QUESTIONS AND ANSWERS ABOUT VALUE BASED PURCHASING

1. How can Congress help health care providers, plans, and manufacturers improve health care quality?

The value-based purchasing concept is an example of payment policy that can help align reimbursements with desired health care outcomes.  Demonstration projects, such as the Premier Performance Pays study, are proving that when evidence-based processes are delivered, quality is higher and costs are lower.

However, value-based purchasing initiatives should be very carefully considered. Successful adoption requires that all stakeholders participate in the design and selection of quality measures.  Value-based purchasing programs should be incentive-based, not punitive, and encourage a culture of continuous quality improvement. Financial incentives should reward those who demonstrate improvement or exceed benchmarks, as well as sustain quality. 

2. How is the administration encouraging value-based purchasing initiatives?

HHS is currently developing a plan to implement a value-based purchasing program for hospitals under Medicare beginning in 2009.  The plan is required to address several issues, including the ongoing development, selection, and modification process for quality and efficiency measures; the reporting, collection, and validation of quality data; structure of value-based payments; and sources of funding.

CMS has several demonstration projects underway to facilitate the development and implementation of a set of P4P initiatives to improve quality in Medicare. Two HLC members, Premier, Inc. and Marshfield Clinic, are working with CMS on P4P demonstration projects. The Premier Hospital Quality Incentive demonstration is a three-year effort to link payment with quality measures for Medicare inpatient care.  Marshfield Clinic is participating in the Physician Group Practice demonstration, which is the first P4P initiative for physicians under Medicare. It rewards physicians for quality and efficiency.

CMS also announced an initiative in October 2005 to pay physicians for the quality of the care they provide to seniors and disabled beneficiaries with chronic conditions. The Medicare Care Management Performance (MCMP) demonstration was authorized under section 649 of the “Medicare Prescription Drug, Improvement, and Modernization Act of 2003” (MMA).  Participating physicians submit data annually on up to 26 quality measures related to the care of patients with diabetes, congestive heart failure, and coronary artery disease, as well as the provision of preventive health services. In its first year, the program is a “pay-for-reporting” initiative to provide information on quality and to help physicians become familiar with the quality measurement process.  In subsequent years, practices are eligible to earn an annual incentive of up to $10,000 per physician and up to $50,000 per practice.

3. What efforts are the administration making to encourage transparency in the health care sector?

On August 22, 2006, the president signed an executive order to direct federal agencies that administer or sponsor federal health insurance programs to increase transparency in price and quality.

The executive order requires federal agencies to share with beneficiaries of federal health insurance programs information about prices paid to health care providers for procedures.  Federal agencies must also share information on the quality of services provided by doctors, hospitals, and other health care providers.

In addition, the executive order directs federal agencies to develop and identify approaches that facilitate high quality, efficient care and the adoption of interoperable health information technology.

HHS Secretary Michael Leavitt has urged private companies to commit to the goals of the executive order in their procurement of health care for their employees. At a conference in November 2006, Secretary Leavitt issued a "toolkit" to enable companies to declare their commitment to "the four cornerstone actions" – interoperable electronic health records, quality transparency, price transparency, and value-based purchasing – of the executive order. Secretary Leavitt received commitments from 100 of the largest companies in 2006.
 
4. Is there potential for legislation and government regulation to reverse the course of health quality improvements?

Yes. New regulatory requirements for Medicare providers will only result in added administrative burden and complexity, creating a health care environment that is not conducive to patient safety.

Provider resources are of great importance to continued progress on improving patient safety.  If Congress were to pass legislation reducing provider payments, it would have a dramatic impact on the ability of doctors and hospitals to continue making quality improvements.

Finally, Congress must act to relieve the burden of costly liability insurance.  The liability lawsuit crisis is forcing many doctors to leave their practices. Remaining providers must struggle to meet the overwhelming demand for services, putting them at risk of errors due to overwork and understaffing.  Congress' continued inaction on liability reform puts the health care system at risk.

5. What are members of the health industry doing to ensure that quality in the health care system is constantly improving?

A variety of initiatives aimed at improving the quality of care are ongoing across the healthcare continuum.  In the past few years, organizations like NQF and QASC, have formed to ensure that these efforts are aligned and consensus-based to ensure that quality improvement efforts are both efficient and produce meaningful results.

 The Quality Alliance Steering Committee (QASC), formed in 2006, is a collaborative effort among existing quality alliances, government, physicians, nurses, hospitals, health insurers, consumers, and others working to promote public reporting of provider information. QASC is working to ensure that quality measures are constructed and reported in a clear and consistent way that informs consumer and employer decision-making, as well as the efforts of practitioners to improve the delivery of care. During 2007, six CMS and AHRQ-funded pilots have begun to test approaches to combining data from public and private sources and measuring and reporting on physician practice in a way that is meaningful to consumers and purchasers of health care. QASC has also partnered with the Robert Wood Johnson Foundation (RWJF) to test methods for combining Medicare and private plan quality data at the national level, with a focus on identifying racial and ethnic health care disparities on quality improvement efforts.

The National Quality Forum (NQF), a membership organization that has already endorsed over 300 consensus-based standards for quality measurement, continues work on a wide variety of ongoing initiatives related to standards development and adoption. Some of these projects include health information technology structural measures and national voluntary consensus standards for adult immunization, emergency care, perinatal care, prevention and care of venous thromboembolism (VTE) and end-stage renal disease (ESRD), and the reporting of healthcare-associated infections.

Individual stakeholders are taking measures and best practices, adopted by organizations like NQF or developed independently, and applying them to implement innovative solutions in the private sector.  For example, the Geisinger Health System of Danville, Pennsylvania, launched ProvenCare™, a warranty-like approach for acute episodic cardiac care, which offers both surgery and 90 days of follow-up treatment at a flat fee.  By capping insurer payments to a known amount, Geisinger is effectively taking responsibility for surgical outcomes.  Patients enrolled through ProvenCare are also encouraged to use a Patient Compact, which requires adherence to 40 best practices measures. An analysis done by the Annals of Surgery has demonstrated nearly 100 percent compliance with the Compact, improved likelihood of discharge to home, and decreased average length-of-stay. Geisinger has cited its robust electronic health records system as one of the reasons for the initial success of this provider-driven pay-for-performance program.

6. How are employers furthering quality and price transparency and performance measures?

In 2000, the Business Roundtable, a national coalition of large employers, launched the Leapfrog Group, an initiative founded to mobilize employer purchasing power to reward improvements in health care safety, quality, and customer value. Other, more regionally based efforts have been underway since the early 1990s.  In 1989, a California business purchasing group, the Pacific Business Group on Health (PBGH), was founded to improve the quality and effectiveness of health care while moderating costs. Throughout the 1990s, the PBGH made progress with quality reporting and price negotiation. PBGH and other business organizations have helped further the dialogue on value-based purchasing and greater transparency in the health arena.

In 2005, the Leapfrog Group launched the Leapfrog Hospital Rewards Program.  The program measures the quality of care and the efficiency with which hospitals use resources in five clinical areas that represent a significant portion of hospital admissions and expenditures among the commercially insured population. Hospitals are scored and rewarded separately for each of the five areas and can participate in any of the areas in which they provide care. If they demonstrate sustained excellence or improvement, hospitals are eligible for financial rewards and increased market share. 

By late 2007, more than half of hospitals participating in the Leapfrog Group had pledged to adhere to the Never Events Policy, under which hospitals will not bill insurers for serious reportable, or “never,” events.  Hospitals that have committed to the policy are also demonstrating higher scores on the Leapfrog Safe Practices Score, which measures performance on 27 of NQF’s safe practices.