5 Benefits of Value-Based Purchasing in Health Care

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Insurers no longer reward health care organizations based on the quantity of services delivered. [1] A prime example of this is the Centers for Medicare and Medicaid Services (CMS) Hospital Value Based Purchasing (VBP) Program, which uses financial incentives to improve performance among health care provider organizations. The program ultimately improves treatment outcomes for the United States patient population by reimbursing care providers based on a scale commensurate with organizational service quality. When issuing disbursements, the CMS also considers how well organizations comply with health care best practices and the results of patient satisfaction surveys.

Hospital value based purchasing initiatives promote quality health in care services. [2] In this scenario, value is a product of quality multiplied by costs; as the quality of treatment increases, patients receive more value for health care services. Using this concept, the CMS evaluates the actions that health care organizations take to improve the quality of medical services. As a result, patients receive more value from medical treatments.

The following passages highlight five ways that hospital value based purchasing benefits patients.

1. Reduces Costs

In practice, value based purchasing involves a proactive approach to promoting service quality. The precept of value based purchasing is that patients have a right to hold care providers accountable for costs and service quality. Value based purchasing plans combine information regarding patient outcomes and medical cost data in a meaningful, actionable way. Ideally, the outcomes produced by value based purchase plans result in improved patient health care services, satisfaction with insurers, and care providers that can compete capably in a competitive marketplace.

2. Increases Patient Satisfaction

Value based purchasing encompasses reducing medical errors and rewarding the best performing care provider organizations. Historically, limited incentive attempts, such as overall price discount negotiations, have not proved effective in improving quality of care. Value based purchasing links specific objectives to reimbursement incentives.

Patient satisfaction is an important benchmark that health care administrators use to measure organizational performance. Duly, hospital value based purchasing programs result in increased satisfaction with healthcare plans and service delivery.

It is important to recognize that patient satisfaction alone does not necessarily indicate quality of service. Despite this, health care administrators regularly utilize patient satisfaction surveys to measure organizational performance because surveys are a simplified, cost-effective method of gauging patient outcomes.

3. Reduces Medical Errors

Medical errors are a pressing concern among significant insurance sponsors such as large employers. They’ve started to realize that a significant portion of organizational funds go towards wasted resources and ineffective or harmful treatments. As a result, they are now buying insurance plans that incentivize care providers with value based purchasing plans that lead to reduced medical errors. This trend has resulted in improved service quality and reduced health care costs.

4. Informs Patients

Improved treatment outcomes attract patients. [3] Organizations that the CMS incentivizes with value based purchasing, succeed in attracting selective patients. These successful care provider organizations deliver coordinated care with a patient centric focus. They use technology to harness the full potential of health care information, take proactive measures to prevent illnesses among populations, and maximize the financial rewards earned from effective service coordination.

5. Promotes Healthy Habits

Poor habits such as cigarette smoking, overeating, and excessive alcohol consumption contribute to poor employee health. [2] Many major insurance buyers, especially employers, adjust their benefits packages to conform to insurer recommendations. This encourages healthy habits among employees.

By rewarding employees for healthy behavior, such as smoking cessation and weight loss, employers encourage wellness and contribute to reductions in medical costs. This directly relates to midterm health improvements employees and financial savings for all stakeholders; when wellness initiatives are successful, employees have better health outcomes and employers pay less in medical costs.

Encouraging Value Based Purchasing

Several health advocacy organizations have conducted successful value based purchasing campaigns. The New York Business Group on Health was a private enterprise and government partnership between the New York State Health Accountability Foundation and the State of New York. The cooperative funded the now defunct AboutHealthQuality website where patients could compare the performance of care providers throughout the state.

A current initiative is a consumer assessment survey conducted by the Pacific Business Group on Health (PBGH). The group collects and evaluates the survey data to publish their annual Physician Value Check Survey report. The report measures traits such as patient satisfaction and quality of service.

Value based initiatives encourage health care organizations to deliver treatments that are custom tailored to the local population. [3] By complying with valued based purchasing plan objectives, administrators give patients powerful motivation to identify and utilize quality health care organizations. This wise course of action taken by administrators assist organizations in meeting service quality objectives that promote community wellness.

Learn More

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Recommended Readings

Improving Patient Care through Clinical Integration
Improving Patient Safety
Making Predictive Analytics a Routine Part of Patient Care in Hospitals


[3] United Healthcare