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, the nation continues to compare unfavorably with many other industrialized countries across a wide range of measures (Kavanagh & Cimiotti, 2012). In fact, the U.S. health care system continues to suffer from rapidly increasing costs and lower quality care relative to other industrialized countries (Kavanagh & Cimiotti, 2012). In response to this failure to achieve satisfactory results despite 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 offers only an outline for change, there also remains a need to identify 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. The organization's mission to provide the highest quality medical care to the nation's veterans makes the need to identify the most cost-effective, evidence-based solutions both 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 key stakeholders and critical departments is followed by a strategic plan to fully implement VBP over the next three years. A summary of the research and important findings is provided in the conclusion.

Evaluating the VA's Embrace of Value-Based Purchasing

In reality, VBP suffers from some misperceptions among practitioners, due in part to the emphasis on "purchasing" in the term. VBP, however, includes a much wider range of activities intended to improve the quality of health care services. According to the National Business Coalition on Health's Value-based Purchasing Council, 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 across its nationwide network of 152 medical centers, VBP represents a useful framework for systematically implementing 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 needed because the VA competes with the private sector for some types of patients (Burgess, 2011). To the extent that the VA succeeds in improving its quality of care will likely be the extent to which it is able to more effectively compete for these patients while simultaneously improving health services for all veteran patients. As the National Business Coalition on Health's Value-based Purchasing Council emphasizes, organizations that adopt 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). For 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 Healthcare System, the VA has only partially embraced the tenets of VBP to date, and implementation of some components remains in the planning stages. It is important to note that not all components of VBP are applicable to the VA. Since the VA occupies a unique position in the national health care system — serving as both a payer and a provider of services — implementing VBP initiatives requires a full understanding of the organization's mandate and operations. On one hand, some VBP requirements apply to the VA in the same fashion as to other health care providers. Burgess (2011) notes 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, the VA's unique role also means that only certain aspects of VBP are directly applicable. Burgess (2011) points out that "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). Other aspects of VBP are also applicable to the VA, including the use of appropriate metrics to measure clinician performance and resource utilization relative to clinical outcomes. This means implementing processes that can aggregate performance data transparently and compare these data to other VA medical centers and civilian hospitals to identify areas of deficiency, reduce waste, and identify opportunities for improving health care quality.

The VA also differs from non-VA health care providers because of the source of its funding. Nevertheless, responsible stewardship of scarce taxpayer resources requires that make-or-buy decisions achieve optimal outcomes. 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). Because the VA will be "borrowing" money from the Treasury during projected deficit years, it makes sound business sense to use strategies that can improve clinician performance while simultaneously achieving reduced costs and waste.

Nevertheless, the VA faces many of the same constraints as non-VA counterparts. 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 the VA must develop strategies for identifying community resources that can complement its services while maintaining a sufficiently robust range of medical services to satisfy the needs of the majority of its patient base (Burgess, 2011). It also means the VA must implement additional VBP framework components to achieve its Blueprint for Excellence goals and comply with the Department of Defense and VA Central Office mandates for transitioning to electronic health records.

Even in this area the VA has confronted challenges not shared by most non-VA providers. Burgess (2011) notes 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" (p. 3). Like Medicare, the VA shares common challenges in the provision of high-quality health care services, and these challenges are exacerbated by rising costs of technological solutions and the diversity of its patient population (Burgess, 2011). Some departments, such as nursing, have made further progress in implementing VBP initiatives (Kavanagh & Cimiotti, 2012).

Although the VA has made some progress by collaborating with CMS on joint standards for transparency of reporting and safety issues, further steps will require additional collaboration and system-wide changes that will demand significant time and effort. Burgess (2011) 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" (p. 5). The VA's current electronic health records (EHR) system remains a work in progress, and many of the other information technologies in place are legacy systems that will require significant upgrade or replacement (Wisdom & Ford, 2010). Given the enormity of the VA's size and the scope of its operations, implementing additional VBP initiatives will be complex and costly enterprises.

To its credit, the VA has already included VBP as part of its vision for the future. 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). These data will be analyzed to identify the extent to which value increases over time relative to the resources required to achieve improvements in care (VA blueprint for excellence, 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 and measure clinical performance against other health care providers, including non-VA facilities. The selected components of the VA's framework are described below.

Selected Components of the IOM Framework Guiding the VA's VBP Initiatives

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 VA 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. Steps include: (1) developing core measures applicable to VBP initiatives; (2) developing safety metrics concerning nosocomial conditions; and (3) developing performance measures for use by the Physician Quality Reporting System (PQRS) and the 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. Innovations in technology such as mobile applications will be employed to collect feedback from veterans in real time both during and following outpatient visits. Using this systematically collected data, the VA will endeavor to identify the source of problem areas in order to resolve them promptly and prevent their recurrence. This component will also help fine-tune health care services to individual patient needs, support patient education, and identify best practices for implementing new services.

