Marcia Guida James, MS, MBA; Margaret E. O’Kane, MPH; Peter Salgo, MD; and Jed Weissberg, MD
Value-based purchasing (VBP) can foster quality improvement throughout the healthcare system. VBP principles had traction years before the PPACA and now, private and public VBP programs cover about 50 million lives. This module explores the definition of VBP and the links between VBP, quality, and the quality enterprise.Value-Based Purchasing Defined: A Radical Departure From Fee-for-Service
The definition of VBP can be introduced by contrasting it with the traditional FFS model. FFS pays based on quantity of services. VBP pays based on outcomes, with built-in incentives and transparency throughout the system. VBP thereby holds providers accountable for the quality and cost of their services.
The implications of transitioning from FFS to VBP are significant. For example, nearly 75% of services to Medicare beneficiaries are paid via FFS, and Medicare represents about 40% of the payer mix for the average hospital. According to projections, VBP payment reform will reduce Medicare spending by approximately $214 billion over the next 10 years.The 6 Key Features of Value-Based Purchasing
The key features of VBP, all aligned with the quality enterprise, are discussed below.1. Standardized measurements
Outcomes are crucial in VBP. Therefore, how measuring standards are set, and who sets the standards, matters. Typically, each purchaser devises its own standards, which may or may not match standards set by outside organizations such as NCQA. This multiplicity conflicts with goals to create a coordinated system and improve population health. The reform legislation aims to standardize measurements.2. Data collection
Interoperable HIT is crucial to allow systemwide data sharing.3. Publicly reported results
Kaiser Permanente reports on the performance of clinicians, including nurses and pharmacists, quarterly. Kaiser Permanente’s self-reporting, although atypical, is worth emulating, for several reasons. Measurement and reporting are essential to quality improvement, and require a team mentality involving collaboration and trust. Team members can embrace shared accountability because they will practice to the level of their preparation.4. Reforming the payment system to reward quality, value, and ongoing improvement
VBP supports incentives for interventions known to deliver better value. Providers are paid more for reaching or exceeding quality measures or operational thresholds. For example:
Humana, a private plan, allows physicians to share in cost savings.
For Community Care of North Carolina’s (CCNC’s) 1.4 million managed Medicaid patients, each network receives an enhanced per-member per-month payment for coordinating care. These payments are eligible for federal matching funds, and should also qualify for an “enhanced match” under the PPACA. A 90% “enhanced match” is made available to the states under the “Health Homes for Enrollees with Chronic Conditions” provisions of the PPACA.
VBP also involves negative incentives, penalizing inappropriate or unnecessary services. For example, Medicare will no longer pay to correct HACs (hospital-acquired conditions that could reasonably have been prevented through the application of evidence-based guidelines). Negative incentives are controversial and often unwelcome, but they can force rethinking of old ideas and produce positive changes.
For example, hospitals are motivated to discharge intensive care unit patients; otherwise, length of stay increases and costs skyrocket. Many believe that a certain readmission or “bounceback” rate is inevitable. Payers commonly review discharges retrospectively and consider premature discharge a non-compensable mistake. However, the bounceback rate might not be attributable to poor judgment, but to insufficient post-discharge coordination and monitoring—problems the quality enterprise is intended to address.
At the Columbia University Medical Center in New York City, decision makers refused to accept a 1% to 2% tolerance rate for hospital-acquired infections (HAIs), and HAIs have been eliminated almost entirely. When a hospital team at Kaiser Permanente complained about the difficulty in handling HAIs, they were told that other Kaiser Permanente teams had reported no HAIs in 18 months. Ms O’Kane concluded: “Fifteen years ago, most people believed that HACs couldn’t be helped. They were flat wrong.”5. Engaging purchasers/consumers
VBP incentives must be allocated to providers and patients. “Consumers must share responsibility for their own health status,” said Ms James. The consumer’s role involves reporting their results and experiences with the healthcare system, and otherwise contributing to the quality dialogue. Ms O’Kane noted that when NCQA discusses quality measurement, consumers are represented (via organizations such as AARP, the National Partnership for Women and Families, and others) and provide input on standards.
To engage consumers, it must also be recognized that consumers define quality differently from providers. While providers typically focus on outcomes, consumers usually assume good outcomes; instead, consumers worry about access, and want compassionate care. Therefore, a credible quality program must encompass not only clinical quality, but coordination of care and patient interaction with the system.6. Managing expenses (providers)
Because of reductions in and downward pressure on provider payments, cost containment (including reducing waste and non-labor costs) will become increasingly vital for survival, particularly for providers who fall short of incentive performance targets.
The Quality Component in VBP Programs
Population Health: The Definition of Public Health Quality
Public Health Quality Forum
Quality in public health is the degree to which policies, programs, services, and research for the population increase desired health outcomes and conditions in which the population can be healthy.
US Department of Health and Human Services (HHS)
The HHS vision for public health quality is to build better systems to give all people what they need to reach their full potential for health.
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