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Realizing the Promise of Value-based Purchasing

Current Status

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, PA.

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 numbers.

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 reviews).
  • 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 providers.

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 current state-of-the-art.
  • 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:

  1. A well-designed infrastructure with the necessary information capacity.
  2. Partnerships.
  3. 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:

  1. 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.
  2. 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.
  3. 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: LF_FactSheet.pdf

Leapfrog Patient Safety Standards: The Potential Benefit of Universal Adoption. Executive Summary.

Leapfrog Sample Completed Checklist.

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