How the VA in Using Value Based Purchasing to Improve Health Care

¶ … components of value-based purchasing (VBP) that are most pertinent to the U.S. Department of Veterans Affairs (VA) based on its vital mission to provide high-quality health care services to the nation's veterans while identifying opportunities to reduce costs and improve efficiencies in ways that promote improved clinical outcomes in measurable ways. The study also describes the three departments of a VA medical center that will be most important in implementing VBP, purchasing services, nursing services, and ambulatory care services and provide appropriate goals for this purpose. Because the three selected departments are at different stages of their VBP implementations, the preparation needed to achieve their VBP-related goals will vary, but staff will need to be educated and trained concerning the basics of VBP and how they apply to their unique departmental situations and all three departments must develop appropriate performance measures that can be used to determine the cost-effectiveness of their operations in terms of clinical outcomes. Because the VA funding source is different from non-VA healthcare facilities, the goals of the VA's VBP program to reduce costs, improve efficiencies, and promote improved measurable clinical outcomes will be comprised of the following selected components: adopt and publish relevant metrics for comparison with non-VA facilities; provide accessible means of collecting feedback from key stakeholders; provide individualized treatment planning; add value and eliminate waste along every step of the supply chain; increase value-added opportunities by evaluating and supporting more efficient clinical practices; simplify the VA Leadership Performance Contract; perform a thorough evaluation of the current state of VA health care services; and, conduct a thorough environmental scan to provide the basis for annual veteran service planning. Finally, a discussion concerning the education and training that will be needed to achieve the VA's current VBP-related goals is followed by a summary of the research and important findings concerning these issues in the study's conclusion.

Value-Based Purchasing at the U.S. Department of Veterans Affairs

Introduction

Although the United States continues to spend up to 81% more on health care services per capita than any other country today, the nation continues to compare unfavorably with many other industrialized countries today (Kavanagh & Cimiotti, 2012). In fact, the health care system in the United States continues to suffer from rapidly increasing costs and lower quality care versus other industrialized countries across a wide range of measures (Kavanagh & Cimiotti, 2012). In response to this failure to achieve satisfactory results despite these enormous investments, the Patient Protection and Affordable Care Act (PPACA) mandated that the Centers for Medicare & Medicaid Services (CMS) implement a value-based purchasing (VBP) strategy to improve the quality of health care services while also reducing their costs (Kavanagh & Cimiotti, 2012). Because the PPACA only offers an outline for change, there also remains a need to identify the optimal approaches for implementing and administering VBP solutions (Kavanagh & Cimiotti, 2012).

These are especially important issues for the Department of Veterans Affairs' (VA) which is the largest health care provider in the United States today. This organization's mission to provide the highest quality medical care to the nation's veterans also makes the need to identify the most cost-effective, evidence-based solutions timely and relevant. One strategy that has proven efficacy for this purpose is value-based purchasing (VBP). This paper evaluates the VA's current position and strategy for the implementation of VBP requirements at the medical center level. A discussion concerning the key stakeholders and the critical departments of the VA that will be involved is followed by a strategic plan to fully implement VBP over the next 3 years. Finally, a summary of the research and important findings concerning the foregoing issues are provided in the study's conclusion.

Evaluation concerning the degree to which the VA has embraced VBP

In reality, VBP suffers from some misperceptions concerning its tenets and purposes among some practitioners, due in part to the stress on "purchasing" in the term, but VBP includes a much wider range of activities that are intended to improve the quality of health care services provided by clinicians. For example, according to the definition provided by the National Business Coalition on Health's Value-based Purchasing Council, value-based purchasing (VBP) is "a demand side strategy to measure, report, and reward excellence in health care delivery" (Value-based purchasing overview, 2016, para. 2). Likewise, Burgess (2011) reports that VBP is "a relatively new term in health care that encompasses, at its heart, the idea that the value equation includes both utilization or cost of services, and the quality of care delivered with those services" (p. 2).

Given the recent failures of the national health care system in general and the high-profile failures of the VA in particular to deliver excellence in health care in its nationwide network of 152 medical centers, it is clear that VBP represents a useful framework in which to systematically implement steps that will transform the organization into a world-class health care provider. Moreover, the improved clinical outcomes that can be achieved using VBP are also needed by the VA because the organization competes with the private sector for some types of patients (Burgess, 2011). To the extent that the VA succeeds in improving its quality of health care services will likely be the extent to which it is able to more effectively compete for these patients while simultaneously improving the quality of health care services for all of its veteran patients. As the National Business Coalition on Health's Value-based Purchasing Council emphasizes, organizations that use VBP "are rewarded with improved reputations through public reporting, enhanced payments through differential reimbursements, and increased market share through purchaser, payer, and/or consumer selection" (Value-based purchasing overview, 2016, para. 4). In order to the VBP initiative to succeed, however, the VA will require ongoing support from executive leadership and an unwavering commitment to better understand the needs of the healthcare marketplace (Chernof, 2016).

