There is tremendous momentum in the movement towards using “Population Health Management (PHM)” as the mechanism for providers to evolve from a volume- to a value-based care delivery model. As quiet as it is kept, insurers have been practicing PHM for years, with varying degrees of success and acceptance. However, due to the adversarial relationship with providers, the value of PHM from insurers has been diluted and diverted to more heavy-handed utilization management techniques. As opposed to utilization management, PHM is the most proven and customer-friendly model for success when you are managing premium dollars, capitation or taking on various levels of risk. Provider-led PHM has the potential to be more effective as well as necessary for providers to take on risk. Mature models have been shown to be higher quality and lower cost(1). This is what customers are demanding. We have to shift from an illness system to a health system and PHM is the way to accomplish this goal and achieve value objectives such as the Triple Aim. However, there are three key issues that create dilemmas for PHM as a strategy in terms of when, where and how do you implement. The issues are: (a) effectively defining population health and PHM, (b) ensuring organizational culture readiness and (c) determining the timing of the shift to a value-based business model. An organization needs to resolve these questions to effectively execute on a PHM strategy. A recent study by Numerof and Associates highlights these issues.
Numerof and Associates partnered with the Jefferson College of Population Health on the “Numerof State of Population Health Survey”. This is one of the first studies to provide insight into PHM issues and strategies and the pace of transition from Fee-For-Service (FFS) to models based on reimbursement linked to outcomes. This national study synthesizes survey responses from more than 300 executives and in-depth interviews with over 100 key decision makers across U.S. healthcare delivery organizations. Some of the findings point to the dilemmas we face in executing on a PHM strategy and crossing the whitewater of change to deliver value-based care.
What is the Definition of Population Health Management?
The Numerof study underscored the continued confusion around the definition of Population Health Management. Is it focused on specific programs such as wellness and prevention? How broadly do you define the population? Is it just the population of patients for which you are taking risk or is it all patients that you care for? Does it extend to the community and consumers in general? The study found that the definitions of PHM varied greatly and the definition greatly impacted the pace and prioritization of initiatives. It is also important to be clear on the distinction between Population Health and Population Health Management. PHM is an expensive and risky endeavor and how you define and scope it has significant implications for its success and value created.
Impact of Organizational Culture
An interesting finding of the Numerof study was that when asked why they were pursuing PHM initiatives, those that said it was part of their mission/culture were more progressive, successful and advanced in their movement towards value-based care. This finding underscores the importance of leadership driving the culture shift necessary to really embrace this model of care. At a tactical level, this culture shift has to start within primary care practice patterns and culture(2). In many ways, it is a 180 degree shift from successful models and cultures of the past and present. This will set-up tension between the old and new but the reality is that you have to cannibalize your prior business model and dramatically shift the culture to be successful with PHM. This brings up the question of when you go “all-in” on your value-based model?
As Andy Grove said in “Only the Paranoid Survive”, “if you’re wrong, you will die. But most companies don’t die because they are wrong; most die because they don’t commit themselves. They fritter away their valuable resources while attempting to make a decision. The greatest danger is in Standing still”
Timing of the Shift to a Value-Based Model
Until the industry fully eliminates FFS and aligns incentives under a value model, there will be an inherent conflict between players. One organization’s cost and waste is another’s revenue. Within a trillion-dollar industry with an estimated 30% waste, such as healthcare, the financial stakes are very high. For providers who have been very successful at FFS, it means intentionally reducing their revenue as well as investing capital and resources in a model where the revenue and profit margins are unpredictable at best. However, as it has been said, “the best way to predict the future is to create it.” Some organizations such as Intermountain are directly taking on this challenge but this is not an easy strategy to pursue and one an organization needs to be well prepared for. Some providers who have chosen to “do the right thing” and create benefit for the larger community have created financial challenges for themselves. Even non-profits have to contend with the “no margin, no mission” reality. Until there are clear profitable revenue streams for PHM and value-based care, the commitment from many providers will be tentative. This is what the Numerof study validated. Even though many organizations expect risk agreements to represent over 40% of their revenue in 2 years, currently the majority have 20% or less of their revenue from such agreements. Although it is debatable, it seems that 30% of revenue from risk-based contracts is the tipping point for an organization to begin to fully commit to the value-based journey. Therefore, with the exception of a few organizations, the value-based model of care is still “in the lab”.
If reimbursement really does change dramatically over the next 2 years, which CMS is committed to do, then, as Grove stated, ambivalent organizations will be at risk. Although it is resistant, healthcare is not immune to market forces. It takes time and resources to establish infrastructure and change culture. When the key financial metric shifts from “heads in beds” to “lives covered”, organizations stuck in the past or standing still may see profits rapidly diminishing with very little time to transform and recover. Resolving these dilemmas and early and full commitment to PHM will avoid this risk.
- Kanter MH, Lindsay G, Bellows J, Chase A. Complete care at Kaiser Permanente: transforming chronic and preventive care. Jt Comm J Qual Patient Saf. ingentaconnect.com; 2013 Nov;39(11):484–94.
- Cronholm PF, Shea JA, Werner RM, Miller-Day M, Tufano J, Crabtree BF, et al. The patient-centered medical home: mental models and practice culture driving the transformation process. J Gen Intern Med. 2013 Sep;28(9):1195–201.