Value-Based Purchasing in Healthcare

Subject: Healthcare Financing
Pages: 8
Words: 2189
Reading time:
8 min
Study level: College

In the context of healthcare, value-based purchasing (VBP) is defined as the strategy of linking the payments for received services to the improved performance of healthcare providers. This type of payment ensures that providers hold themselves accountable for both the quality and the cost of services they offer. Therefore, inappropriate and low-quality care is reduced while rewards are given to practitioners with whom patients are satisfied the most. VBP programs are important because they combine a range of objectives into one system.

Hospitals are encouraged to eliminate or at least reduce the occurrence of adverse events such as medication errors to avoid harm caused to patients. To do so, they should adopt the standards of evidence-based care that ensure that patients get the best outcomes when receiving care in healthcare facilities. The change of processes in hospitals is needed to make experiences in care better. Other components of VBP include the increase of care transparency and recognition of facilities that provide services of high quality at costs lower than Medicare offers.

Origin of Value-Based Purchasing

It should be mentioned that value-based purchasing has originated recently. In January of 2015, “the U.S. Department of Health and Human Services announced their intent to tie 85% of all traditional Medicare payments to quality or value by 2016 and 90% of payments by 2018” (Chee, Ryan, Wasfy, & Borden, 2016, p. 2197). Due to the passing of the CHIP Reauthorization Act and the Medicare Access, it was possible to repeal the previously unsuccessful Sustainable Growth Rate formula that introduced alternative methods of payment, which enabled the commitment of far-reaching and bipartisan payments. Because of this, it was needed to establish a system in which clinicians had to understand the weaknesses and strengths of the services they provide, thus laying out the basis for the future of value-based purchasing in healthcare.

Parameters of Value-Based Purchasing

The principle of value-based purchasing implies the achievement of success when caring for patients. To do so, health care providers have to meet the established parameters. The first parameter is the measurement of patient outcomes and functional status. It is concerned with the increased move toward the accountability of hospitals through finding the valance between processes, structures, and outcome measures. Functional health status is also important for achieving the success of VBP programs because it will show any existing gaps in patients’ ability to meet their basic needs (functional capacity and functional performance).

The second parameter is care appropriateness. There is a risk of healthcare providers failing to use evidence-based practice guidelines due to the availability of fee-for-service systems which incentivize their diagnostic and treatment procedures and measuring the appropriateness of assigned procedures to patients. The parameter is complex because patients’ preferences may go against the metrics of care appropriateness. The third parameter is associated with the enhancement of Electronic Health Records (EHRs) for supporting performance measurement. Since so many EHRs fail to include a comprehensive set of data, it is hard to achieve success in VBP implementation.

The third parameter includes clinical quality for measuring the quality of health care facilities and professionals that work in them provide. Clinical quality measures (CQMs) can help healthcare providers to deliver efficient, safe, effective, and patient-oriented services, all of which are essential for achieving VBP success. CQMs measure a variety of care aspects, that include the safety of patients served at hospitals, the engagement of family members in the provided care, the coordination of services, the effectiveness of clinical services, and the overall public health. The parameter allows facilities to ensure evidence-based medicine and the application of logic.

Cost is the fourth parameter of VBP success. Since the goal of value-based purchasing in healthcare is ensuring that the best services are provided at reasonable prices, this parameter is especially important to consider. From pay-for-performance to bundled payments, it is essential to measure the approaches of facilities to price policies. Changes in income and spending are also important to consider due to the need to determine whether VBP programs can be implemented in certain facilities. Accountability and transparency imply the last parameter of value-based purchasing. The governance of healthcare facilities has been challenged by issues of transparency and the lack of accountability, which in turn affect patients’ experiences and the quality of care they receive. Because of this, healthcare organizations should establish an environment of coordinated care and show transparency in financial reporting.