According to Burgess (2011), a senior investigator for the VA Boston Healthcare System, the VA has only partially embraced the tenets of VBP to date and implementation of some components of VBP remain in the planning stages. It is important to note, though, that not all of the components of VBP are applicable to the VA. Since the VA occupies a unique position in the national health care system in terms of being a payer as well as a provider of services, implementing VBP initiatives at the VA requires a full understanding concerning the organization's mandate and operations. On the one hand, some of the requirements of VBP apply to the VA in the same fashion as other health care providers. For instance, Burgess (2011) advises that, "The VA competes with the private sector by offering its own diverse blend of quality, access, and cost within a specific eligible patient population that thereby is offered universal access to health care" (p. 3).

On the other hand, though, the VA's unique role in the national health care system also means that only certain aspects of VBP are applicable. In this regard, Burgess (2011) points out that, "But since the VA operates as both the regulator of health care service provision and the provider of those services, many of the goals that CMS is promulgating apply to VA only in the 'make or buy' decision to provide services directly or contract for those services with the private sector" (p. 3). In addition, other aspects of VBP are also applicable to the VA, including the use of appropriate metrics to measure clinician performance and resource utilization versus the clinical outcomes that are achieved. This means implementing processes that can aggregate performance data in a transparent fashion and comparing these data to other VA medical centers and civilian hospitals to identify areas of deficiency, reduce waste and other opportunities for improving the quality of health care services.

In addition, VA also differs from non-VA health care providers because of the source of its funding; nevertheless, responsible stewardship and management of these scarce taxpayer resources requires that the make-or-buy decisions used by the VA for its purchasing needs achieve optimal outcomes. In this regard, Burgess (2011) emphasizes that, "The VA differs in that it does not operate off of a specific trust fund, so the financial viability of the federal government is not directly at issue, but it does mean that in evaluating 'make or buy' decisions the current Treasury interest rate is the best approximation of borrowing costs for VA" (p. 3). This means that during periods of budget deficits, the VA is in essence borrowing money from the U.S. Treasury for its operational budget (Burgess, 2011). As can be readily discerned from Figure 1 below, the Great Recession of 2009 served to increase federal deficit levels which have only recently returned to near pre-recession levels.

Figure 1. Recent federal deficits: FY 2005-FY 2015

Source: http://www.usgovernmentspending.com/include/usgs_chartDp01f.png

As can be seen from Figure 2 below, the projected federal deficit will continue to increase slightly before leveling off by 2020.

Figure 2. Budgeted federal deficits: FY 2016-FY 2020

Source: http://www.usgovernmentspending.com/include/usgs_chartDp02f.png

Because the VA will be "borrowing" money from the U.S. Treasury during these projected deficit years, it just makes good business sense to use strategies that can improve clinician performance while simultaneously achieving reduced costs and waste. Nevertheless, the VA is confronted with many of the same types of constraints to achieving these outcomes as their non-VA counterparts. In this regard, Burgess (2011) emphasizes that:

The use of payment incentives by VA in using VBP for ensuring quality and efficiency when buying from the private sector face the same challenges as when health plans use such incentives, including the key challenge in directing the incentive payment to an organized entity capable of bringing resources and organizational expertise to support process improvement. (p. 4)

This means that the VA just develop strategies for identifying resources in the community that can complement the services that are provided by the VA while maintaining a sufficiently robust range of medical services to satisfy the needs of the majority of its patient base (Burgess, 2011). This also means that the VA must implement additional components of the VBP framework in order to achieve its Blueprint for Excellence goals and comply with the relevant provisions of the Department of Defense and VA Central Office's mandates for transitioning to electronic health records.

Even in this area, though, the VA has confronted some challenges that are not shared by most non-VA health care service providers. For instance, Burgess points out that, "It can be difficult in some cases to convince outside contractors to follow VA directives and other evidence-based and outcomes-driven guidelines developed in VA if the contract represents only part of the contractors' business and requires costly redesign" (2011, p. 3). Like Medicare, though, VA shares some common challenges in the provision of high quality health care services to all its stakeholders and these challenges are exacerbated by the rising costs of technological solutions and the diversity of needs of their patient bases (Burgess, 2011). In addition, the VA shares some other commonalities with non-VA health care providers in what some departments, such as nursing, have made further progress in implementing and administering VBP initiatives (Kavanagh & Cimiotti, 2012).

