Taking population health expertise to the market

There’s another, less common way providers are attempting to make money on population health: by selling it.

A prominent example is Providence's 2019 launch of its for-profit population health management subsidiary, Ayin Health Solutions.

Providence, a 51-hospital notfor-profit health system, said it was harnessing the population health expertise it had amassed over the years to equip other providers—as well as insurers, employers and government agencies—with the same skills.

With the venture, Renton, Wash.-based Providence entered a multibillion-dollar industry that includes a number of large and small players selling their own population health management solutions to countless organizations that will eventually have to make the shift.

“The reality is for most healthcare systems, once they've figured out how to successfully provide population health services, they will take that to market,” said Kyrsten Chambers, vice president of population health at Health Catalyst.

It's unclear whether providers will find success with this approach. Since its launch, Ayin's financial impact on the overall enterprise has been “limited,” Providence said in a statement. The system said Ayin has performed well in its first two years of operating as a startup. Providence lost more than $300 million on operations in 2020, which the system said was due to the COVID-19 pandemic.

It's partly altruism, not profit, that drives providers to want to share their population health expertise, said John Poelman, senior director with consulting firm Leavitt Partners.

“Everyone is trying to figure this out,” he said, “and you can only justify spending so much of your time giving that away for free.”

On the other hand, Poelman said commercialization of population health strategies is indeed a new way to make money in a high-demand market. Further, providers that have moved heavily toward population health need the market to move in that direction, too, or risk having their investments negated, he said.

There's high demand particularly among smaller, physician-led organizations, especially in rural areas, that don't have the capital to develop their own population health programs, said Rob Saunders, research director for payment and delivery reform with the Duke-Margolis Center for Health Policy. They benefit from using third-party vendors rather than reinventing the wheel.

“That can be very attractive and useful,” he said.

Others are skeptical that ventures like Ayin are truly moving the industry out of fee-for-service contracting. Michael Abrams, co-founder and managing partner with Numerof & Associates, said he doesn't think providers' attempts to commercialize population health are meaningfully changing the business model, noting that they're heavily focused on helping clients cut costs.

“They're following the market; they're not leading it,” he said. “And the market is hanging back.”

Providence set a goal of earning $1 billion in revenue from nonclinical sources by 2023. In Abrams' mind, Ayin is more about diversifying the health system's revenue.

“Which, from a strategic point of view, is a defensible thing to have done,” he said. “But let's look at it for what it is.”

Rather than launching its own subsidiary, Toledo, Ohiobased ProMedica made a more than $2 million investment in the Washington, D.C.-based population health startup Socially Determined. In addition to being a client, ProMedica is now a Socially Determined shareholder and would benefit financially from the startup's success.

“We're not doing this as charity,” said Steve Cavanaugh, ProMedica's chief financial officer. “When we invested in Socially Determined, we hoped it grows up into being a big, interesting company that drives an ultimate financial return for us.”