Pillar Three: Payment Reform

The third pillar of value-based purchasing is payment reform.

There are two critical aspects of payment reform:

1. Differential reimbursement based on demonstrated performance;
2. The need to redesign payment methodology to better align economic incentives with desired outcomes.

Both elements of payment reform are needed and complementary. Differential reimbursement or “pay for performance” as it is popularly known, reflects the principle, as in other segments of our economy, that payment rates should be aligned with performance. Differential reimbursement creates a powerful business case, now absent in the current system, for providers to produce high quality and efficient service.