This chapter describes the concept of “value-based” healthcare as an attempt to prioritize value (or quality) over volume (or quantity). However, it points out that the problem with fee-for-service is not that it prioritizes volume per se but that it may prioritize volume of the wrong (low-value) things. This chapter also acknowledges that “value” is difficult to define and quantify – if we are going to pay on it, how do we determine which health services are valuable for which patients? It then outlines an economic model of supplier payment that would lead to maximizing net value and discusses supply curves more in depth. The chapter discusses several forms of value-based payment, including pay-for-performance, bundled episode-based payments, and capitated population-based payments, as well as value-based insurance design. It concludes that the optimal payment mechanism may be a hybrid payment between part capitated (fixed per-patient per-month) and part fee-for-service to carve out high-value services.