Preparing for Value Based Purchasing

Value-based purchasing is definitely on its way, and healthcare organizations need to prepare for its arrival, according to a recent report by the Healthcare Financial Management Association.

The findings from this latest research, which were based on interviews with executives representing payers, purchasers and government agencies, indicate that healthcare organizations anticipate a real commitment to pursuing value-based payment methodologies over the next three to five years. For example, more than 90% of the interviewees indicated that pay for performance relative to quality benchmarks will account for more than 5% of payments from commercial carriers; almost 80% indicated that pay for performance relative to utilization of efficiency benchmarks will account for more than 5% of payments from commercial carriers; and more than 70% indicated that bundled payments based on episodic care will account for more than 5% of payments from commercial carriers.

“Of all the transformations reshaping American health care, none is more profound than the shift toward payment for value,” the report, which is entitled “Defining and Delivering Value,” noted. “Medicare payment is factoring in quality and patient satisfaction, while private payers are pursuing performance and risk-based payment structures. Meanwhile, rising healthcare costs are creating more price sensitivity among healthcare purchasers, including government agencies, employers, and patients themselves, who are being asked to pay higher premiums, copayments and deductibles for their care. These financial pressures make it imperative for all providers of care to develop collaborative approaches that combine strong clinical outcomes with effective cost containment.”

To successfully navigate these new payment realities, healthcare organization need to:

  • Quickly develop the people and culture, business intelligence, performance improvement, and contract and risk management capabilities required to adapt in a new payment environment.
  • Embrace strategic agility that provides a foundation that enables organizations to change course successfully and quickly.
  • Seek stakeholder alignment around a common set of value metrics that are meaningful to users.
  • Explore strategic partnerships and opportunities with payers, employers and patients. Leading organizations are pursuing unique arrangements with key stakeholders that focus on the critical healthcare needs of the providers’ patient populations.
  • Prepare to differentiate the effectiveness of care provided by the organization within a value-driven, competitive marketplace. Although the extent to which changing market dynamics will drive purely price-sensitive purchasing of health care remains uncertain, provider organizations need to be thoughtful about the value proposition they intend to offer purchasers.