Continuing the health insurance industrys march further away from fee-for-service medicine, UnitedHealth Group UnitedHealth Group (UNH) executives said this week they will increase value-based payments to doctors and hospitals by 20 percent this year to north of $43 billion.

UnitedHealth, considered a barometer for the health insurance industry given its size, is rapidly departing from the traditional fee-for-service approach that can lead to overtreatment and unnecessary medical tests and procedures. Value-based pay is tied to health outcomes, performance and quality of care provided.

We are expecting about a 20% increase in the concentration of value-based reimbursement, Dan Schumacher, chief financial officer of UnitedHealths UnitedHealthcare subsidiary, told Wall Street analysts on the companys fourth-quarter and 2014 full-year earnings call earlier this week. We ended the year at about $36 billion of spend in value-based arrangements and were looking to drive that north of $43 billion in 2015.

UnitedHealths pronouncements are in keeping with its previously stated commitment to increase payments that are tied to value-based arrangements to $65 billion by the end of 2018.

Value-based payments come in a variety of forms. They include: pay-for -performance programs, patient-centered medical homes and accountable care organizations, a rapidly emerging care delivery system that rewards doctors and hospitals for working together to improve quality and rein in costs. UnitedHealth said it is generating 1 percent to 6 percent in savings from its various value-based reimbursement approaches.

Once rolled out by commercial and government insurers on a pilot basis, they are quickly becoming the norm. The Centers for Medicare and Medicaid Services said 20 percent of its payments are no longer fee-for-service based for providers reimbursed by the Medicare health insurance program for the elderly, a spokesman confirmed to Forbes this week.

As insurance companies report their fourth quarter earnings in the next two weeks, look for Aetna Aetna (AET), Cigna Cigna (CI), Humana (HUM) and others to provide updates on their value-based contracting for this year.

The structure actually drives volume towards the better providers that enter into these performance contracts, UnitedHealth chief executive Stephen Hemsley said earlier this week. Were progressing these contracts into more sophisticated forms where theyre actually taking on even greater performance responsibility over time. Wondering how the move away from fee-for-service medicine will affect your health care? The Forbes eBookInside Obamacare: The Fix For Americas Ailing Health Care Systemanswers that question and more. Available nowat AmazonandApple.

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UnitedHealth's $43 Billion Exit From Fee-For-Service Medicine