Although the VA has made some progress by collaborating with CMS concerning joint standards concerning transparency of reporting and safety issues to provide patients with relevant information about their health care, further steps will require additional collaboration that will inevitably involve system-wide changes that will require time and significant amounts of effort. For example, Burgess adds that, "The focus of CMS in trying to incentivize electronic health records illustrates the transitions and effectiveness challenges perfectly, for a contractor providing care to veterans: fully adopting seamless information exchange with the VA electronic health records system would be especially costly and challenging" (2011, p. 5). The VA current electronic health records (EHR) system remains a work in progress and many of the other information technologies (ITs) that are in place at the organization are legacy systems that will also require significant upgrade or replacement (Wisdom & Ford, 2010). Based on the enormity of its size and the scope of its operations, it is clear that implementing and administering additional VBP initiatives at the VA will be complex and costly enterprises.

To its credit, the organization has already included VBP as part of its vision for the future of the VA. For example, the VA's Blueprint for Excellence (2014) emphasizes that, "Veterans deserve care that compares favorably to the best of private sector. Standard metrics (such as the CMS Core Measures) should be used to assess the performance of VHA's general health services, patient experience, and access to care" (p. 6). In order to determine if performance is improving, these data will also be analyzed to identify the extent to which value increases over time with respect to the amount of resources required to achieve improvements in care (VA blueprint for excellent, 2014).

For this purpose, the VA will use selected goals established for high-performance health care organizations developed by the Institute of Medicine (IOM) as a framework to improve clinical performance and measure this performance with other health care providers, including non-VA health care facilities. The selected components of the VA's framework are set forth in Table 1 below.

Table 1

Selected components of the IOM framework guiding the VA's VBP initiatives

Component

Description/Comments

Adopt and publish relevant metrics for comparison with non-VA facilities: This component requires the adoption and online dissemination of CMS Performance Measures that can be used to evaluate the VA's operations with respect to the Veterans Integrated Service Network (VISN) as well as the performance of practitioners and their health care facility in comparison with non-VA providers.

These steps include the following:

1. Developing core measures that can be applied to VBP initiatives;

2. Developing safety metrics concerning nosocomial conditions; and,

3. Developing performance measures for use by the Physician Quality Reporting System (PQRS)'s Healthcare Providers and Systems (HCAHPS) outpatient patient experience survey.

Provide accessible means of collecting feedback from key stakeholders: This component involves implementing innovative approaches to collecting real-time feedback from veteran patients as well as supply chain partners.

This component will employ innovations in technology such as mobile "apps" in order to collect feedback from veterans in a real-time fashion both during and following an outpatient visit. Using this systematically collected data, the VA will endeavor to determine the source of problem areas in order to resolve these at the time as well as formulate informed responses to prevent their recurrence if appropriate. This component will also help fine-tine the health care services to individual patient needs as well as providing a patient education element that helps keep veterans apprised of the treatment planning. In addition, this component can help identify best practices for the implementation of new health care services.

Provide individualized treatment planning: This component is focused on ensuring that the Institute of Medicine's (IOM's) timeliness goals are met in providing veteran patients with appointments for primary and specialty clinics, as well as other VA services. This component also includes the online publication of health information and support services at veterans' preference.

To achieve these steps, the VA will rely on the IOM to develop clinically appropriate measures that can provide benchmarks to assess the effectiveness of VBP-related initiatives concerning improved access to health care services. Further, the VA will also adopt appropriate policies concerning timeliness and access based on the findings that emerge from the IOM study.

Add value and eliminate waste along every step of the supply chain: This component is focused on adding value by employing LEAN management practices to improve the health care services provided veteran patients.

This component seeks to eliminate waste along the entire supply chain, culminating in the actual delivery of medical care. Therefore, this component evaluates metrics such as the amount of time veterans are kept waiting for their outpatient appointments, the extent to which practitioners' time is wasted, and other factors that detract from the quality of care. This component requires top-down support but relies on the feedback from health care staff on the front lines of delivery to identify opportunities for improvement. This component provides a systematic framework in which to produce continuous improvements in the management of the VA's supply chain at the medical center level.

Increase value-added opportunities by evaluating and supporting more efficient clinical practices: This component involves drawing on industry-standard models of physician and health care staff productivity tailored to the unique needs and characteristics of the veteran population.

