What Can the Past of Pay-for-Performance Tell Us About the Future of Value-Based Purchasing in Medicare?

Published In: Healthcare, v. 1, 2013, p. 42-49

Posted on RAND.org on January 01, 2013

by Andrew M. Ryan, Cheryl L. Damberg

Research Question

  1. To what extent do Medicare's existing and planned value-based purchasing programs align with best practices in pay-for-performance (P4P) program design?

As mandated by the Affordable Care Act, the Medicare program has implemented pay-for-performance (P4P), or Value-Based Purchasing, for inpatient care and for Medicare Advantage plans, and plans to implement a program for physicians in 2015. In this paper, we review evidence on the effectiveness of P4P and identify design criteria deemed to be best practice in P4P. We then assess the extent to which Medicare's existing and planned Value-Based Purchasing programs align with these best practices. Of the seven identified best practices in P4P program design, the Hospital Value-Based Purchasing program is strongly aligned with two of the best practices, moderately aligned with three, weakly aligned with one, and has unclear alignment with one best practice. The Physician Value-Based Purchasing Modifier is strongly aligned with two of the best practices, moderately aligned with one, weakly aligned with three, and has unclear alignment with one of the best practices. The Medicare Advantage Quality Bonus Program is strongly aligned with four of the best practices, moderately aligned with two, and weakly aligned with one of the best practices. We identify enduring gaps in P4P literature as it relates to Medicare's plans for Value-Based Purchasing and discuss important issues in the future of these implementations in Medicare.

Key Findings

  • Alignment with best P4P practices varies across the programs.
  • Design of the Medicare Advantage Program aligns most strongly with best-practice criteria.
  • It is unclear which P4P design elements are critical to motivate quality improvement.

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