Value-based purchasing (VBP)

There is some evidence that value-based purchasing (VBP) programs that include pay for performance (P4P) modestly improve health care quality for chronic disease management, when implemented as part of a broader initiative to improve quality of care^3, 4; effects have been demonstrated for diabetes and asthma management, but not for heart disease management⁵. Additional evidence is needed to confirm effects of VBP, especially long-term effects on patient outcomes and system costs^{5, 6}.

Financial incentives such as VBP and P4P may improve health care practice and process outcomes⁷. In a New York City-based study, small clinical practices that implemented a P4P program have modest improvements in cardiovascular processes and outcomes⁸. In UK-based studies, P4P programs that included larger bonuses than most U.S. programs and significant investment by hospitals in quality improvement activities are associated with a clinically significant reduction in mortality⁹, however, the effect may not be maintained over the long-term¹⁰.

Research suggests that effective programs engage providers with program design, measures, and performance targets, and set objective achievement and improvement targets so all providers who reach that target receive an incentive. Effective VBP programs also track cost and quality data, strive for measure alignment across programs, and include provider supports (e.g., best practice sharing mechanisms, health information technology and data registries, and infrastructure building). Larger incentives have been associated with greater effects on performance when these incentives do not reduce resources for low quality provider improvement^2, 5, 11.

In some circumstances, providers participating in VBP programs have neglected care that is not incentivized by the program’s design. U.S. and UK-based studies suggest that VBP and P4P could also lead providers to select healthy or compliant patients over severely ill or non-compliant patients or encourage gaming or manipulating data to maximize income. Careful design and implementation of VBP programs, including aligning financial incentives with professional values, can help avoid such unintended consequences^{5, 12}.

Value-based purchasing could narrow, widen, or maintain existing disparities in access to and receipt of quality health care⁵. Programs that explicitly consider disparities, collect race and ethnicity data, focus on conditions that are of higher prevalence among minorities, reward improvements, and support efforts to establish national disparity measures and guidelines are more likely to reduce disparities than programs that do not¹³. 

VBP and P4P have the potential to be cost-effective when programs are well designed and implemented⁵.

The Centers for Medicare & Medicaid Services (CMS) has linked Medicare’s payment system to a value-based purchasing system for inpatient stays in over 3,500 hospitals in the U.S.¹⁴.

A few states have enacted policy reforms that include value-based purchasing, as in Massachusetts, Minnesota, and Vermont¹⁵. State agencies and public/private coalitions have also led initiatives to increase value in health care services using value-based purchasing, for example the Massachusetts Group Insurance Commission¹⁶, the Minnesota Smart Buy Alliance¹⁷, the Washington Health Alliance¹⁸, and the Wisconsin Department of Employee Trust Funds¹⁹.

AHRQ-VBP guide - Agency for Healthcare Research and Quality (AHRQ). Evaluating the impact of value-based purchasing: A guide for purchasers.

CHQPR-Resources - Center for Healthcare Quality & Payment Reform (CHQPR). Resources, guides, and what's new on CHQPR.

NQF-Ryan 2014 - Ryan A, Tompkins C. Efficiency and value in healthcare: Linking cost and quality measures paper. National Quality Forum (NQF). 2014.