This component is designed to improve practitioner efficiency by identifying ways to streamline clinical practices in order to provide as much time as possible for the treatment of veteran patients. This component also seeks to eliminate any time wasted by clinicians by providing them with the allied health care staff they need to optimize their time. In addition, this component seeks to eliminate unnecessary red tape that can consume large chunks of practitioner time that do not directly contribute to the quality of health services.

Simplify the VA Leadership Performance Contract (LPC): This component involves more carefully aligning the LPC with the VA's strategic goals and the metrics that are being used to evaluate how well the VA is achieving them.

The simplified VA LPC should include three components to achieve these goals: (a) evaluate how well the VA is progressing in attaining the strategic goals outlined in the Blueprint for Excellence; (b) the comparison findings that emerge from the evaluation of clinical and operational performance metrics, and (c) Congruent with the Office of Personnel Management's (OPM's) leadership criteria, develop appropriate measures for leadership competencies and integrity. Although component (a) and (b) can be rated along a percentage continuum, component (c) should be ranked either "pass" or "fail," with a failure representing a disqualification of both (a) and (b).

Perform a thorough evaluation of the current state of VA health care services

For this component, the VA will create and provide support services for a "Commission on Care" (COC). The COC will be tasked with performing a thorough evaluation of the current state of VA health care services as well as the feedback received in response to the Blueprint for Excellence and its recommendations with a view towards determining the extent to which these services are aligned with best evidence-based practices in the non-VA health care sector.

Conduct a thorough environmental scan to provide the basis for annual veteran service planning

This component requires a yet-unnamed element of the VA to continuously monitor the non-VA health care sector to identify current trends and innovations in health care that could be applicable to the VA's unique needs.

Source: Adapted from VA blueprint for excellence, 2014, pp. 14-15.

Achieving these broad-based goals at the medical center level will require a systematic approach that builds on the VA's successes to date while maintaining the momentum despite the complex challenges that are involved, and these issues are discussed further below as they apply to the three most important departments in a VA medical center, the purchasing service, nursing service and ambulatory care service.

Strategic plan to continue progressing VBP in the VA

Although each VA medical center typically offers a wide array of tertiary inpatient and outpatient services, the three departments that will have the most impact on VBP in are purchasing, nursing and ambulatory care as described below.

Purchasing Service. The VA National Contract Service has responsibility for National Contracts and Blanket Purchase Agreements (BPAs), which are established against VA and GSA Federal Supply Schedule contracts. VA's National Contract and National BPA programs are used by all VA medical centers and consist of the purchasing activities set forth in Table 2 below.

Table 2

VA Purchasing Service responsibilities/activities

Purchasing Responsibility/Activity

Description

Medical/Surgical Prime Vendor

These activities are concerned with administering the VA's nationwide medical/surgical prime vendor program which is required for use in all 152 VA medical centers. This program is comprised of seven 3-month long prime vendor contracts that can be extended indefinitely. The prime vendors are paid for the product price as well as a distribution fee by all VA medical centers, with the prices being tied to the VA National Standardization Program, Federal Supply Schedule Program (FSS), Veterans Integrated Service Network (VISN), local contracts or a combination of these. The distribution fee paid to prime vendors is designed to reimburse and reward prime vendors for the costs they incur as a result of warehousing and delivery in order to optimize supply chain management. These practices are increasingly being facilitated by electronic commerce systems that are specifically designed for these applications.

Subsistence Prime Vendor

These activities are intended to facilitate just-in-time deliveries for food as well as food-related supplies and equipment.

High Tech Medical Equipment

This branch of the VA collaborates with the U.S. Department of Defense (DoD) to evaluate bids for high-tech medical equipment systems in order to identify the best vendor. These activities are conducted three times a year at a minimum in order to ensure the VA receives the timeliest bids for these high-dollar products.

Pharmaceutical Prime Vendor

This program also uses just-in-time acquisition/inventory processes supported by specialized software applications. This program is also mandatory for all 152 VA medical centers.

Source: Adapted from NAC Purchasing Programs, 2016, para. 3

As can be readily discerned from the purchasing responsibilities outlined in Table 2 above, the operations of the VA medical center's purchasing service affect virtually every aspect of patient care and satisfaction, making this a vitally important department for inclusion in VBP initiatives.

