Not ready for population-health risk
The concept of population health management is necessary, important and good, but the healthcare industry’s current assumptions about the benefits of assuming global risk is déjà vu all over again.
As the industry sprints to take global risk, I hearken back to 1993 when much of the industry was convinced that health systems should employ physicians to strategically position the system to profit under very competitive capitated rates.
Twenty years later, the projected growth in capitation did not materialize. In the end, many of the health systems that adopted these strategies hemorrhaged tens of millions of dollars. Some were permanently crippled by the losses.
Many population health management competencies will improve care and should be pursued regardless of whether capitation becomes a dominant form of payment. These skills include population stratification, case management, care coordination, etc. But there is little evidence that the obsession with taking global risk for the management of the health of a population will end any better than it did in the ’90s. Consider:
Many healthcare experts are again espousing capitation as the payment model for the future without any empirical evidence to support their position.
Most health systems lack the competency to deliver optimal value-based care to the relatively small captive population of patients that flows through their institutions.
In Medicare fee-for-service, health systems bear financial risk for performance. On average, hospitals operate at negative 5.6% margin under this FFS.
Few health systems have demonstrated the ability to optimize the health of their own employee population.
A significant percentage of medical and surgical specialists and hospitalbased physicians have no interest or desire to change how they deliver care.
Many systems have spent millions creating a “clinically integrated network.” The result is a network structure that lacks the functionality to be successful.
Much of “value-based” payments are relatively small withholds from traditional fee-for-service payments, which do not appear to have a material longterm impact on quality of care.
One cannot successfully optimize the health of a population unless there are associated public health policies, supporting better nutrition, hygiene, etc., and incentives for personal responsibility—neither of which exist at this time.
Any objective analysis of the Shared Savings ACO program highlights the aforementioned lack of competencies and probable failure should population health management programs take risk.
Carl McDonald, Citigroup’s highly regarded managed-care analyst, has stated that the “vast majority of hospitals don’t have anything close to the systems and infrastructure necessary to take risk successfully and most who have tried in the past have not succeeded.”
To be successful, systems need to develop the competencies necessary to manage population health over time, at a realistic, logical pace, progressing through clearly defined milestones for competency development, while staying focused on managing their fundamentals. These milestones include:
Providing great care/service while breaking even at Medicare rates.
Supplementing the core measures with more relevant quality measures, which are routinely monitored and reported to the public.
Operating highly disciplined, evidencebased hospitalist and intensivist programs.
Maturing the employed physician group to function as a group practice, focusing on care coordination, efficiency and patient satisfaction.
Running an emergency department that achieves best-in-class performance.
Demonstrating that “patient-centered” means easy-to-understand, accurate, reasonable charges and billing.
Having the ability to predetermine the actual cost and price for an episode of care.
Affiliating with a digitally connected network of physicians, complying with hundreds of office-based and inpatient protocols, along with a physician hierarchy holding colleagues accountable.
Redesigning care to make it more affordable, accessible, coordinated and evidence-based, especially for the frail elderly and chronically ill.
Installing an electronic health record that adds measurable value to care delivery and does not disrupt clinical productivity, quality and financial performance.
Collaborating with payers to offer affordable, high-quality care through a “preferred” narrow network.
By definition, population health management will reduce the use of expensive hospital services. Health systems must develop the competencies to consolidate services and reduce the cost of the care they provide, or find themselves in a declining financial spiral.
There’s an adage that says, “History does not repeat itself, but it rhymes.” The concept of population health management is directionally correct, but taking global risk has proven to be catastrophic for most. Bolting a population health global risk platform on top of a dysfunctional delivery system will not work. The key to successful population health risk is to first excel at the fundamentals and then develop essential new competencies over time.
Nathan Kaufman is managing director of Kaufman Strategic Advisors, San Diego.