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If the value of a healthcare system is defined as the quality of the system divided by its cost, then the value of care in the United States is very low compared to other developed nations. The United States spent nearly 18% of GDP in 2012 on health care, while the next highest spending among developed nations was 12%.1 It is estimated that more than $700 billion of healthcare spending each year in the United States is waste.2 In the measure of outcomes, the US healthcare system ranks 37th globally.3 Low quality divided by high cost equals a system that has great potential for improvement.

Inpatient hospital care accounts for nearly one quarter of the annual amount spent on child health,4 with that figure climbing even higher when emergency department visits are added. Therefore pediatric hospitalists are in a position to exert strong influence and leadership upon improving the value of that care by increasing the quality and decreasing the cost. Examples of quality projects in hospitals that have improved value include reduction of catheter-associated bloodstream infections (CLABSI),5 reduction in mortality through rapid response teams,6 reduction in codes outside of the ICU,7 increases in hand washing,8 decreases in contaminated blood cultures,9 and decreases in identification band errors.10,11 Payers have already begun to increase pressure on hospital systems to deliver value by implementing payment penalties for care that is perceived to be of low quality. The Center for Medicare and Medicaid Services (CMS) has issued instructions to stop paying for CLABSIs and pressure ulcers that occur during a hospital stay. Additionally, despite the ambiguity of evidence that unplanned readmissions are either preventable or a marker of poor quality in pediatrics,12,13 many state Medicaid plans have begun to penalize hospitals for readmission rates that are perceived to be high.

Historically, one of the barriers to improved quality was that the return on investment did not accrue to the hospital or the physicians. For example, decreasing a hospital’s CLABSI rate would lower charges and payments, thus lowering the revenue stream to the hospital and increasing profits for the payer. Over the previous decade, many individual quality measures had payment penalties associated with them as an incentive to the hospitals to improve. However, with the passage of the Patient Protection and Affordable Care Act (PPACA) in 2010, the potential for the incentives around quality improvement to align with both the payer and the hospital increased dramatically. One of the cornerstones of the PPACA was the creation of vehicles known as accountable care organizations (ACOs) that allow institutions to take financial risk for a group of patients.14 By taking on that risk, the increased value in the system that is created by quality improvement can accrue to the institution bearing the risk, instead of an insurance company.


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