Nursing Services. Like the purchasing service discussed above, the quality of nursing services provided also directly affect clinical outcomes and patient satisfaction, both key measures of performance as mandated by the Joint Commission and the tenets of VBP. As noted above, the VA's nursing department has made more progress in implementing various VBP-related initiatives in an effort to improve clinical outcomes while identifying opportunities to reduce costs. For instance, according to Kavanagh and Cimiotti (2012), "Nursing-sensitive value-based purchasing (NSVBP) helps to promote optimal staffing and practice environment through financial rewards and transparency of structure, process, and patient outcome measures" (p. 386). Notwithstanding the benefits that can accrue to the use of VBP processes and procedures in support of NSVBP, there remains a dearth of timely and relevant research concerning its use in real-world VA settings that can provide a set of best practices for other nursing services to follow (Kavanagh & Cimiotti, 2012).

As indicated in Table 1 above, one of the VA's VBP-related goals is to develop service-specific measures that can be used to evaluate performance to identify opportunities for improvement as well as to develop appropriate incentives for superior performance. Therefore, it will also be important for VA's nursing services to develop appropriate nursing measures for this purpose (Kavanagh & Cimiotti, 2012). In this regard, Kavanagh and Cimiotti (2012) point out that these outcomes will improve veteran care while saving taxpayer money in the process: "NSVBP needs to be designed and incentivized to decrease adverse events, hospital stays, and readmission rates, thereby decreasing societal healthcare costs" (p. 387). In sum, fully implemented and appropriately administered as part of the VA's VBP initiatives, NSVBP can provide a "win-win" outcome by aligning the cost effectiveness of nursing care with incentives and improvements in clinical outcomes as well as patient safety and satisfaction (Kavanagh & Cimiotti, 2012).

Ambulatory Care. Commonly referred to as outpatient care, the VA's ambulatory care service provides a wide array of medical services and surgical procedures that are delivered in the various parts of the medical center, designated physicians' offices or ambulatory surgical centers (Ambulatory care, 2016). Some of the typical procedures that are performed by VA's ambulatory care services include specialty clinics such as dermatology, minor surgery, eye care, routine follow-up visits and so forth (Ambulatory care, 2016). Because the vast majority of veterans are treated on an outpatient basis, this department also represents a key stakeholder in the VBP initiatives currently underway at the VA.

2. Goals for each of the three departments that will help the VA further the implementation of VBP

As noted above, the three selected departments are at different stages of their VBP implementations, so the preparation needed to achieve the following goals will vary; however, in each case, staff will need to be educated and trained concerning the basics of VBP and how they apply to their unique situations. In addition, all three of these departments must develop appropriate performance measures that can be used to determine the cost-effectiveness of their operations in terms of clinical outcomes.

Purchasing Services

Goal One. Align purchasing function with vendor ecommerce systems.

Goal Two: Develop appropriate performance measures.

Goal Three. Provide all stakeholders with the education and training they will need to use existing IT tools in support of VBP-related initiatives.

Nursing Services

Goal One. Develop appropriate performance measures.

Goal Two. Provide all stakeholders with the education and training they will need to use existing IT tools in support of VBP-related initiatives.

Ambulatory Care Service

Goal One. Develop appropriate performance measures.

Goal Two. Identify opportunities to outsource specialty clinics to third-party health care providers.

Goal Three. Provide all stakeholders with the education and training they will need to use existing IT tools in support of VBP-related initiatives.

How each of the above goals will help attain quality outcomes in both patient care and reimbursements over the next three years

Purchasing Service

Goal One. Align purchasing function with vendor ecommerce systems. Although the level of VBP uptake various from VA medical center to medical center and region to region, the goals for this department will generally include continuing the alignment of its medical/surgical prime vendor, subsistence prime vendor, high tech medical equipment and pharmaceutical prime vendor activities with vendor ecommerce systems in order to facilitate the purchase function, reduce waste, and improve the timeliness of deliveries.

Goal Two: Develop appropriate performance measures. In addition, an equally important goal for this department will be develop appropriate performance measures that can track the relationship between costs and the effectiveness of clinical care outcomes.

Goal Three. Provide all stakeholders with the education and training they will need to use existing IT tools in support of VBP-related initiatives. This goal is absolutely essential in order to provide purchasing department staff with the knowledge and tools they need to use existing and further innovations in IT resources in support of VBP-related initiatives.

Nursing Services

Goal One. Develop appropriate performance measures. In order to ensure that the best evidence-based practices are in place, nursing service should develop performance measures that evaluate the effectiveness of nursing care in ways that are congruent with the relevant patient-care dimensions of the Hospital Consumer Assessment of Healthcare Providers and Systems (HCAHPS) survey, including the quality of communication between nurses, physicians and allied health care staff, the efficacy of pain management interventions, satisfaction levels with nursing communications concerning medications, the quietness of nursing wards, and the adequacy of discharge information.