Business Case for Value Based Purchasing

Healthcare’s old reimbursement paradigm is no longer tenable.  High costs and the need to accelerate improvements in the quality of healthcare requires a new paradigm.  Regardless of the problems with the existing payment methodolgies, there must be a business case for adopting pay for performance if the health care industry is to expend the time and energy to affect the dramatic change it will take to accomplish it.  The business case is relatively simple to summarize on paper.  It can be summarized as follows.

1. Use of medical protocols (e.g., quality indicators) lead to better physical outcomes.
2. Better physical outcomes reduce complication rates and reduce costs associated with the care.
3. Better physical outcomes and less costly care result in patient satisfaction.

            As in many things in life, the concept is simple, the execution is hard.  A major concern with pay for performance is its potential to produce unintended results.  The “side effects” can take several forms.  If providers are paid to achieve certain results there is a natural tendency to take advantage of the system.  If physicians shun patients with difficult cases it may increase the score that a physician achieves on a scorecard used to calculate compensation, but does it really improve care?

 

            The existing payment systems may also lead to unintended consequences.  As laudable as reducing complications may be, a hospital which finds its profit margin reduced because it has reduced complications of conditions that produce higher profit margins will reward the payors with lower reduced payments thorough the hospital and not the payor’s actions.  There is little question that we do not know enough about the unintended consequences of implementing a pay for performance program. 

Comments

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