Innovative population health programs across the country are improving the health of the communities they serve by doing things like reducing readmissions, shortening patients’ length of stay, and improving overall utilization. Yes, that last one hurts a bit, especially as many organizations are still in the process of transitioning from fee-for-service to value-based care contracting. Nevertheless, health systems are progressing in their ability to better manage the care of chronically-ill patients – keeping them out of the hospital and in lower-cost sites of care. In essence, they’re fulfilling their mission. And that’s something to celebrate.
However, as many have learned in recent years, population health management does not succeed with incremental, cosmetic changes. Impactful population health programs must truly be transformational. It requires a shift in organizational culture, provider alignment, significant investment in technology and analytics capabilities, and changes where and how care is delivered. As we’ve learned more about how healthcare is being transformed through innovative population health programs, we’ve formulated a list of the top three lessons learned:
1. Location, location, location…and timing
The transformation to effectively manage population health is a big investment, and the timing of building a new program can be tricky. In some cases, the contracting market may not have shifted from transaction-based to value-based yet. Some providers may still be contracting on a percent of charges. (Yes, these do still exist!). Payors and self-insured employers may not yet be knocking at the door demanding that providers drive down costs and improve quality outcomes. Thus, when the objective is to drive the greatest value for an investment, it’s essential to consider the market’s readiness to reward those efforts. After all, a successful population health program will drive down preventable utilization (aka revenue).
This is not to say providers should not invest in population health management if the market is not yet requiring it. As a provider, being last to the value-based table is not a good position to be in, and at that point, there may not be viable partners left in the market. It’s never too early to have discussions with payors and self-insured employers to help drive the change needed. At the very least, providers should be aware of the market’s appetite and focus investments accordingly. They should consider potential physician partners with whom to enter into value-based arrangements. When the market finally tips toward value-based care, this diversified investment will help ease the transition between fee-for-service and value-based payments.
In addition to taking stock of the current market’s population health maturity, it may make sense to understand the likely trajectory of the market over the next five years. Asking who your market partners and competitors will be is important when working to stay viable through the transition from fee-for-service to value-based payment structures.
After aligning the maturity and investment of a program with the market, the next step is to prioritize the initiatives that will have the greatest impact on the health of the covered population. By risk stratifying the patient population, the focus is more accurately narrowed to the greatest opportunity for outcome improvement and utilization reduction. The data required to risk stratify the population cannot be limited to those patients seen at an individual facility/health system and who are in that EMR. Rather, the data is often gathered from the payor entering into a value-based contract with a given provider. Remember, the payor’s goal is to reduce their PMPM (per member per month) costs overall, not just for patients seen by the provider with whom they have a contract. Once the payor provides this data, a tool is needed that can accurately calculate the spend for each patient and risk stratify them based on an algorithm that includes demographics, diagnoses, and utilization. Typically, the highest risk patients are those with chronic conditions, and they’re the highest utilizers of care as well. However, it’s also important to keep a close watch on the second-tier risk patient population, which, without effective and early intervention, will eventually move into the highest risk group.
2. Physician alignment is imperative to your success
A common quote in the healthcare industry is, “The most expensive instrument in healthcare is a physician’s pen.” In the value-based care world, physicians will drive the most impactful results. As important as it is to align with the market and payors around incentives for improving population health, it’s just as critical to align with physicians around a population health vision as early as possible and empower them to lead the transformation. This includes providing data transparency, effectively demonstrating shared goals, and clearly articulating the physician value proposition.
Many seasoned hospital administrators respond with skepticism to the reemergence of risk contracts. Many failed capitation arrangements in the nineties left behind a less-than-favorable view of value-based care concepts. The key difference between population health management now and twenty years ago is the evolution of available data and analytics tools. Today’s tools are not only capable of risk-stratifying the patient population but can calculate and track variances in utilization and outcomes across hospitals, sites of care, and physicians. They even capture intervention protocols, standards, and work queues to help managers effectively manage the population and reduce variation in care once they’ve left the facility. By sharing the results of the risk stratification, utilization and quality outcomes and intervention impacts, organizations have been able to more effectively articulate shared goals and value to physicians and partner with them in forming their population health program vision.
Once alignment on vision has been achieved, it’s important to actively engage physicians early in the planning process. Physicians may participate in assessing the organization’s readiness level, identifying the type of program or contract to pursue, partnering in the IT solution selection process, and, in some cases, even defining the three- to five-year strategic roadmap and detailed work plan. This commitment is essential to starting transformation and beginning to identify, attribute, and track the metrics with the greatest opportunity for quality and cost improvement. As an organization develops protocols, it also becomes critical to effectively coordinate patient care, help increase patient engagement, and ultimately improve quality while reducing unnecessary or preventable utilization of services. With physician commitment, a provider organization can more confidently invest in the tools and programs that will meet their needs now and grow with them as their population health management capabilities mature.
3. Money talks. Even programs formed with the best of intentions require aligned financial incentives to be successful
Aligning on vision, priorities, and the roadmap forward is essential, but without alignment of financial incentives, the sustainability of the population health program is at risk. The hospitals and health systems that have thrived under a population health model have aligned their programmatic investment priorities and employed physician compensation incentives – and independent physician incentive payment funds flow with the level of risk undertaken in their payor contracts.
For example, the return on investment for population health management will be significantly greater under capitated or even shared savings contracts compared with that of pay-for-performance contracts. As one would expect, the programmatic investment in the former can and should be greater. There may also be a greater percentage of an employed physician’s incentive compensation attributable to quality and efficiency outcomes as the program progresses further along the risk continuum. The same is true for the approach to the independent physician’s distribution of funds.
The role of an effective and usable tool here is key to cultivating physician trust and promoting behavioral change. The tool must clearly illustrate how performance drives compensation. Also, the data needs to be accurate and available to physicians on-demand so it’s actionable. As the mix of payor contracts along the risk continuum vary year over year, and as metrics and targets change to address evolving priorities and performance, the complexity associated with building these financial incentive alignments increases. As a result, manually developing, tracking, and maintaining these tools is not a sustainable option. What’s needed is a tool that can easily flex incentive structures and distribution quantities as contracts evolve and metrics change, as well as integrate into the larger suite of finance and accounting systems.
Bottom Line
Population health requires transformational change. Market drivers, robust physician partnerships, and alignment of financial incentives with risk-based contracts should be considered when building a program. There’s a common theme that comes across loud and clear: the role of health IT and information exchange is critical to achieving population health goals. It’s important not to underestimate the critical role of data and analytics tools in the program’s success. Invest wisely in tools that will support an evolving population health program, empower physician leaders, and provide financial transparency and actionable data.