Is Value-Based Purchasing the New Reality in Healthcare?

Abstract

While past studies have analyzed hospital Quality to evaluate organizational performance, this study is unique because it evaluates the relationship between healthcare Efficiency and Quality to create Value.  The Hospital Total Performance Score (TPS) is the Medicare surrogate for healthcare Value. In 2017, TPS will represent five domains including Process of Care, Patient Experience, Safety of Care, Outcomes and Efficiency.

This article provides an innovative approach to measuring healthcare Value as the federal government attempts to realign scarce healthcare resources to reward individual hospitals for best meeting local community needs.

This research study uses data from CMS to assess the projected impact of the Value-Based Purchasing program on 2,955 eligible U.S. hospitals in FY2017.  The data show that Value-Based Purchasing payments are projected to increase from $1.5 billion in FY2016 to $1.8 billion in FY2017. This study found that teaching hospitals and hospitals in urban areas may be at greater risk for reduced funding under the Value-Based Purchasing program.

These results have managerial implications related to improving hospital quality and enhancing organizational performance. The study has policy implications on current initiatives related to pay-for-performance in the healthcare industry. It also supports the premise that hospital leadership through the effective allocation of resources, the development of high performance work processes and a commitment to Quality can improve healthcare Value.