Value Based Purchasing

Value Based Purchasing: Reducing Financial Penalties by Ignoring the Ill.

Jon Willis

American Military University

One of the major components of Health Care Reform is Value Based Purchasing. At the heart of Value Based Purchasing is the goal of providing better quality services at a lower cost. Many of the reforms in healthcare were crafted for the improvement of patient outcomes. However, aspects of reforms like Value Based Purchasing are having unexpected repercussions. For example, a few years ago, Medicare stopped reimbursing for all cause readmissions within 30 days. Meaning, if someone comes in for a hip replacement, then gets readmitted in two weeks for a car accident, the hospital will not receive reimbursement for that admission. The same holds true for the complex patient who may have a chronic disease such as diabetes or heart failure that may require multiple admissions to the hospital. As a result, physicians are becoming more selective of who they will and will not treat as not treating someone can be more profitable than treating them. There is financial incentive to exclude the sickest and most complex patients.

The concept of Value Based Purchasing arose out of the excessive cost of health care in the US compared to other industrialized nations. The United States spent in 2006 more than 16% of its GNP on healthcare expenses but does not have better outcomes than other countries. In the same year in the US, it is estimated more than $2,105 billion was spent on healthcare. As the number of Medicare dependents increases as “baby boomers” age, by 2016 it is estimated to nearly double to $4,007 billion. It is felt that these costs arise out of a system that rewards utilization without regard to patient outcomes. Therefore, there is impetus for governmental and private purchasers of care (Medicare and the insurance industry) to seek ways to contain costs either by using constraints or less expensive providers...