Kaiser Permanente's Jack Cochran on the path to value-based care

As a way of paying for quality rather than volume, many insurers are moving away from a fee-for-service payment model toward a value-based reimbursement process that focuses more on transparency and accountability.

The current model, fee for service (FFS), is dated. Paying for volume encourages insufficient care--implementing tools that measure quality, not quantity, can help shift the entire healthcare industry into focusing on the consumer's needs.

To better understand the benefits of a value-based payment (VBP) model, FierceHealthPayer spoke with California-based Kaiser Permanente's Jack Cochran, M.D., executive director of the Permanente Federation, in an exclusive interview (pictured right).

FierceHealthPayer: What are some components of Kaiser Permanente's value-based care?

Jack Cochran: We are a little unusual. We are an aligned partnership between a healthcare delivery entity and hospitals and the Kaiser Foundation health plan. We began with the intention of  taking care of the population. We integrate primary care and delivery.

For our care to be value-based, we think of how many people we have to take care of, and then we figure how much it'll cost. Based on year-over-year experience, we have an idea how much it will cost for the year--meaning, we'll have a straightforward expectation of income. Then we see what it looks like for next year, and will negotiate if necessary. We think in terms of the entire package, the physicians and their staff and decide how much we will need to expense to them.

FHP: What tools does Kaiser Permanente use to implement value-based payment options?

Cochran: We developed a culture that embraces data, acknowledgement, learning and improvement. We have a culture that measures and compares data across the board--it's very important. We put tools in place to measure what is important to delivering care. We reward transparency and find ways to improve.

Doing the right thing will also be the best thing to make sure care is affordable. The move from paper services is likely to happen. With prepayment, you can step back and look at a problem and a process and develop some thinking, what will be a good end-to-end solution, and what is the best way to do this. Not, what is the best way to do this for the hospitals, but what is this best way to do this--period.

FHP: Why doesn't Kaiser Permanente operate under a fee-for-service model?

Cochran: Under an FFS model, people are paid fees for individual tasks that require coding--the overall payment process focuses on doing codeable events. At Kaiser Permanente, under a VBP model,  we look at the process of care, which may not entail classically codeable events. We pay them for their intellect, not for what is just codeable.

FHP: How will the industry continue the shift from fee-for-service to a value-based payment model?

Cochran: People are worried about VBP. Obviously, both payers and providers know and understand FFS, and they know it may be flawed but it works now. With impending changes, they worry about seeing savings in healthcare. But those savings will come from avoiding misuse and errors, among other factors.

Many insurers are talking about VBP, which is a good sign. They understand that's a way of getting a handle on the totality of costs. Most importantly, healhcare needs to be affordable for the average family. As consumers have tried to keep their healthcare affordable, there is more risk of out-of-pocket costs. So they think, how can I afford coverage? No insurance plan will perfect that.

As an industry, we need to learn from one another. The entire industry needs to shift its focus on quality at a reasonable cost for families. What's more, health plans and hospitals can also help with this by aligning and forming accountable care organizations that focus on quality of care.