HCI3 Update from the Field: Conversion from Volume to Value-Based Payment

Submitted by francois.debrantes@hci3.org on Thursday, June 30, 2011 - 06:17

HCI3 Update from the Field – Newtown, CT

When the CFOs of many of the country's hospital systems got together this week at the HFMA's annual conference, the talk was all about the conversion from volume to value-based payment – that's more than just a small shift and shows how significantly the 2009 debate on health care and the 2010 passage of the ACA has changed mindsets.  There are two reports that the HFMA has released this week that are important to read.  The first describes the strategies and tactics that health systems and hospitals will have to employ to manage the transition to value-based payment.  It also provides examples from current efforts to transition.  The second stems from a collaboration between some of our Prometheus Payment pilot participants and the HFMA in gathering lessons learned to-date.  The conclusions are sobering:

  • Focus on chronic disease management and right-size the system as necessary, while sustaining the viability of providers to offer access to care.
  • Establish new collaborative relationships between hospital administrators and clinicians that focus equally on improving quality and reducing the avoidable costs of care.
  • Ensure that participants in improvement efforts are not penalized to the benefit of those who are reluctant to change.


What this means to you – we all need to understand the implications of the three conclusions listed above. As chronic care management really gets into high gear, current overcapacity of beds and buildings will have to shrink. That will require a lot of people to make tough decisions. Some of that capacity can be repurposed, for example by providing chronic care management, but some will simply have to be mothballed. Total provider revenue will either stagnate or, in some instances, go down. But margins will have to be protected for these organizations to continue to provide access to critical care. Finally, we cannot allow massive free-riding, despite the temptation, else the transformation will cause the financial collapse of many provider organizations. And that would, in fact, be detrimental to everyone. So yes, capacity has to shrink, and that will be good for the country, and current delivery systems will change form and function. This transition has to be supported, not simply witnessed from the sidelines. We all need to play our part.


Francois de Brantes
Executive Director
Health Care Incentives Improvement Institute, Inc.
w: www.hci3.org