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Evaluating Medicaid Value-Based Purchasing Agreements: How to Align Innovation Financing by Pay for Success within Medicaid Value-Based Purchasing Programs

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By Andrew Olson, Michael McKnight, Brendan Brown

Innovative financing can facilitate the transition to value-based purchasing in publicly-financed healthcare, using a variety of evaluation methods that meet federal regulatory requirements. Existing standards and methods can be adapted to the evaluation of these purchasing programs.

Medicaid value-based purchasing arrangements allow states to pay for outcomes rather than the historical cost of care. Proper oversight of these models requires evaluation, which can be complicated by the complex interdependencies of health, the novelty of the approaches, and a lack of precedent for basing compensation on an evaluation, rather than retrospectively determining effectiveness. Of the complications, Pay for Success financing mechanisms can address the time-gap in payments by leveraging the future value of programs to raise funds for service delivery in the current period. The other elements are addressed through program design, including designing an appropriate evaluation of the program that determines who gets paid and how much under the value-based purchasing agreement. That is the focus of this document.

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