The Convergence of Hospital Value-Based Purchasing and Healthcare IT

Ben H.

Hatched by Ben H.

Aug 07, 2023

4 min read


The Convergence of Hospital Value-Based Purchasing and Healthcare IT


The healthcare industry is constantly evolving, with new initiatives and technologies aimed at improving patient care and outcomes. Two key areas of focus in this regard are Hospital Value-Based Purchasing (VBP) and Healthcare Information Technology (IT). While these may seem like separate entities, they are interconnected and have the potential to revolutionize the healthcare landscape. In this article, we will explore the concept of Hospital VBP and its effectiveness, as well as the latest developments in Healthcare IT and their impact on the industry.

Understanding Hospital Value-Based Purchasing:

Hospital VBP is a program introduced by the Centers for Medicare and Medicaid Services (CMS) that incentivizes acute care hospitals based on the quality of care they provide to patients. The program adjusts payments to hospitals under the Inpatient Prospective Payment System (IPPS) based on their performance in various metrics such as mortality rates, patient safety, and healthcare-associated infections. Participating hospitals have a percentage of their Medicare payments withheld, which is then used to fund value-based incentive payments to hospitals based on their performance.

The Effectiveness of Hospital VBP:

While the Hospital VBP program has been in place since the Affordable Care Act (ACA) was introduced in 2009, its effectiveness is a topic of debate. Some argue that the program has been successful in driving improvements in quality of care, while others question its impact. One suggestion to enhance the effectiveness of the program is to increase the percentage of Medicare payments withheld from hospitals, potentially up to 3 or 5%. This would provide hospitals with a stronger incentive to prioritize quality care and drive better outcomes.

The Complexities of Hospital VBP:

One aspect of the Hospital VBP program that raises concerns is its complexity. The program incorporates elements such as Medicare severity diagnosis-related groups (MS-DRGs) and claim-by-claim adjustments, which can be challenging for hospitals to navigate. Simplifying the program and reducing administrative burden could potentially improve its effectiveness and encourage broader participation.

The Role of Healthcare IT:

In parallel to the Hospital VBP program, Healthcare IT has emerged as a crucial component in driving quality improvement and operational efficiency in the industry. The Q1 2023 Healthcare IT Report indicates that despite a slight decline in VC rounds and PE deals, there is still a significant need for advancements in healthcare delivery, reimbursement, and operations. The Healthcare Information and Management Systems Society (HIMSS) Conference highlighted the potential of generative AI and interoperability solutions, which have the ability to transform the industry but are currently underutilized.

Key Developments in Healthcare IT:

Several notable developments in Healthcare IT have taken place recently, further emphasizing its importance in the healthcare landscape. UnitedHealthcare's announcement to reduce prior authorization by 20% addresses concerns about overutilization and streamlines the process for patients. Partnerships between healthcare providers like Atrium Health and tech giants like Best Buy demonstrate the industry's focus on developing innovative solutions, such as hospital-at-home programs. Additionally, investments in value-based care enablers like Pearl, Vytalize, and Wellvana highlight the growing interest in leveraging technology to drive better outcomes.

Actionable Advice:

  • 1. Embrace Healthcare IT: Hospitals and healthcare providers should invest in robust Healthcare IT systems to streamline operations, enhance patient care, and improve outcomes. This includes implementing interoperability solutions and leveraging AI technologies to optimize decision-making processes.
  • 2. Advocate for Simplicity: Stakeholders in the healthcare industry should work together to simplify programs like Hospital VBP, reducing administrative burdens and improving participation rates. Streamlining processes will allow hospitals to focus on delivering quality care rather than navigating complex systems.
  • 3. Foster Collaboration: Encouraging collaboration between healthcare providers, payers, and technology companies is crucial for driving innovation and achieving meaningful advancements in patient care. Partnerships and collaborations can lead to the development of transformative solutions that address the industry's most pressing challenges.


Hospital VBP and Healthcare IT are converging to shape the future of the healthcare industry. While the effectiveness of Hospital VBP is debatable, there is a growing recognition of the need for advancements in healthcare delivery and operations. Healthcare IT, with its potential to optimize processes and improve patient care, is a key driver in this transformation. By embracing Healthcare IT, simplifying programs, and fostering collaboration, stakeholders can work towards a future where quality care is accessible to all.

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