, and the number of clients receiving MAT has increased by 153% from the baseline of 7554 in FY 2023 to 19,123 in FY 2025. In addition, SUD workforce recruitment resulted in staff levels of 1748 (13% above baseline) and 2045 (17% above baseline) in program years 1 and 2, respectively. This workforce growth was most pronounced among clinical roles with higher training, such as licensed clinicians, increasing to 385 from 291 (32%), and certified SUD counselors, increasing to 720 in calendar year (CY) 2024 from 556 in CY 2023 (29.5%). These data points suggest an immediate impact associated with the county's value-based incentives in these areas and represent foundational shifts in the SUD treatment network as a whole, signaling the potential for a longer-term impact. These tiered base rates and this value-based incentive payment model provide a replicable framework for health systems, particularly publicly funded behavioral health systems, to use alternative payment approaches to drive system change beyond the status quo and toward high-quality, sustainable client services, while remaining grounded in the operational realities of system transformation.