Value Based Purchasing

Why and how did this come about?  What are the goals?  What is to be accomplished?

These are often asked questions about Value Based Purchasing (VBP). The answers are often mired in jargon, making it difficult for most to truly look at the process from a strategic viewpoint.  The goal of this informational article is to provide concise answers to support the continued development of your organizational roadmap toward quality and safety.  This will be the first of several articles, each with the intent of providing you with further knowledge on this initiative.

The Why and How

Long before the Affordable Care Act (ACA), it was obvious that the current state of healthcare in the United States was more reactive than proactive, and the Prospective Payment System was not financially sustainable.  Prior to 2011, Medicare payments to providers were tied only to volume, rewarding providers based on how many tests they ran, how many patients they saw or how many procedures they did, regardless of whether or not the service(s) helped patients.

The hospital Value Based Purchasing program was an initiative of the Centers of Medicare and Medicaid Services (CMS) developed to reward acute care hospitals for the quality of care they provide to patients with Medicare.  This initiative impacts more than 3000 hospitals.  Value Based Purchasing is a program that hopes to assist providers transition from a fee-for-service model to one linked to quality rather than quantity.  Organizations are rewarded for striking a balance between high quality and lower costs.  The hope is that providers and organizations will be inspired to become not just thrifty, but innovative as well.

 Health and Human Services Secretary Sylvia Mathews Burwell indicated at the inception of VBP this was the first time in the history of the Medicare program that measurable goals and timelines were established with the impetus of paying providers based on quality rather than quantity.  Rewards are based on the quality of care, how closely best clinical practice is followed and what is done to enhance the patient’s experience during the hospital stay.

The Goal

The goal quite simply is to raise the bar on quality and the patient perception of care.  CMS wishes to reward value and care coordination, rather than volume and care duplication.  The expectation is that VBP will improve the manner in which providers are reimbursed – quality and value instead of quantity.

Another major goal is to strengthen care delivery by better integrating and coordinating care for patients, and to make information more readily available to the consumer and provider.  In doing so, this will improve the coordination and integration of healthcare, engage patients more into the decision-making process with a priority on prevention and wellness.

How is this to be Accomplished

Incentive payments are based on how well the organization performs on the measures in the four domains (discussed below), and how much they improve when compared to their performance baseline.  As more requirements are implemented and the goals elevated, it is readily evident that just sustaining is not sufficient.  Organizations must progressively get better and consistently improve results – continual improvement must be part of the organizational fabric.

Toby Cosgrove, M.D. was quoted in the Harvard Business Review for his description of VBP; “This is a breakthrough that will change the face of medicine.  The pay-for-performance model will lower health care costs, improve quality and outcomes and eventually affect every patient.  But the road ahead is difficult as many oppose the plan.  Healthcare is evolving from a proficiency-based art to a data-driven science.”

There are four domains used to measure performance.  Those domains are: Outcomes, Patient Experience (HCAHPS), Clinical Process of Care Measures (Core Measures), and Efficiency Measures.

The Studer Group reported the number of measures taken into account by Medicare when considering bonuses or penalties will increase from 20 to 26 this year.  There was a weight increase by 5% in the Outcome domain moving from 25% to 30%, a decrease in the Clinical Process domain from 40% to 20%, the Patient Experience domain remained steady at 30% and the Efficiency domain was added and weighted at 20%.

In the Patient Experience domain, there is continual pressure to perform better and the percent of threshold increased in all composites.  In the Clinical Process domain, almost all national benchmarks are at 100%, making it imperative to get these correct each time to receive optimal reimbursement.

Hopefully, this has provided you with concise information regarding Value Based Purchasing.  Next month ICH will share information on the Better Care - Smarter Spending - Healthier People initiative that is tied to VPB, and the impact VBP has had on healthcare delivery to date.

Elizabeth York