Value-Based Purchasing Strategy for Finance, IT, and Purchasing

Executive Summary

My organization has a fairly high commitment to value-based purchasing (VBP), and I believe that with a clear plan it can become even more engaged with VBP over the next three years. While one might naturally think that those who deliver medical services are the most important — and they are very important — I would like to focus on the roles that the Finance, Purchasing, and IT departments play in achieving the balance between high-quality service delivery and cost control. By engaging all relevant stakeholders and making VBP a central focus with consistent messaging over the course of three years, it is believed that the organization can set and achieve fairly aggressive goals with respect to VBP objectives.

All three departments will need to prepare by reviewing how the VBP program works and understanding how their specific functions contribute to these objectives. Each department will then need to outline the specific steps it will take to influence the achievement of VBP targets. The first steps must be outlined clearly, but this is a continuous process, and one of the most important elements will be ensuring sustained commitment to these objectives throughout the three-year period.

There will definitely need to be training in order to implement the strategy. The first phase of training will focus on the basics of VBP, providing the groundwork and context for each department and its key managers to understand the roles they will need to play. The next phase of training will be more functional, with managers for each department training their employees on the specific behaviors necessary to succeed.

Organization's Current VBP Status

Value-based purchasing is an initiative that rewards acute-care hospitals with incentive payments for the quality of care provided to Medicare beneficiaries (CMS, 2017). The program originated as a tactical measure to increase overall healthcare quality and is part of a larger reform project (CMS, 2017). In order for a healthcare facility to excel at VBP, it must deliver high-quality service at a cost that fits within the Medicare payment structure. Because of Medicare's high bargaining power, it dictates the rates it pays to healthcare providers. By also dictating quality levels, it compels healthcare facilities to excel at efficient, highly reliable service delivery that is also cost-effective. My organization is committed to VBP as a means of serving high volumes of Medicare patients and has built VBP strategy into most of its departments.

My current organization has embraced VBP to a fairly high degree. There are several reasons I believe this. First, staff are made aware of service standards and of management's desire to receive incentive payments through the VBP program. Second, the organization has restructured certain aspects of healthcare delivery around the needs of Medicare patients — partly to address the aging population, but also as a means of providing better care to Medicare recipients. VBP standards are regularly discussed at the managerial level, and there is a high level of engagement with VBP metrics among managers.

While management does not always explicitly state that VBP is a top priority, the high visibility of the program and the efforts made to engage Medicare patients indicate that value-based purchasing is indeed a priority for senior management. At the operational level, a meaningful degree of awareness of VBP has been established, and there are actions being taken that clearly support VBP as a strategic priority.

Departments Impacting VBP

Value-based purchasing is influenced by a number of departments. The three most important non-clinical ones are Finance, Purchasing, and Information Technology. Each contributes in different ways to achieving VBP targets for patient care.

The Finance department's role is fairly direct. Finance tracks costs — what each procedure costs — and then works with other functional departments to find ways to keep those costs at levels where VBP goals are being met. Finance is uniquely positioned to track financial transactions and serves as the final line of control. By setting budgets and examining cost structures, Finance plays a critical control function to ensure that the hospital is able to treat Medicare patients profitably, and to take full advantage of the funding available through the VBP formula.

The Purchasing department is the second critical area. While Finance records transactions and exerts financial control, Purchasing is ultimately responsible for ensuring that medical equipment and supplies are acquired at prices that allow the organization to deliver value-based treatment. By sourcing supplies from cost-effective suppliers, buying in bulk when appropriate, and applying other purchasing best practices, the Purchasing department equips healthcare practitioners with the tools to deliver an excellent standard of care at the lowest achievable cost — without compromising that care.

The third department that can play a critical role is Information Technology. Obviously, the departments directly responsible for clinical care matter as well, but IT is playing an increasingly transformative role in healthcare. The use of remote monitoring, telemedicine, clinical apps, decision-support tools, and other technological advances can result not only in dramatically improved health outcomes at lower cost, but also in reduced malpractice risk. However, IT has not yet fully delivered on its promise in healthcare settings (Agha, 2015). This suggests that many healthcare organizations have not been sufficiently strategic in selecting which technologies to adopt and how to deploy them. If IT works closely with clinical delivery teams and with Finance, it can help ensure that only technologies which genuinely add value are adopted — resulting in lower service delivery costs, fewer errors, and progress toward VBP targets.

References

Agha, L. (2015). The effects of health information technology on the costs and quality of medical care. Journal of Health Economics, 34, 19–30.

CMS (2017). Hospital value-based purchasing. Center for Medicare and Medicaid Services. Retrieved June 4, 2018, from https://www.cms.gov/Outreach-and-Education/Medicare-Learning-Network-MLN/MLNProducts/downloads/Hospital_VBPurchasing_Fact_Sheet_ICN907664.pdf