In January 2015, a survey from KPMG found that more than half of the nearly 300 healthcare manager respondents expected to recoup their investments in population health management programs within three to four years. This same report found that just 24 percent of respondents surveyed saw their own population health management capabilities as "mature" and 38 percent described their capabilities as in the "elementary stages." Nearly 15 percent of those surveyed saw their population health capabilities as "nonexistent" or in their infancy (23 percent).
Two years later, population health investments are widespread across the sector—San Francisco-based Rock Health continues to see population health-specific venture investing as one of the biggest digital health funding areas—but healthcare system leaders are still grappling with how to determine ROIs from these investments.
Nonetheless, as newer payment models become linked to population-based outcomes, organizations will undoubtedly need the right tools in place to successfully evaluate population health and target improvement opportunities. To help such healthcare leaders, last year Dennis Weaver, M.D., chief medical officer and executive vice president, consulting at Washington, D.C.-based Advisory Board, led the development of a population health maturity model after surveying senior executives at 30 U.S. health systems.
The model has five stages: The Skeptic; The Intender; The Builder; the Advancer; and The Committed, and to evaluate an organization’s maturity level, Weaver and his team started by looking at the number and flavor of risk-based contracts. Weaver, who is based in Nashville, says that “If you look on the delivery system side of the ledger, organizations on the high end in terms of how much of their business is risk-based or accountable care-based, may still have 20 to 30 percent of their revenue that’s truly at risk, and the rest [of their revenue] is fee-for-service. Most organizations sit in that 10 to 15 percent range.” Weaver says that overall, although most people would assume that organizations would largely be on the left side of the model—meaning the less mature side—since there were a fair number of those surveyed that had their own provider-sponsored health plan, those organizations’ scores fell much more to the mature side of the model.
Dennis Weaver, M.D.
Weaver’s team then looked at what the variables are that separate the advanced organizations from the rest of the pack. One of these factors is that the organization leverages system-wide technology to analyze in-network utilization, and report on cost and quality, something that requires real investment in data and analytics. Weaver says technology was “split out” as a variable since it deserves to be its own component. He adds that just having an electronic health record (EHR)—even if the organization is HIMSS Stage 7-designated and has an EHR with CPOE functionalities and disease registries within it—is not enough to take on risk. “You need additional business intelligence tools to sit on top of the EHR to allow you to be successful,” he says. “Some of those capabilities include risk stratification and segmenting populations, and once you segment them, understanding where there are gaps in care and services, then fulfilling those gaps, and then have outcomes measures that allow yourselves to be successful, both on the financial side and the clinical measurement side.”
Weaver notes that from the organizations they have measured, the biggest technology gaps they found were that most places were much more advanced on the clinical side, compared with the financial or economic side, in both risk stratification, and in the implementation steps and the measurement steps. “If they were lagging on the IT front, it was not having the maturity of financial tools to help them understand the economics for where they were in these risk-based contracts,” he says.
Thinking about ROI
One thing that many organizations continue to do wrong, Weaver says, is think about the ROI for population health based on how they are performing in their managed care contracts. “So they think about it from the [standpoint of] getting shared savings, making money on their capitation contracts, and not having to pay downside risk. There is a whole revenue stream that goes along with that bucket,” he says. “They are trying to pay for all of the investment—the technology, care managers, operational changes, medical homes—all with the accountable payment bucket.”
But Weaver feels that there are actually two other buckets that most other organizations have not put into their population health business plan: reduction of leakage and unwarranted care variation. Regarding reduction of leakage, or having patients not go out of network, Weaver emphasizes that healthcare systems have to keep patients in the system for which they are getting paid for. “A lot of organizations don’t use their IT tools, care managers, and all their different capabilities to keep people within the system. Yet we find that the revenue opportunities to get the ROI for the investments they make are 7 to 10 times greater in the ‘keeping patients inside the system’ bucket than they are in the ‘accountable payment’ bucket,” he says.
The second category Weaver mentions is unwarranted care variation, referring to the variability of care leading to different outcomes and increased costs. Here, Weaver says that, “You can contractually, and we call this a hospital efficiency improvement program, have the acute care enterprise work with the population health management side of the business to reduce that unwarranted care variation. And in this bucket, you can get a big ROI as well, even bigger than with the reduction of network leakage.” He says that across health systems, there is potentially a 5 to 10 percent margin improvement that can be achieved by reducing care variation.
Both Weaver and James Green, managing partner for revenue cycle at Advisory Board, note that healthcare organizations are struggling with having their feet in two payment buckets—fee-for-service and value-based care. As Green puts it, “You have two feet in different payment worlds, with a child-sized foot in value-based care, and an adult-sized foot in fee-for-service.” He adds, “So you’re trying to look for an ROI, yet not overinvest in value-based care so that the revenue you’re counting on is still coming in.” As such, Weaver again stresses that “Too many people look at that accountable payment bucket to calculate ROI.”
Moving forward, Weaver notes that some folks believe the transition of administrations in D.C. has led some people to take their feet off the accelerator when it comes to making investments. But he also feels that “the industry will continue to move in this [value-based purchasing] direction and you will have to be competent in this space.”