Value-based Purchasing: A Strategic Overview for Health Care Industry Stakeholders

New Issue Brief examines value-based purchasing in the context of health care reform


Interest is high in both public and private health care sectors to achieve better outcomes and value for funds invested. Value-based purchasing (VBP) is a payment methodology that holds health care providers accountable for the quality and cost of the services they provide by a system of rewards and consequences, conditional upon achieving pre-specified performance measures.

VBP payment reform is expected to reduce Medicare spending by approximately $214 billion over the next 10 years and has significant implications for health care organizations. The Centers for Medicare and Medicaid Services (CMS) began implementing pilots in 2003; health care reform legislation can accelerate VBP as cost and quality concerns are aligned.

This Issue Brief:

  • Defines VBP in health care delivery;
  • Summarizes notable VBP initiatives already implemented by CMS;
  • Looks ahead to VBP implementation under health care reform legislation;
  • Reviews commercial health plans' response to VBP and other payment reforms;
  • Discusses potential challenges of implementing VBP;
  • Provides key takeaways for health care providers, employers, health plans, state and federal government, and consumers.