VHA Conference: Get set for value-based purchasing

In this context, ‘purchasing’ refers to Medicare’s purchases of hospital services

VHA members bought nearly $26 billion in supplies and purchased services in 2009 through VHA and Novation contracts. This figure represents a 3.6 percent increase in contracted purchases over 2008. The Irving, Texas-based network’s revenue increased approximately 2.2 percent, from $622.4 million to $636.4 million. Operating income decreased 1 percent, from $331 million to $327.9 million, due to a year-over-year change in VHA’s employee compensation liability. Excluding this change, VHA realized annual operating income growth of 2.7 percent.

“It’s hard to recall a more turbulent year in health care – from lingering economic woes to uncertainties about the impact of national health care reform,” said Curt Nonomaque, president and chief executive officer of VHA, at the network’s recent Leadership Conference in Orlando, Fla. “Through it all, we saw members rely on VHA more than ever, which increased the value our cooperative delivered. That meant more savings for the not-for-profit health care organizations we serve and better care for their patients and their communities.”

VHA reported it distributed $371 million to its members in 2009, and helped members achieve $1.1 billion in savings on purchases, up from $997 million in 2008. Nonomaque noted that manufacturer rebates declined significantly in 2009, which led to a slight decline in total cash distributions when compared to 2008. However, the drop in manufacturer rebates was offset through contract price reductions negotiated by Novation, VHA’s supply contracting company, he said.

Key initiatives of the past year for VHA included:

  • Increased emphasis on efforts to disseminate clinical improvement knowledge to members. VHA’s Leading Practice Portal™ is said to have been enhanced to include easier and more intuitive navigation. In addition, its Leading Practice Blueprint™ catalog grew to include nearly 80 blueprints in 2009. The blueprints capture the cultural elements and hidden factors that are believed to define leading clinical performance.
  • Continuing development of VHA member networks, in which members collaborate and develop solutions for common operational and clinical challenges. One network in the Central Atlantic region is said to have helped participating members reduce their methicillin-resistant Staphylococcus aureus (MRSA) infection rate by an average of 39 percent.

Preparing for value-based purchasing
At the Conference, VHA announced the introduction of a new suite of services to help members prepare for the start of value-based purchasing, a new payment system that will be implemented for the Medicare program by the Centers for Medicare and Medicaid Services starting in October 2012. Under value-based-purchasing, hospitals that fail to meet CMS-mandated performance targets for five clinical conditions and for ratings reflecting patients’ perspectives on care will be subject to reimbursement penalties.

The program is called VHA Value Insurance Program Services, or VIP Services. “It’s a dynamic environment, there’s a sense of uncertainty,” said VHA Chief Medical Officer Trent Haywood, M.D., speaking with the Journal of Healthcare Contracting. “People aren’t certain what’s in the legislation or what its ramifications are.” But they do know that their payments will be at risk if they fail to meet certain performance targets. “People want to feel a sense of security in this value-based purchasing environment.” VIP Services is intended to help them do so, by implementing best practices. Haywood is the former deputy chief medical officer of CMS.

October 2012 may seem far away, but Haywood notes that many healthcare experts believe 2011 will be used as the baseline year for measuring hospital performance in the value-based-purchasing program. That leaves hospitals with little time to implement practice changes or improvement strategies.
VIP Services is designed to help hospitals focus on the five clinical conditions (and more will undoubtedly follow in the years ahead, says Haywood) for which CMS is mandating performance targets: acute myocardial infarction, heart failure, pneumonia, post-operative complications, and healthcare-associated infections. CMS has also told hospitals that it will take into consideration the patient’s perspective of his or her care when determining reimbursement. This is based on the so-called HCAHPS score. (“HCAHPS” stands for “Hospital Care Quality Information from the Consumer Perspective.”)

VIP Services will help hospital leaders identify their performance and financial risks under value-based purchasing, as well as specific opportunities to adopt proven practices found in the VHA network. It will focus on what VHA calls “context-based design principles that fit each hospital’s unique environment.”
“We’ve all been in that situation, where an outside consultant sees the world in one particular manner, and the solution [he or she recommends to the client] is what the consultant had previously determined it should be,” says Haywood. “That’s opposite the way it should be done. [VIP Services] does not offer an idealized model. Instead, it is based on [the hospital’s] particular context.”

The program is intended to engage four levels of professionals in healthcare institutions: the C-suite, the chief clinical executive, operational managers at the unit level, and the bedside clinician. The bedside clinician is an important part of the picture in terms of improving clinical performance, he says. “They have to help you design [new practice patterns], because they will be doing it every day.” Far better that than simply handing them a protocol that was developed by someone else, some place else. “If you’re not working in the environment, you don’t know how to get things done. [Bedside clinicians] have vital local knowledge in a particular practice that a senior executive may not have.

“In this environment, knowledge is the competitive advantage,” says Haywood. “The better we can transfer knowledge, the more successful we will be. For the bedside clinician, knowledge will make the competitive difference.”

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