¶ … Medicaid and Medicare Value-Based Purchasing A value chain is defined as "a linked set of value creating activities that begin with basic raw materials coming from suppliers, moving on to a series of value-added activities involved in producing and marking a product or service, and ending with distributors getting the final goods into the hands of the ultimate consumer" (Wheelen & Hunger, 2009). The process of improving raw goods along a value chain until a product is ready to bring to market includes chain segments such as uphill and downhill, and the effective supervision and analysis of its value chains is paramount to a corporation's ability to grow and thrive. The center of gravity along any value chain is defined as "the part of the chain that is most important to the company and the point where its greatest expertise and core competencies lie" (Wheelen & Hunger, 2009). Speaking of the medical field specifically, an example of a value chain can be found in the Wharton School's Study of the Health Care Value Chain, which examined "three major players at various stages of the value chain: producers (product manufacturers), purchasers (group purchasing organizations, or GPOs, and wholesalers/distributors), and health care providers (hospital systems and integrated delivery networks, or IDNs)" (Burns, et al., 2002). The authors of this comprehensive...

This link is followed by Providers, (hospitals, physicians, and IDN's), Purchasers, (wholesalers, mail-order distributors, and group purchasing organizations), and the value chain concludes with Producers (drug manufacturers, device manufacturers, and medical/surgical equipment manufacturers).
The Centers for Medicare and Medicaid Services (CMS) advocates that a policy of value-based purchasing be implemented by hospitals other health care providers, because the financial burden caused by devalued purchasing decisions is inevitably forced upon patients. A recent article published by The New York Times quoted federal investigators who recently concluded that "hospital employees recognize and report only one out of seven errors, accidents and other events that harm Medicare patients while they are hospitalized" (Pear, 2013). According to the reporting contained therein, hundreds of thousands of patients experience adverse medical events in hospitals every month due to a lack of value-based purchasing, with these complications including "medication errors, severe bedsores, infections that patients acquire in hospitals, delirium resulting…