HHS Launches Value-Based Purchasing Program

The Department of Health and Human Services (HHS) today launched a new initiative which will reward hospitals for the quality of care they provide to people with Medicare and help reduce health care costs. Authorized by the Affordable Care Act, the Hospital Value-Based Purchasing program marks the beginning of an historic change in how Medicare pays health care providers and facilities—for the first time, 3,500 hospitals across the country will be paid for inpatient acute care services based on care quality, not just the quantity of the services they provide.

This initiative helps support the goals of the Partnership for Patients, a new public-private partnership that will help improve the quality, safety and affordability of health care for all Americans. The Partnership for Patients has the potential over the next three years to save 60,000 lives and save up to $35 billion in U.S. health care costs, including up to $10 billion for Medicare. Over the next ten years, the Partnership for Patients could reduce costs to Medicare by about $50 billion and result in billions more in Medicaid savings.

In FY 2013, an estimated $850 million will be allocated to hospitals based on their overall performance on a set of quality measures that have been shown to improve clinical processes of care and patient satisfaction. This funding will be taken from what Medicare otherwise would have spent, and the size of the fund will gradually increase over time, resulting in a shift from payments based on volume to payments based on performance.