Provide individualized treatment planning. This component is focused on ensuring that the IOM's timeliness goals are met in providing veteran patients with appointments for primary and specialty clinics as well as other VA services. It also includes the online publication of health information and support services according to veterans' preferences. The VA will rely on the IOM to develop clinically appropriate benchmarks to assess the effectiveness of VBP-related initiatives concerning improved access to health care services and will adopt appropriate timeliness and access policies based on emerging findings.

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 health care services for veteran patients. It seeks to eliminate waste along the entire supply chain, culminating in the actual delivery of medical care. Metrics include wait times for outpatient appointments, the extent to which practitioners' time is wasted, and other factors that detract from quality of care. This component requires top-down support but relies on front-line staff feedback to identify improvement opportunities, providing a systematic framework for continuous improvements in supply chain management 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 of the veteran population. It is designed to improve practitioner efficiency by streamlining clinical practices to maximize time available for patient treatment, providing allied health care staff to optimize clinician time, and eliminating unnecessary administrative burden that does not directly contribute to health service quality.

Simplify the VA Leadership Performance Contract (LPC). This component involves more carefully aligning the LPC with the VA's strategic goals and the metrics used to evaluate progress. The simplified LPC should include three elements: (a) evaluate progress in attaining the strategic goals outlined in the Blueprint for Excellence; (b) assess comparison findings from 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. While elements (a) and (b) can be rated along a percentage continuum, element (c) should be rated either "pass" or "fail," with a failure disqualifying 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 support a "Commission on Care" (COC). The COC will be tasked with performing a thorough evaluation of the current state of VA health care services and the feedback received in response to the Blueprint for Excellence, with a view toward 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 designated VA element 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.

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 momentum despite the complex challenges involved. These issues are discussed further below as they apply to the three most important departments in a VA medical center: purchasing service, nursing service, and ambulatory care service.

Strategic Plan: Key Departments and Their VBP Goals

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 are purchasing, nursing, and ambulatory care.

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 following purchasing activities.

Medical/Surgical Prime Vendor. These activities involve 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 three-month prime vendor contracts that can be extended indefinitely. Prime vendors are paid the product price plus a distribution fee by all VA medical centers, with prices tied to the VA National Standardization Program, the Federal Supply Schedule Program (FSS), the Veterans Integrated Service Network (VISN), local contracts, or a combination thereof. The distribution fee reimburses and rewards prime vendors for warehousing and delivery costs in order to optimize supply chain management, increasingly facilitated by electronic commerce systems specifically designed for these applications.

Subsistence Prime Vendor. These activities 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 at minimum three times a year to ensure the VA receives timely bids for high-dollar products.

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

As can be discerned from the purchasing responsibilities outlined 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, the quality of nursing services directly affects clinical outcomes and patient satisfaction — both key performance measures as mandated by the Joint Commission and the tenets of VBP. The VA's nursing department has made more progress than some other departments in implementing VBP-related initiatives to improve clinical outcomes while identifying opportunities to reduce costs. 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 these benefits, 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).

One of the VA's VBP-related goals is to develop service-specific measures that can be used to evaluate performance, identify opportunities for improvement, and develop appropriate incentives for superior performance. Therefore, it will be important for VA nursing services to develop appropriate nursing measures for this purpose (Kavanagh & Cimiotti, 2012). Kavanagh and Cimiotti (2012) point out that optimal outcomes will improve veteran care while saving taxpayer money: "NSVBP needs to be designed and incentivized to decrease adverse events, hospital stays, and readmission rates, thereby decreasing societal healthcare costs" (p. 387). Fully implemented and appropriately administered, NSVBP can provide a "win-win" outcome by aligning the cost-effectiveness of nursing care with incentives and improvements in clinical outcomes, 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 delivered across the medical center, designated physicians' offices, or ambulatory surgical centers (Ambulatory care, 2016). Typical procedures include specialty clinics such as dermatology, minor surgery, eye care, and routine follow-up visits (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.

Conclusion

The research was consistent in showing that the U.S. Department of Veterans Affairs shares many of the same goals, challenges, and priorities with respect to implementing value-based purchasing initiatives as non-VA providers — including most especially the need to develop appropriate performance measures, establish benchmarks, and evaluate the effectiveness of current health care practices in order to continuously improve the quality of care and contain and reduce associated costs. The research was also consistent in showing that there are some important differences between the VA and non-VA private sector health care providers, most notably the difference in funding sources. Because the VA's health care mission is so important and its budget so large, the constraints to implementing additional VBP-related initiatives at the local level should remain the focus of VA Central Office and regional authorities. Systematically achieving the department-level goals according to the timetable described above will facilitate this process and help ensure that the nation's veterans receive the high-quality health care they have earned.

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