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1.) Create a positive incentive to improve performance.

VBP is an engine for improvement and can be a framework for fundamental transformation, but it must be built like any good business incentive program. It should be positive and motivational.
There are ample sticks in the reimbursement system today (non-payment for hospital acquired conditions, payment reduction for non-submission of data).
This program needs to use carrots. To achieve this, we recommend:

1. All unallocated funds must be used to reward top performers and improvers
2. There must be an annual actuarial assessment to identify savings. Our analysis shows that improved quality and outcomes can reduce healthcare costs over time.
3. These savings should be used to fund a bonus pool to further drive performance improvement.
4. Given that the program is likely to use existing funds and therefore constitute a payment reduction for some hospitals in the short term, it must be carefully phased in so that hospitals can realistically achieve the benchmarks

2.) Align physician and hospital interests.

The biggest challenge for hospitals in achieving top performance is support from physicians.
The system should be designed to achieve this by:

1. CMS and measure development organizations must assure alignment between physician and hospital measures.
2. Hospitals should be able to share money from the bonus pool with their physicians based on their performance on quality measures and the number of patients seen.

3.) Set benchmarks using the evidence gained from the CMS/Premier HQID project.

The HQID project has demonstrated a realistic level of hospital improvement. Therefore, we recommend:

1. Performance benchmarks should use the evidence of performance improvement attained by hospitals in the Premier demonstration project
2. Allow hospitals two years to attain the benchmark performance level

4.) VBP should be irrevocably tied to public reporting.

It is the combination of pay for performance and pubic reporting that inspires performance improvement. Therefore:

1. VBP should be irrevocably tied to public reporting of performance
2. The Hospital Compare Web site must be overhauled to make it more user friendly
3. Hospital Compare should include reporting of the hospital’s performance in delivering all recommended quality measures for each clinical condition.
4. All new measures should be tested and publicly reported before being used in a VBP program.

5.) Government should direct attention and resources to lower performing hospitals

QIOs should be directed to focus attention on non-performing hospitals
Private organizations that provide quality improvement services should be an option for underperforming hospitals to utilize instead of QIOs