Progress in Value-Based Purchasing – High Performance Health Care
Financing, Health Policy, Leadership

Progress in Value-Based Purchasing

88587326One of the important goals of health care reform is to bend the cost curve of health care inflation.  Two recent events show progress on this long journey. 

Section 3001 Value Purchasing

The Affordable Care Act (ACA) contains 10 major sections (titles) and the third is entitled “Improving the Quality and Efficiency of Health Care.”  The first section (3001) is the Hospital Value-Based Purchasing Program (VBP) and its location shows the importance the authors of the ACA felt it deserved.   Many health policy analysts have argued for years that the payment system needed to change from paying for volume to paying for “value.”  Value is most commonly defined as the highest quality clinical care at the lowest cost.

The Centers for Medicare and Medicaid Services (CMS) has recently released its draft regulations to implement Section 3001 and, although lengthy, it deserves to be read by health care leaders.  It can be found online in the Federal Register.

The VBP builds on a number of years of successful reporting of quality in hospitals that is now available on

Translating quality reporting into real money is a delicate regulatory exercise and CMS has made a reasonable start with a strong focus on quality.  CMS defines quality as both clinical quality and patient satisfaction.  Most of the quality measures are process measures, but some outcomes are included and they will be expanded in the future.  CMS also has devised a system that rewards both “achievement” for high performers and “improvement” for lower performers who are demonstrating better results than prior years.  Interestingly, the draft regulations barely mention “efficiency” as agreement on these measures is not yet widely agreed upon by health care professionals. 

VBP in Action: Massachusetts Blue Cross Alternative Quality Contract (AQC)

Since 2009, Blue Cross Blue Shield of Massachusetts has provided a five-year contract which is a modified global payment model where annual payments to medical groups are linked to monthly budgets for each patient with quality performance incentives.

In the first year, the 6,300 physicians working under AQCs improved care more than the 14,200 physicians working in the Blues’ traditional HMO network. The participating physicians have the opportunity to earn up to an additional 10 percent of their global budget by meeting 64 quality measures, including 32 hospital measures. These measure processes, outcomes and patient-care experience. AQC participants did better than those physicians working under the traditional network agreement. For instance, the AQC groups’ performance on preventative-care measures was three times that of non-ACO groups.

Reducing the rate of hospital readmissions and non-emergent emergency use are also goals of the program. The readmission rate for both groups averages 8 percent, but AQC groups in the program longest showed improvements, and a decrease equivalent of $1.8 million in avoided readmission costs. One AQC reduced its non-emergent ER visits by 22 percent in the year, a $300,000 savings in ER costs, according to the report.

One of the more successful groups participating in the AQC is Atrius Health (800 physicians.)  Their journey to improved care management and financial success with the AQC is detailed here.

The Accountable Care Organization regulations will soon be released, but the success of the AQC provides hope that the concept of Value-Based Purchasing can be realized nationally.

In my next post, I will explore the Lean Six Sigma tools that Atrius and other leading health systems are using to support making significant achievements in improving quality.



Vesely, R. 2011. Pilot Payment Plan Cuts Costs; Non-Traditional Model also Improving Quality. Modern Healthcare 41.5 (2011)

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