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Four Ways Hospital Value-Based Purchasing is Changing the Way We Think about Quality

Hospitals, federal agencies, and industry organizations have promoted and used quality measures for more than two decades, but value-based purchasing agreements have increased their impact dramatically. No longer just reporting requirements, quality metrics now drive a significant and growing share of hospital reimbursements via pay-for-performance models, making them a high priority for healthcare organizations.

The increased adoption of value-based purchasing (VBP) has occurred simultaneously with other significant changes in the healthcare system, altering the way that hospitals have previously viewed quality in several key ways:

  1. The patient perspective matters more. Patient experience is a significant element in the pay-for-performance contracts established by the Centers for Medicare and Medicaid Services (CMS). A national survey, the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS), is used to assess the patient view of hospital care. Patient evaluations of the quality of care received, communication with healthcare providers, and the hospital environment are now factored into payments.1

  2. Flexibility and scalability make a difference. As the specific processes and outcomes measured change from year to year, organizations need to have systems that can help them continue to maintain their successes on quality measures that are phasing out because they have been widely adopted, while monitoring and reporting on new metrics. For instance, for 2016, CMS added influenza immunization to the clinical process of care domain and five processes previously used in calculations have been removed. Catheter-associated urinary tract infection (CAUTI) and surgical site infection (SSI) following colon surgery and abdominal hysterectomy were added to the outcome domain.2

  3. Quality extends beyond the hospital or patient visit. Under CMS VBP and readmissions reduction programs, systems and providers are held accountable for outcomes over which they have had limited control, leading to new approaches to patient care and communication. With chronic diseases consuming an increasing portion of healthcare spending, payers want to see changes in outcomes, not just changes in processes. While hospital-based providers can set up follow up appointments and order new medications upon discharge, compliance with these care plans is still highly dependent on patient follow through once they have left the facility. These new programs are driving the adoption of follow up calls, use of mobile health apps and devices, and other mechanisms to keep patients on track and communicate out-of-range results to providers so they can take action before complications develop or hospitalization is required.
  4. Quality and transparency go hand-in-hand. The Hospital Compare website is a central feature of the CMS value-based purchasing program that allows consumers to see how hospitals in their area perform relative to local and national averages.3 Quality metrics reported include patient experience, timely and effective care, rate of healthcare-associated infection and surgical complications, readmission and mortality rates for specific conditions, use of medical imaging and value of care. Other payers are making more cost information available to consumers, so that they can engage in the discussion with providers about the best value for them in terms of medication therapies, imaging services, or inpatient care. For healthcare organizations, those discussions add a new angle to quality of care: affordable treatment for patients, particularly as high deductible plans become the new norm.

For a detailed breakdown of the diffrent regulatory programs and payment models, view this infographic from The Advisory Board.

How has value-based purchasing changed how your hospital views quality?


  1. Pay-for-Performance. Health Policy Briefs. HealthAffairs. October 11, 2012.
  2. Hospital value-based purchasing. Updated October 30, 2015.
  3. Compare. 

Value based purchasing: driving down infection rates. Download the eBook.

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