Nurse-Sensitive Value-Based Purchasing

Nursing-sensitive value-based purchasing (NSVBP) refers to an initiative that means to promotes the appropriate practice and staffing environment. These are achieved through the establishment of monetary rewards and a structure of transparency. According to Kavanagh, Cimiotti, Abusalem, and Coty (2012), the National Database of Nursing Quality Indicators supported by other indicators can be used as measurements of nursing-sensitive outcomes within the initiatives associated with VBP. In regards to the indicators that focus on the improvement of nursing care, several should be mentioned. First, nurse retention and voluntary turnover are of immense benefit in creating reliable VBP initiatives. Second, nurse staffing measurements such as “full-time equivalents, nursing hours per patients per day, or nurse-to-patient ratios are often analytically adjusted for patient acuity” (Kavanagh et al., 2012, p. 389). Third, morbidity rates associated with the quality of nursing services are another indicator for successful VBP creation. All of these measures are structured and thus are encouraged to report by the majority of hospitals interested in maintaining the transparency and fairness of purchasing.

Problems of Value-Based Purchasing

Despite the apparent benefits of value-based purchasing, the system still has its disadvantages. A recent report developed by Harold Miller (2014) for the Center for Healthcare Quality and Payment Reform revealed several issues of VBP that remain to be addressed. When establishing such a program, physicians, hospitals, and other providers may be monetarily penalized for the failure to provide evidence-based care for patients with complicated health issues. Another issue may be associated with the inappropriate assignment of accountability to health care providers for services they cannot control nor can deliver while failing to hold them responsible for a variety of services they do offer. Following this logic, it is also possible that hospitals, nurses, physicians, and other providers will not be equipped with the necessary information for being able to deliver low-cost care without compromising its quality. Lastly, Miller (2014) identified an issue of patients receiving misleading information about specific providers offering low-cost and higher-quality care compared to others.

The identified issues are associated with the weaknesses in simplistic methodologies Medicare and other parties paying for care using for the assignment of accountability to specific providers of care. Under current approaches, most spending necessary to support physicians is usually taken from services that other providers offer. In addition, there is an issue of clinicians being assigned the responsibility of caring for patients without them even meeting. This results in confusion, resentment, as well as a lack of effective communication between patients and their providers. The existing approaches to VBP also show instances of physicians specializing in primary care being assigned the responsibility to care for patients with complex conditions that should be served by specialists (Miller, 2014). Taking into account the mentioned issues, it can be concluded that improved ways of assigning and measuring the accountability for spending are necessary but is not enough for achieving high-value systems of healthcare.

Role of Nurses

Nurses play a massive role in contributing to and leading transformative changes in VBP. They are fully contributing members of the quality of health care by engaging in interprofessional teams that aim to provide “seamless, affordable, and quality care” (Salmond & Echevarria, 2017). However, it must be mentioned that nurses’ contributions to the VBP establishment require an enhanced set of skills and knowledge, which they often lack due to the lack of hospitals’ resources for education. If to consider the value aspect of VBP systems, nurses play several parts. First, nurses are healthcare providers that influence the outcomes of care. For instance, the higher average levels of nurses’ human capital can improve patient satisfaction and therefore health outcomes. Importantly, the quality of human capital is fundamental: higher rates of employed nurses with baccalaureate degrees, higher experience in the field, and nurse certification are associated with improved VBP. This means that nurses have the responsibility for increasing the level of their expertise to assist organizations to achieve success in VBP.

Apart from adding value to healthcare organizations, nurses have to improve the existing processes and the environment within facilities. For instance, the introduction of transitional care guarantees the improvement of patients’ experiences, the enhancement of health outcomes, positive outlooks on team-based interventions, and decreased health care costs. A higher quality of nurse work environments is associated with better services and their results. Nurses are encouraged to foster a trusting environment where teamwork, balance, and mutual support are celebrated. To achieve success in these aspects, nurses should participate in hospital-level decision-making, dedicate time and effort to continuous education, work on reducing medication errors, and ensure continuity of patient care assignments (Lindrooth, Yakusheva, Fairman, Naylor, & Pauly, 2015).

