Exploring Value Based Purchasing Models in DVA’s private hospital contracting

Project Type - Funding, Health economics


The Department of Veterans’ Affairs (DVA) appointed HOI to conduct a research project to explore value based purchasing (VBP) models in DVA’s contracted private hospitals. The overarching objective of the project was to determine and make recommendations around the following:

  • an appropriate model for DVA’s client population within the private hospital sector (if any)
  • DVA’s potential role as a change agent given its place in the market
  • how a VBP model best could promote quality improvement efforts in the Australian private hospital sector to benefit DVA and wider populations
  • incentives for hospitals with small DVA client throughput to accept a new VBP-based contractual arrangement
  • how a VBP model and its policies could be successfully and practically implemented to ensure that goals are achieved

This project involved a number of methodological processes including:

  1. A comprehensive rapid literature review and preliminary analysis of contemporary developments associated with the implementation of VBP initiatives internationally.
  2. Extensive stakeholder consultations. 
  3. Analysis of pay for performance data around activity, outcomes and payments related to all contracted private hospitals.

HOI delivered a technical report outlining the project findings in order to inform the specifics of DVA’s private hospital purchasing arrangements in 2014 and beyond. It was recommended that DVA develop and implement ‘the preferred VBP model’ which focused on targeted participation for private hospitals/groups which met certain payment criteria.