Value Lessons from PFS for Medicaid’s VBP

Increased pressure on public sector budgets has prompted government to focus on improving value for money in social service contracts. In response, Pay for Success (PFS) has been trialed across a range of sectors, from supportive housing to juvenile recidivism, to improve the measurement and delivery of quality outcomes. Since 2015, Value Based Payment (VBP) models have emerged in the healthcare field as a shift away from paying for volume of services. These two innovative contracting models both aim to improve public sector value, and Medicaid entities can use both to more effectively manage population health.

However, the models differ in their approaches and development. PFS focuses on improved service quality and government accountability for expenditure through outcomes-based repayment. By contrast, VBP shifts cost fluctuations to providers, while standardizing quality through performance thresholds. PFS models are more likely to be developed through a feasibility process that involves services providers and their data, whereas co-development is not necessarily a fundamental part of the VBP model. PFS also offers flexible funding to providers for infrastructure and other improvements, whereas this level of flexibility is not available in VBP models until the most sophisticated manifestations, such as population-based payment.

A new paper from CSH offers a brief overview of both VBP and PFS models, discusses differences between them and how each can offer improved value for money, and lessons to apply to the future development of VBP.

“VBP healthcare payors should ensure that quality is measured in all VBP contracts so that shared savings or shared risk incentives do not endanger patients, particularly for vulnerable, high cost populations.”


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