Private health insurance markets in the United States have assumed many of the features of managed competition, as evidenced by the presence of competing HMOs that negotiate prospectively with employers to provide health services. Employers now have the potential to incorporate quality as well as price into their health care purchasing decisions. Some prominent purchasers have taken advantage of this opportunity to reshape health insurance markets by pursuing a set of practices that have come to be known as value-based purchasing (VBP), whose central goal is to purchase high-quality health care at attractive prices.

The actions of purchasers and their impact on the cost and quality of care are little understood. Greater understanding of effective practices would make it possible to identify ways in which employers might reshape their efforts to produce greater value and improve quality of care, without the need for new regulations.

The overall aim of this research is to provide systematic descriptions and analyses of VBP in the context of markets. This will involve a set of careful data-collection efforts from large employers and from HMOs, accompanied by analyses of the use of VBP in nationally representative market areas and its impact on HMO quality management and performance. Specifically, the research will describe the use of a variety of VBP strategies by large employers in a national sample of 40 markets, and describe quality-management practices of HMOs that serve the commercial population in these same 40 markets.