This information is for reference purposes only. It was current when produced and may now be outdated. Archive material is no longer maintained, and some links may not work. Persons with disabilities having difficulty accessing this information should contact us at: https://info.ahrq.gov. Let us know the nature of the problem, the Web address of what you want, and your contact information.
Please go to www.ahrq.gov for current information.
Realizing the Promise of Value-based Purchasing
Value-based Purchasing: Where Are We?
Kathleen Burek, Director of Strategic Initiatives, Buyers Health Care Action Group,
Bloomington, Minnesota and Member, Leapfrog Steering Committee, Washington, DC.
William F. Haggett, Ph.D., Senior Vice President, Independence Blue Cross, Philadelphia,
Irene Fraser, Ph.D., Director, Center for Organization and Delivery Studies, Agency for
Healthcare Research and Quality (AHRQ), Rockville, MD.
This session examined the current status of value-based purchasing strategies and the potential
barriers to their implementation from three different perspectives: a purchaser, a health plan,
and a health services researcher.
Kathleen Burek of the Buyers Health Care Action Group (BHCAG), a coalition of 30
corporations in the Minneapolis, Minnesota area that jointly purchase health care, spoke from
the perspective of a purchaser. She explained that value-based purchasing differs from more
traditional purchasing in that it shifts the focus from cost alone to include holding health care
plans and providers accountable for the value of care received. A value-based
purchasing strategy should contain several essential elements:
- Choices that allow enrollees and purchasers to change to higher-performing vendors or
other alternatives in care.
- A system of value-based contracting that includes both performance standards and
incentives and penalties for non-performance.
- The development of performance standards, including both administrative measures
(e.g., claims accuracy, coordination of benefits) and quality and patient safety standards
(e.g., immunization rates, cancer screening).
- Aligned incentives that award quality improvement and customer satisfaction.
- Leverage that arises from purchasers joining together to wield their strength in
BHCAG incorporated many of these elements when establishing its own quality improvement
strategy in 1993. The group's purchasing model includes incentives such as the BHCAG
Excellence in Quality Awards, which recognize care systems that have high customer
satisfaction ratings and preventive care scores.
The Leapfrog Project is another example of value-based purchasing, initiated by a group of
large purchasers that use leverage to promote improved quality and safer medical practices.
Leapfrog makes recommendations based on findings in peer-reviewed literature (e.g., using
computerized physician order entry to reduce prescribing errors) and encourages purchasers to
coordinate with one another to improve the value of the health care that they buy.
Ms. Burek concluded by noting the barriers that can inhibit successful
implementation of value-based purchasing strategies:
- Often a lack of outcomes measures.
- High costs associated with data collection, particularly at the clinical level (e.g., chart
- Hospitals and providers may view public reporting as threatening to their success.
- Few purchasers are large enough to gather data for their populations.
- Both public and private purchasers tend to focus on short-term cost savings rather than
long-term quality improvement.
- Consumers tend to rely upon experience rather than data when choosing plans and
William Haggett of Independence Blue Cross (IBC) spoke from a health plan perspective, and
suggested that the following elements must be in place for value-based purchasing efforts to be
effective on a broad level:
- Clear definitions of concepts such as success, and acknowledging the limits of the
- Industry standards for the data to be collected to provide answers to questions
surrounding quality of care.
- A focus on what is important to the marketplace.
- Realistic improvement thresholds, including time lines for making progress.
Three elements are then needed to support the purchasing endeavor:
- A well-designed infrastructure with the necessary information capacity.
- Adequate reimbursement.
Irene Fraser of AHRQ spoke from a health services research perspective, and reviewed the
evidence examining purchasers' roles in promoting quality. Dr. Fraser's
research theorizes that employers, who cover the health care of roughly 60 percent of
Americans, can be a force for quality. She addressed three concerns:
What aspects of quality do employers try to influence? A study of the literature and focus
groups with employers revealed that they place value on:
- Plan and provider capacities (e.g., a broad network of accredited physicians).
- Benefits and treatment decisions.
- Performance-based indicators, including those associated with administrative quality, employee satisfaction ratings, use levels, and clinical outcomes.
What strategies are they pursuing? Employers pursue a range of strategies to influence
quality and cost, including:
- Building quality criteria into plan selection.
- Monitoring health plan quality.
- Linking plan payments to performance.
- Dropping those plans or providers with unsatisfactory performance.
What difference does it make?
- The research determined that these strategies have had mixed
success in making a difference for those receiving care (employees and their families), for
corporate health, and for the community. Some employers are tracking and using markers they
define as quality, but these may not be equal to what clinical experts and policymakers would
select as most reflective of clinical quality. There is also a large variation in how these markers
have been used.
The quality markers used by employers also may have little effect on reducing medical errors.
Dr. Fraser emphasized how purchasers' actions fit in the context of patient safety, and noted
that research indicates that health care purchasers should look to other industries (e.g., aviation)
to learn safety strategies to reduce unnecessary deaths and excess costs incurred by medical
errors. Research also shows that systems changes are key to reducing errors.
States could take a number of innovative approaches to promote quality in health care. Dr.
Fraser suggested that a State could develop its own specific version of the Federal Quality
Interagency Coordinating (QuIC) Task Force, which coordinates efforts at the Federal level to
purchase, provide, regulate, and improve health care quality.
Research can also bolster value-based purchasing efforts by:
- Providing tools and measures for purchasers.
- Providing evidence of practices that improve safety and quality.
- Testing the potential to replicate strategies that work.
Fraser I, McNamara P Employers: Quality Takers or Quality Makers? Medical Care Research
and Review 2000; 57(2):33-52.
Fraser I, McNamara P, Lehman GO, et al. The Pursuit of Quality by Business Coalitions: A
National Survey. Health Affairs 1999; 18(5):158-65.
Leapfrog Fact Sheet. Available online at: http://www.leapfroggroup.org/PressEvent/ LF_FactSheet.pdf
Leapfrog Patient Safety Standards: The Potential Benefit of Universal Adoption. Executive
Leapfrog Sample Completed Checklist.
Previous Section Contents