What Are Alternative Delivery Models?

Key Takeaways

• Alternative healthcare delivery models, like value-based care, direct primary care, and virtual-first plans, change how care is organized and paid for.
• Provider performance still varies widely within any given model, with studies finding bigger differences in spending across doctors in the same hospital than between hospitals.
• Evaluate any delivery model on whether it can measure provider-level quality and cost, then steer employees toward the best providers.

Employers project a median 9% increase in healthcare costs for 2026, according to the Business Group on Health's annual strategy survey. A big part of the problem is fee-for-service medicine, which pays for volume no matter the results. In response, many are evaluating alternative healthcare delivery models — including value-based care, direct primary care, and virtual-first plans — as ways to improve outcomes and control spend.

But a delivery model only changes how care is organized and paid for. Whether it actually delivers value comes down to a factor that rarely shows up in the vendor pitch: the individual provider your employee ends up seeing.

Alternative healthcare delivery models explained

Alternative healthcare delivery models are strategies for organizing and paying for care that differ from the traditional fee-for-service PPO structure. Rather than paying each provider separately for each service, they are typically built around care coordination, prevention, or a more direct relationship between patient and physician. Researchers use the umbrella term alternative delivery arrangements for these changes to how, where, and by whom care is delivered. The American Hospital Association's overview of the most common alternative care delivery models covers accountable care organizations, medical homes, integrated service lines, and provider-sponsored health plans. Employer benefits strategies add direct primary care and virtual-first plans to the list.

All of these models pursue better outcomes and lower cost by changing how care is organized, rather than simply negotiating lower prices for the same fragmented care. Three models come up most often when employers weigh their options.

Value-based care and accountable care organizations (ACOs)

Value-based care ties provider payment to patient outcomes and cost efficiency instead of the volume of services delivered. Providers earn more when quality targets are met and total spending stays under a benchmark, and they can share the loss when spending runs over. Accountable care organizations (ACOs) put that principle into practice as networks of physicians, hospitals, and other providers that share responsibility for the cost and quality of care for a defined patient population. Medicare's Shared Savings Program is the largest example, with 476 ACOs responsible for 10.3 million beneficiaries in 2024.

Direct primary care and concierge medicine

Direct primary care replaces insurance billing for primary care with a flat membership fee. Employers or employees pay a monthly or annual amount directly to a physician or practice, and in return employees get faster access, longer visits, and a primary care relationship that never touches a claims system. Concierge medicine runs on the same membership logic at a higher price point, usually layered on top of insurance rather than replacing it. Both bet that a stronger primary care relationship prevents expensive downstream care.

Virtual-first and telehealth-led care

Virtual-first plans make a telehealth relationship the front door to the health system. Employees start with a virtual primary care visit for triage, ongoing management, and coordination, then move to in-person care when they need it. For employers, the draw is that employees in any location get seen quickly and the plan keeps a single point of coordination for whatever comes next.

Here's how the three models compare:

Why the delivery model matters less than the provider within it

Adopting an alternative delivery model has become a mainstream benefits strategy. In KFF's 2025 Employer Health Benefits Survey, 30% of firms with 50 or more workers that offer health benefits contract for virtual primary care services, and that share rises to 45% among firms with 1,000 or more workers. The Business Group on Health reports that 35% of large employers now offer primary care through on-site or near-site health centers.

Along the way, though, a basic distinction has gotten lost. Choosing a delivery model changes how care is organized and paid for. It does not, by itself, guarantee that an employee sees a high-quality provider. Every model above still comes down to an individual physician's decisions: what to test, when to refer, whether to operate. And physician performance varies widely, even inside coordinated and value-based structures.

A JAMA Internal Medicine analysis of Medicare hospitalizations found that spending varied more across physicians within the same hospital than it did across hospitals, with no better mortality or readmission outcomes to show for the extra spending. The same pattern shows up at the organizational level. Even in the Medicare Shared Savings Program's record 2024 performance year, one in four ACOs failed to earn shared savings. Same model, same incentives, very different results.

