Value Based Purchasing

Value Based Purchasing was conceptually developed by the National Business Coalition on Health (NBCH) as a means to organize the activities in place at many coalitions across the country into a concise and understandable common strategy.

The Value Based Purchasing strategy is built on 4 pillars:

1. Standardized Performance Measurement
Standardized Performance Measurement is the foundation of Value Based Purchasing because the capacity to reward excellence in health care does not exist without first measuring performance. Priority areas for measurement include:

• Medical services and interventions, especially competing interventions for the same or similarly diagnosed illness or condition;
• Health plans (like Anthem, United Healthcare, Aetna, Humana, etc.);
• Hospitals; and
• Physicians, both in groups and individually.

The Institute of Medicine (IOM) has defined the dimensions of health care performance that need to be measured as:

• Safe;
• Timely;
• Efficient;
• Effective;
• Equitable; and
• Patient-Centered.

Standardized performance measurement can only be accomplished by aggregating data from different sources including administrative data (medical and pharmacy claims data), medical records, and patient safety based information.

An all payer, all provider, community database is a priority to generate robust and reliable performance measurement.

2. Transparency & Public Reporting
Standardized performance measurement needs to be converted into useful information for purchasers (i.e., employers, Taft-Hartley plans), payers (i.e., Anthem, United Healthcare, Aetna, Humana), and consumers to inform their decision making, especially for payment, treatment and provider choices.

Research demonstrates that public reporting can be a significant external motivator for provider performance improvement,given the importance of community reputation.

3. Payment Reform
There are two critical aspects of payment reform that are needed and are complimentary to each other:

• The principal of differential payment/reimbursement based on demonstrated provider performance.
• The need to redesign payment methodologies to better align economic incentives with desired patient care outcomes.

Differential Reimbursement is more popularly known as “pay-for-performance”.

• Differential Reimbursement reflects a principal present in other segments of our society: payment should be aligned, or tied to, performance.
• Differential Reimbursement creates a now absent but powerful business case for providers to provide high quality and efficient health care services.

Redesign of Payment Methodologies addresses a fundamental issue: the method we use to pay for health care is a significant determinant of the kind of care we receive.

• The most obvious example is “fee-for-service” reimbursement – the most common payment methodology in our health care system today – which creates an economic incentive to providers to actually perform more healthcare services because each service performed gets reimbursed (a fee is paid for each service).
• There are several other methods of reimbursement that should be explored and used when possible to encourage high quality and efficient health care rather than just more health care.

4. Informed Choice
Informed choice involves encouraging employees and their dependents to choose better:

• Lifestyles;
• Treatments;
• Compliance with treatment;
• Health plans;
• Hospitals;
• Physicians.

Strategies to influence and encourage more informed consumer choices include:

• Employee and community health and productivity programs to encourage lifestyle choice and personal behaviors which will reduce the need for many types of health care services thus keeping individuals from having to use the health care system.
• Information dissemination through all possible communication channels.
• Evidence based benefit design – tiering coverage, through copay incentives, of medical treatments and interventions and/or providers by clear evidence of efficacy and performance which steer consumers towards effective treatments and high value providers.