Making Public Aware

When it comes to letting the public aware of the benefits or takeaways of value-based purchasing, the issue is complex. Facilities usually communicate the outcomes of VBP programs only when they are successful while the public lacks information about how these programs should be implemented. In addition, patients that receive services in healthcare facilities often fail to communicate their expectations of care quality because they do not know the appropriate standards of care. This means that the public is rarely aware of the results of VBP programs, which contributes to the lack of transparency and accountability.

Resources for the Public

When it comes to the sources of information that educate the public, there are not enough of them. A Google search of resources on VBP reveals a myriad of links to published articles, policy sheets, guidelines for practice, and resources for nurses. However, for the general public, there are not many resources. There is some information on VBP available at the Centers for Medicare and Medicaid Services (CMS). While this resource is reliable and provides abundant information on the principles of value-based purchasing, it is not oriented on VBP programs specifically and thus is not enough to ensure that the public is well-informed. Also, the American Hospital Association website provides some information about VBP programs in healthcare facilities; however, it has the same problem as the CMS website. Therefore, the exploration of resources suitable for the public shows that there are not enough of them. It is recommended for hospitals that have their websites create sections dedicated to VBP for the public’s easy access. CMS should also invest in developing separate VBP resources that the public can easily access.

Addressing Identified Issues

Continuous improvement is among the characteristics of VBP, and nurse leaders should engage in solving the problems associated with the system. It has been identified that assigning and measuring the accountability for healthcare spending can improve such issues as providers not controlling services, failures in attributed spending, and the lack of service appropriateness. To solve the problem of health care providers not being able to control their services and spending assigned to them, nursing leaders should identify the services and spending that providers can control. For instance, the differentiation of spending categories can be beneficial. According to Miller (2014), such categories can include “services both ordered and delivered by the physician being measured,” “service delivered by other providers that are integrally related to services delivered by provider being measured,” and “serviced delivered by other providers that resulted from orders or referrals” (p. 2). Two more categories include “services delivered by other providers that were related to services delivered or order by the provider being measured” and “all other services the patient received that are unrelated to services delivered by the provider being measured” (Miller, 2014, p. 2).

To address the issue of care appropriateness, nursing leaders should adjust to the differences in patient needs. This is possible through using concurrent risk adjustment, differentiated spending into subgroups for patients that have similar health conditions and needs, using EHRs for data management, and disaggregating non-health-related factors for identifying the influence on spending. Lastly, for dealing with the problem of failures in attributed spending on health care, nursing leaders should identify the areas of spending that are possible to improve. For instance, if there are services that do not meet the required standards of quality but still require significant monetary resources, they should be improved to meet VBP criteria.


To conclude, value-based purchasing is an effective tool for aligning the quality of services with affordable prices. It encourages facilities to be transparent and accountable for the services they provide while also considering the needs of their patients. Nevertheless, there are still some challenges to VBP implementation. It is recommended for nursing leaders to take action and establish an environment in which patients’ desires are considered and where high quality does not mean high prices. There is a significant gap in resources available to the public because most of them focus on research and thus are not appropriate for the general audience.


Chee, T. T., Ryan, A. M., Wasfy, J. H., & Borden, W. B. (2016). Current state of value-based purchasing programs. Circulation, 133(22), 2197-2205. Web.

Kavanagh, K. T., Cimiotti, J. P., Abusalem, S., & Coty, M.-B. (2012). Moving healthcare quality forward with nursing-sensitive value-based purchasing. Journal of Nursing Scholarship, 44(4), 385-395. Web.

Miller, H. D. (2014). Measuring and assigning accountability for healthcare spending. Center for Healthcare Quality & Payment Reform. Web.

Lindrooth, R. C., Yakusheva, O., Fairman, J. A., Naylor, M. D., & Pauly, M. V. (2015). Increasing the value of health care: The role of nurses. Leonard Davis Institute of Health Economics. Web.

Salmond, S. W., & Echevarria, M. (2017). Healthcare transformation and changing roles for nursing. Orthopedic Nursing, 36(1), 12-25. Web.