This is what employers miss. An alternative delivery model can feel like a solution to the quality problem because its pitch is written in quality language: coordination, accountability, outcomes. What it actually changes is the payment and coordination structure. Who the employee ends up seeing is still largely left to chance, and neither a system's size nor its brand name tells you much about quality. The research has the same blind spot. One analysis of 531 systematic reviews on alternative delivery models found that only a third included any economic evaluation, which means the value of many of these models is simply unknown. Meanwhile, provider-level variation in cost and quality remains one of the central drivers of employer healthcare spending.

What to look for when evaluating any alternative model

Whichever model is on the table, the screening question is the same. Does it include a way to measure and steer toward the specific providers who perform best within it?

In practice, that means asking for provider-level quality and cost data, not plan-level or model-level averages. A virtual-first vendor can report strong satisfaction scores while its individual clinicians vary widely in how they refer. An ACO can post overall savings while some of its physicians order far more low-value care than others. Averages hide exactly the variation that determines what an episode of care costs and how it turns out. High-performance networks are built on this insight, narrowing access to providers with measured results. And you can apply the same standard to any model already in place.

A few questions worth asking any vendor or plan partner:

• Can you show quality and cost performance for individual physicians, not just the program as a whole?
• Does the model actively steer patients toward its best-performing providers, or merely include them?
• Do the incentives reach employees at the moment they choose a doctor?
  
  

Garner is one example of what that standard looks like in practice. It uses proprietary provider-level data to identify the best-performing doctors within an employer's existing network, then pairs that data with financial incentives that steer care to those doctors, regardless of which underlying model or network is in place. It's the same logic behind shifting demand toward the best-performing doctors across the system. When patients change who they see, cost and quality change with them.

The one question every delivery model should answer

The delivery model determines how care is organized and paid for. Provider quality determines what the care costs and how the patient does. Keep those two separate when evaluating anything new, and the decision gets simpler. Ask whether the model can show provider-level performance, not just model-level promises. If it can't, it may still be worth adopting for access or experience reasons, but it isn't a quality strategy.

Whatever delivery model your plan uses, the provider still matters most. Book a demo to see how Garner surfaces top-performing providers in your existing plan.

FAQs

What is an alternative healthcare delivery model?

An alternative healthcare delivery model is an approach to organizing and paying for care that departs from the traditional fee-for-service PPO structure, typically by emphasizing coordination, prevention, or a more direct provider relationship. Common examples include value-based care arrangements, accountable care organizations, direct primary care, and virtual-first plans. The shared goal is better outcomes at lower cost through changing how care is organized rather than negotiating lower prices for the same services.

What is the difference between value-based care and fee-for-service care?

Fee-for-service care pays providers for each visit, test, or procedure, so revenue rises with volume regardless of results. Value-based care ties payment to patient outcomes and cost efficiency. Providers earn more when quality targets are met and total spending stays below a benchmark, and they share the loss when spending runs over. In practice, most value-based arrangements still pay fee-for-service underneath and reconcile spending against targets afterward.

Do alternative delivery models actually lower healthcare costs for employers?

Sometimes, and usually modestly. The Congressional Budget Office estimates that Medicare ACOs reduce spending by 1 – 2% on average relative to trend, and evidence for other models is mixed, since most published evaluations never measured cost at all. Savings depend less on the model itself than on the providers practicing within it, which is why provider-level measurement belongs in any evaluation.

Does the delivery model guarantee better quality of care?

No. A delivery model changes payment and coordination structures, but the quality of care still depends on the individual physician an employee sees. Performance differs from one physician to the next within the same ACO, virtual-first plan, or health system, and studies of within-organization variation find larger differences in spending across physicians in the same hospital than between hospitals. A model improves the odds of quality only when it measures provider performance and steers patients accordingly.