Brief on Centers for Medicare and Medicaid Services CMS Value-Based Purchasing

¶ … 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 study identify Payers, consisting of the government, employers, and individuals, at the beginning of the medical industry value chain, followed by Fiscal Intermediaries, which include insurers, HMO's, and pharmacies. 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 from overuse of painkillers and excessive bleeding linked to improper use of blood thinners (Pear, 2013). The underlying premise of the article is that although the nation's healthcare delivery system has implemented a comprehensive network of incident reporting systems, which require nurses, doctors, and other healthcare professionals to document the occurrence of adverse events for reporting to hospital management and to federal agencies, the vast majority healthcare workers engage in wanton underreporting or simply neglect to fulfill this aspect of their duties. In light of this reporting, it appears that the state of QA/RM programs throughout America's healthcare system is irrevocably broken, which would necessitate a fundamental restructuring from self-reporting practices to independent oversight. As the article makes clear, "federal investigators identified many unreported events by having independent doctors review patients' records" (Pear, 2013), which is why individual states should maintain a review board of independent doctors who conduct quarterly reviews of a hospital's QA/RM efforts.