Value Based Purchasing refers to various payment types other than Fee-For-Service. Value-based programs are part of the overall quality strategy of the Center for Medicare and Medicaid Services. They reward health care providers for the quality of care they give to people with Medicare, and not for quantity. These programs support the triple aim, i.e., better care for individuals, better health for populations, and lower costs. VBP is founded on a framework of standardized, comparative, and transparent information on patient outcomes, health care status, patient experience (satisfaction), and costs of services. It is a departure from the earlier payment models based on fee-for-service, which mostly reward excessive, costly, and complex services. VBP is among several payment reform changes in the affordable care act. The types of payment through VBP are pay-for-performance or P4P, shared savings, bundled payment, shared risk, and capitation. In many cases, commercial health plans have adopted their own versions of payment reform, including penalties for hospital-acquired conditions, infections, and preventable readmissions.

The goals for CMS VBP initiatives are to improve clinical quality, eliminate waste, encourage patient-centered care, reduce adverse events and improve patient safety, avoid unnecessary costs in the delivery of care, stimulate investments in infrastructures, make performance results transparent to the public, and work to reduce existing disparities.

Key legislation to support VBP are Affordable care act of 2010 and Medicare access and CHIP reauthorization act of 2015. There are several programs, each addressing a different dimension of patient care. For example, HACRP or the hospital-acquired condition reduction program ranks hospitals by their performance on five healthcare associated infections reported to the Centers for Disease Control National Healthcare Safety Network and one composite patient safety measure PSI-90. The hospitals in the lowest quartile are paid 99% of what they would have been paid otherwise. This program saves CMS $350 million every year. The HRRP or the hospital readmissions reduction program offers a strong incentive to hospitals for making their communication and care coordination efforts better, and work better with patients and caregivers on post-discharge planning. There are several other value-based programs, e.g., End-Stage Renal Disease Quality Incentive Program (ESRD QIP), Skilled Nursing Facility Value-Based Program (SNFVBP), and Home Health Value-based Program (HHVBP). These value-based programs work alongside the numerous other quality programs. There is additional information on each of these programs at the CMS website: More recent forays into fully integrating care and coordinating clinical and financial accountability are bundled payments care initiatives (including medical homes and acute care episodes), Medicare Advantage star ratings, and accountable care organization learning networks.

Like anything else, VBP has its share of challenges. Validity and reliability of data collected is always a challenge. Additionally, some of the process measures do not always correlate with outcome measures. The return on investment is not always clear. Because participation in VBP involves significant changes to our delivery system and investments into data collection, the true returns on investment are not always clear or measurable. The measures in VBP are not adjusted for socioeconomic status and there is a risk of promoting healthcare disparities arising from potential for exclusion of patients at high risk for poor outcomes, despite best intentions. The current value-based programs need to be further finetuned with respect to risk adjustment, demographics, and patient populations served in order to make them more meaningful to patients, physicians and healthcare systems. Finally, financial incentives may decrease over time for high performers, because of not having room to grow after a certain plateau is reached in performance.

Despite the limitations, VBP has been and continues to be a worthy effort by the CMS and other third-party payors. On the road to high value high quality care, the future is probably the bundled payment care initiatives and shifting focus from inpatient care to outpatient care. Both public and private health care sectors are highly interested in achieving better health outcomes and better value for money. It is no surprise that healthcare professionals and consumers are just as interested.