Life Science Compliance Update

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February 26, 2016

Recent Study on Population Health Sheds Light on Progress

A recent study provides one of the first, if not the first, in-depth, national look at the pace of transition from fee-for-service to models based on fixed payments linked to outcomes. The study reviewed survey responses from over three hundred executives, and interviews with more than one hundred key decision makers across United States healthcare delivery organizations. The study was done by Numerof & Associates, a healthcare strategy consultancy, and found that most healthcare providers continue to lag in implementing population health management, despite the broad agreement that population health management is important to future market success.

Population health management has increasingly become an important topic of conversation, but little has actually been done. More than half of the respondents to the survey rated population health as "critically important" to the future success of their organization, and nearly all believes that it is more than "somewhat important." However, when asked if their organization was in at least one agreement with a payer that includes some form of upside gain or downside risk, respondents said that 20% or less of their organization's revenues flow through them, leaving population health in the realm of "business model experimentation."

According to Dr. Rita Numerof, president of Numerof & Associates, "U.S. healthcare organizations are entering a period of greater change and disruption than any industry this side of taxicabs. However, our study finds that most providers are still just testing the waters with these models and to date there's still far more talk than action when it comes to population health management." Numerof expects that the push to value will continue to accelerate, since the "wait and see" approach that many organizations have chosen to adopt is quite risky.

Michael Abrams, the managing partner of Numerof & Associates, believes that "[t]he traditional players in the payer, provider, and manufacturer spaces are wrestling simultaneously with not just the question of how to change – but how fast. A select set of leaders are making real progress, but overall we're still a long way from where we need to be."

Dr. David Nash, Dean of the Jefferson College of Population Health, collaborated with Numerof, and stated, "Providers cannot wait any longer to implement the basic infrastructure necessary to practice population based care. Payers cannot wait any longer to grasp the lessons from Medicare experiments and prepare for a world where 'no outcome, no income' will reign supreme.

What Does the Study Tell Us?

During the interviews, some participants talked about "bad memories" from previous healthcare reform efforts, and how those memories and previous experiences are impacting organizational receptivity to change. A vice president of a nationally-recognized academic medical center offered the following during an interview, "We're in the early stages of our population health efforts…However, we're hesitant given previous experiences with capitation. In the 1990s, we aggressively pursued capitated payments, resulting in about $200 million in losses."

Further adding to the hesitance based on previous bad memories, the legacy of mutual distrust and antagonism between providers and payers is slowing the transition to new business models. A COO of a major healthcare network was quoted saying, "Most payers we've engaged are not enthusiastic to partner with us on population health." Barely over half of respondents found that payers are more than "somewhat willing" to enter into cost/quality risk agreements.

The economic incentives are measly, and as such, the study found that when providers are willing to move ahead, it tends to be because they are mission-driven and believe that it is the "right thing to do." Respondents who described their mission statement or culture as the primary driver behind their population health efforts reported a larger proportion of revenue under alternative payment models, contrasted to organizations whose primary motivation is financial or market-based.

Lastly, and somewhat surprisingly, differing definitions of "population health" seems to be holding up progress. Some organizations even reported multiple definitions being used internally, leading to confusion across the organization, and hampering any efforts to make real changes. The authors of the study believe that the internal definition of population health has "real implications for the pace at which the organization can move forward on its value-based initiatives as well as what specific initiatives are prioritized over others."

Conclusion

In sum, despite broad support and agreement among healthcare providers that population health management will be important to their success, there is little to no action being taken. Many providers are worried about getting ahead of the market or facing potential losses, which are valid concerns, but by waiting to make decisions and changes, they might be in jeopardy of not being able to keep up with the shift as it continues to accelerate.

However, given the lag in participation rates, it will likely take either a mandatory program from CMS to get wider participation, or strong incentives from CMS to breathe life back into the idea.

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