HealthCare Business News recently spoke with Richard Kimball Jr. about the move to value-based care. Kimball is a health care technology professional with a background in investment banking, venture capital and public policy. He is also a Fellow in Stanford’s Distinguished Careers Institute and he is behind the health care technology start up HEXL.com.

With the ACA finally in place (at least until the next election) the push for value-based care has gained momentum. Meanwhile feeper-service, while lucrative for some facilities, seems to be a dirty phrase in the public mind.

Although it’s getting more ink as of late, the value-based care reimbursement plan isn’t new. “It’s been around for a long time in various pockets around the country, particularly in Southern California with Heritage and Health-Care Partners. The delegated capitated modelhas been around for about 25 years,” he says.

According to Kimball, those facilities and a handful of others started along the roadas far back as the mid ‘80s, likely with diagnostic-related groups taking the first steps in that direction. “That was started when Medicare started paying hospitals for a full procedure rather than its separate components. From there, we went to bundled payments which handled a broader range of procedures and components,” Kimball says.

“The shift to value-based reimbursement is being accelerated by the creation of the Accountable Care Organizations. Hospitals and physicians are beginning to get experience in value-oriented paradigm.” The problem with ACOs, says Kimball, is that while hospitals and physicians do share in the improvements to patient care, it’s only a small improvement and doesn’t justify the reengineering of the care delivery infrastructure.

“The ACOs are only getting 0 to 2 percent savings below fee-per-service, where Heritage and HealthCare Partners may be attaining 20 to 30 percent below fee-for-service costs,” Kimball says. Even hitting the 2 percent savings below fee-per-service may be unattainable for many facilities unless they can restructure and retrain clinicians in the new paradigm.

Complicating the matter further is the fact that some hospitals are turning a healthy profit right now, so they’ll be reluctant to move into a new structure, especially when it has the potential to hurt the facilities that are doing the best by moving to value-based care. “It’s a very tricky timing matter. Fee-for-service is reasonably profitable. If a hospital moves too quickly, they’ll get financially hurt, because they won’t be able to downsize quickly enough,” says Kimball. “So one way to do this is to take groups that aren’t profitable to begin with, for example, the Medicare or Medicaid population and reduce their utilization rates, but continue with commercial on a fee-for-service basis and try to maximize volumes, i.e. the opposite that providers what to do in a capitated environment. ”

It’s easier said than done though. From what he’s seen, Kimball doesn’t believe that medical schools are shifting gears to help the health care professionals of tomorrow develop the proper mindset to make the change that’s needed. “They’re all being trained about how to fix sick people. There’s very little discussion about preventive medicine. In some ways, it’s culturally conflicting for doctors in hospitals, because they’re designed to be manufacturing plants to treat disease rather than prevent.

There’s been quite a separation from the medical world to the public health world.” Conversely, most medical professionals have the knowledge to make the value-based care shift, at least in theory. “It’s telling that 65 percent of Americans die in an institutional setting – hospital, nursing home or hospice, yet only 7 percent of doctors do,” says Kimball. If done right, while it may be painful at least at the start, with downsizing likely necessary, hospitals that survive and react intelligently could experience significant growth to their bottom line. “Right now, hospitals average a 56 percent bed occupancy rate.

If volumes come down by 20 to 30 percent we would have an even greater oversupply of hospital beds than we do now. And the health care industry is supply driven. Oversupply will drive more demand.” Kimball cautions that there is a potential negative that requires monitoring. “There’s a real risk here of the provider group denying care to some patient groups in order to maintain profitability. There’s a risk that some may cut corners to deliver profits and ultimately end up with worse outcomes.”

We’re currently at a tipping point Kimball says. “I think we have better data than we’ve had in the past and a better ability to understand it. I think that the ACA has put out the concept of value-based reimbursement that people have rallied around. I think it’s a start and in the next few years we’ll see innovations at Medicare for new reimbursement models. I think patients are going to demand something different and transparency in the market place will help that. Because we’re already doing this in pockets around the country, we know there’s value in this move to value-based reimbursement. I think it will take 10 or 20 years to change the system. I think it will take entrepreneurs to shake up the system. Hospitals will not do it all on their own.