Pharmacy OneSource Blog

Understanding the Efficiency Domain in Value-Based Purchasing

Hospitals have certainly felt the effects of the addition of value-based purchasing since its implementation as a part of the Affordable Care Act (ACA) in 2011. The attempt to shift from a fee-for-service model that rewards the quantity of care to evaluating and rewarding the quality of care will take some effort and time from providers.

Perhaps one of the most difficult to understand of the four separate parts of the CMS Value-based Purchasing Program has been the recently-added efficiency domain. What does this metric actually tell us about care, and how can hospitals best demonstrate efficiency as defined by the Center for Medicare & Medicaid Services (CMS)?

CMS measures efficiency on the basis of assessing the cost of services for each beneficiary from a period starting three days before the hospital stay and ending 30 days after the patient is discharged.1 Unlike the other three domains of value-based purchasing, the efficiency domain is measured based only on one criterion, the Medicare spending per-beneficiary. This is CMS’s first domain to be gauged solely on the basis of cost. Providing not just excellent, but also efficient, care translates into streamlined costs and happier patients. Hospitals that are rated efficient provide care at the lowest overall cost to the system. This means that they are standout institutions for both for patients and for insurance providers with regard to controlling costs.

As it stands in 2016, the efficiency domain is weighted at 25 percent of a hospital’s Total Provider Score (TPS). The efficiency domain makes up a smaller portion of the overall TPS than the outcome domain (40 percent of the total TPS), but plays a larger role than the clinical process of care domain (10 percent of the TPS) and even the patient experience of care domain (20 percent of the TPS).2 Being able to hit the benchmark for efficiency is critical to an acceptable TPS for the value-based purchasing model. In 2017, the breakdown will change to 30% clinical process of care, 25% patient experience of care, 25% efficiency and 20% safety.

Since efficiency is determined on the basis of cost-per-visit, and the majority of visits are in a similar range of cost, the points where hospitals can focus their efforts to reduce hospital-wide cost-per-visit is on the outliers – the individual visits that cost far more than the average.  

Many of the conditions that cause the cost, and length, of individual hospital visits to spike are created in hospital environments. Many of these conditions are avoidable and preventable with the right tools. Hospital-acquired infections (HAIs), adverse drug reactions, and incorrect or omissions of care are some of the biggest culprits in turning standard hospital stays into expensive and protracted experiences – as well as in leading to readmissions.

Implementing technological solutions that monitor care throughout a hospital can cause a real impact in limiting the number of HAIs and other avoidable but costly conditions that can appear in hospital environments. These tools can help ensure that patient care is efficient and that a hospital is compensated accordingly.


  1. Hospital Compare. Efficiency domain:
  2. Hospital Compare. The total performance score information:

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

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