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Achieving ROI from Population Health Investments: How Realistic is it?

April 5, 2017
by Rajiv Leventhal
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A senior consultant at Advisory Board emphasizes that healthcare organizations are thinking about ROI from population health investments in the wrong manner

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.”

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