C-Suite Cheat Sheet: Value-Based Purchasing

Educational Briefing for Suppliers and Service Providers

Executive Summary

The Hospital Value-Based Purchasing (VBP) Program adjusts Medicare payments to hospitals based on a pre-set list of quality and efficiency measures. It was one of three pay-for-performance programs (along with the Readmissions Reduction Program and Hospital-Acquired Conditions (HAC) Reductions Program) introduced as part of the ACA, and is the only program that is budget neutral. That is, at the end of a fiscal year, high-scoring hospitals will see an increase in their Medicare reimbursements, while low-scoring hospitals will be reimbursed at a lower rate, resulting in a net neutral effect on the budget.

This is distinct to the VBP Program; in the Readmissions and HAC programs, there is no opportunity to earn a bonus, rather the best outcome is avoiding a penalty. VBP promotes quality care delivery, positive patient experience, and cost effectiveness by factoring in each of these elements into scoring.


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