Financial Vitality – Value-Based Purchasing

Value-Based Purchasing – What you need to know!Mary_McDaniels

By Mary L. McDaniels, MNA, RN, ACM, CPHM  

In 1999, the Institute of Medicine (IOM) published a report stating that 98,000 deaths per year in the United States were due to medical errors in hospitals.  In 2010, a study of 10 hospitals in North Carolina occurring between 2002 and 2007, tracking the harm to hospital inpatients found that 25.1 patient harms occurred for every 100 patient admissions, with no improvement in the reduction of harm during the 6 year period (Landrigan, Parry, Bones, Hackbarth, Goldmann, & Sharek, 2010).

Due to a consistent increase in the cost of healthcare and with a lack of documented improvement in quality of care, the Department of Health and Human Services and the Centers for Medicare and Medicaid (CMS) were challenged by the President and the US Congress to develop practices to decrease the cost of harm to the US healthcare system.  CMS commissioned a multiagency think-tank committee to implement a program that decreased the cost of harm to hospital patients.  From this process, what is currently known as the Value Based Purchasing (VBP) program was initiated.

Strategies to improve the behaviors and decisions of consumers, healthcare providers, and healthcare organizations were developed. Process of patient care and patient experience measures were agreed upon and a method to tie the outcomes to a hospital’s Medicare reimbursement was designed.  The fundamental goal of the program is to improve quality while maintaining or reducing the cost of healthcare.

Beginning in CMS Fiscal Year (FY) 2013 (October 2012 to September 2013), 12 quality measures and 8 patient experience measures, compared to baseline data collected between April 2009 and March 2010, will determine the hospital’s reimbursement for providing care.  Depending on the improvement – or lack of improvement – made in each measure is used to calculate the financial impact for that year.  The percentages range from 1% for FY 2013 to a maximum of 2% by FY 2017 (October 2016 to September 2017).

Figure 1 summarizes the consumer and provider strategies developed to decrease patient harm as published by AHRQ (2012) and Figure 2 summarizes the process of care and patient experience measures on which VBP reimbursement is based.

“A Bird’s-Eye View of Value-Based Purchasing Strategies” (AHRQ, 2012)
Key: HEDIS? = Healthplan Employer Data and Information Set
Agency for Healthcare Research and Quality (AHRQ).  (2012). Evaluating the impact of value-based purchasing. Retrieved February 20, 2012 from
Landrigan, C., Parry, G., Bones, C., Hackbarth, A., Goldmann, D., & Sharek, P. (2010). Temporal trends in rates of patient harm resulting from medical care. New England Journal of Medicine, 363(22), 2124-2134.  Retrieved from Wake Forest University School of Medicine Carpenter Library.