Value-based purchasing elicits favor, concern among healthcare execs

By Erin McCann
04:36 PM

Paradigm shifts in the healthcare industry are more and more common nowadays – their prevalence being powered in large part by an explosion in information technology. It’s perhaps no surprise, then, that a Forbes Insights study released Tuesday showed that, among healthcare executives, value-based purchasing (VBP) continues to gain favor over traditional fee-for-service reimbursement. 

The Allscripts-sponsored report, which surveyed more than 200 hospital and health system executives, reflects the balancing act that’s necessary to get their organizations from so-called "way things have always been" to the "way things will be" – without tumbling into a financial chasm because of the "way things are now."

Seventy-three percent of the executives surveyed agreed or somewhat agreed that healthcare providers must now begin the transition towards VBP, which emphasizes paying for value rather than volume. 

[See also: Value-Based Benefit Design: Capitalizing on Reform Imperatives.]

This type of payment system – soon-to-be ubiquitous among healthcare facilities – will only precipitate greater quality of care, said Michael L. Millenson, president of Health Quality Advisors, and the author of the report. “What’s most impressive about [VBD] is the way hospital executives are preparing for the future in a very determined way.”

He added that "no one is rushing into anything, and at the same time, no one is pretending it’s not going to happen.” Instead, it's simply necessary to prepare for things that are going to happen three to five years down the road. 

VPB also brings with it myriad benefits for both the patient and the healthcare provider said Millenson. First, it encourages physicians to improve their practices, as the system measures and manages value on many different metrics. It gives quantifiable evidence, he continued, and it’s “not just medical evidence, it’s evidence as in report cards and data transparency.” 

[See also: Pay-for-performance takes big step forward.]

Experts say VBP will also lead to greater transparency. No longer will hospitals and healthcare providers be able to take refuge behind an institution’s prestigious name. As, with increasing data transparency, the most renowned names in hospitals could, in reality, yield disappointing outcomes in patient care.

“Some of the biggest names in healthcare may or may not have the best care,” Millenson said, and “that’s good for the patient to know, and that’s good for the provider to know.” If weaknesses aren’t acknowledged, there can be no improvement. 

He cited Cadillac as an example. In the beginning, the car marque essentially enjoyed a monopoly in the luxury car market, establishing a name for itself. However, competitors emerged, and customers realized the brand name wasn’t always indicative of a quality product; thus fewer people were purchasing the cars. Cadillac, since then, has reformed itself, but it serves as an insightful example that can be extended to VBP. If a physician is compensated for the quality of administered care, and patients are more aware of the comparative landscape, the physician, proponents say, will have more incentive to improve if value is lacking.

[See also: Pay-for-performance plan gets mixed reaction at congressional hearing.]

Bottom line, Millenson said, is that VBP rewards people who deliver high-quality care, which is incentive for people to aim higher and to provide better overall care. With this system, he said, “We can now expect a certain amount of positive outcomes.”

Key findings of the study, titled “Getting From Volume to Value in Health Care: Balance Challenges & Opportunities,” included:

  • Disruptive potential of value-based purchasing. Nearly four in 10 respondents (38 percent) completely or somewhat agreed that VBP is likely to become a truly disruptive innovation.
  • Crucial to win hearts and minds. Fully engaging their doctors was seen by surveyed C-suite executives as the top barrier to VBP participation, selected by half of respondents.
  • A warning on consumer-driven health plans. About two-thirds of surveyed executives believed that consumer financial incentives are key to making VBP successful (64 percent). However, about the same percentage (67 percent) also thought that consumers won’t know when that success arrives, since they can’t judge the value of medical care accurately. That’s a warning sign for those who believe that the high-deductible health insurance arrangements known as consumer-driven health plans will automatically drive value-based purchasing on the part of the patient.
  • VBP will require seamless communications. Nearly half of respondents chose system integration across all applications (49 percent) and health information exchange (47 percent) among their top IT spending priorities for VBP over the next three years.

Despite the challenges brought up, executives interviewed in greater depth shared a common optimism.

As Robert Margolis, MD, CEO and managing partner of Torrance, Calif.-based HealthCare Partners, put it: “You manage by having a strong vision people believe in, mission and values and lots of communication.”

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