Population Health Management’s Impact on the Transition to Value-Based Care

Population health management can act as a vehicle to minimize risks across stakeholders

The movement within the healthcare industry to more closely connect payments to results is moving from conversation to action, but not fast enough.

The current fee-for-service model is clearly not driving the right behaviors to improve health. This model creates incentives to order more tests, see more patients and schedule more procedures – but not to improve health outcomes and prevent readmissions. This creates an inefficient system that has no connection to the actual outcome of care provided and does a disservice to patients. It’s time to realign the incentives for all stakeholders.

The Centers for Medicare & Medicaid Services (CMS) will require 50% of payments be value-based by 2018 – meaning healthcare providers are increasingly on the hook to improve the overall health of patients or face significant financial penalties. Xerox recently surveyed over 200 payers and providers and 88% of providers said that less 50% of their current portfolio is made up of value-based contracts. Forty-three percent say less than 10% of their current portfolio is value-based.

What does all this mean? Will CMS consider changing the timing of or lessening the level of the mandate below 50%? There is lots of uncertainty, but with just 24-30 months left, I think we can safely say that many payers and providers are behind where they need to be.

The Shift to Value-Based Care

Value-based models demonstrate that incentives can be better aligned to drive commensurate benefits across the stakeholder spectrum.

With the arrival of healthcare reform in the Affordable Care Act (ACA), we have also seen increased enrollment in high-deductible health plans. Cost is a critical consideration for today’s savvy consumers, and in order to keep premiums low, they are more frequently purchasing high-deductible plans.

With high-deductible plans, consumers see itemized bills that detail the cost for every lab test, doctor visit and procedure – often for the first time, and it can be eye-opening. This experience creates a demand for increased price transparency ahead of services, so a consumer can shop around for the best price. This price transparency is something that to date has been difficult to access.

In the survey, 50% of Millennials, 45% of Gen Xers and 39% of Baby Boomers said they have delayed healthcare treatment due to cost. Under a value-based model, consumers will be more likely to utilize care appropriately, and with more predictable costs for care. Providers will no longer be able to charge more than the market bears for preventative care, because consumers will simply choose their competitors who are offering more palatable prices.

Payers, who have been ultra-focused on driving costs down will move away from a transactional focus to a focus on consumer health outcomes instead. Cost reductions will be implicit in healthier members.

Providers, who will now be paid based on their patients’ health outcomes, will be tasked with influencing consumers to make better decisions about their care and health. By encouraging healthy behaviors, providers will benefit in the shared savings with the consumer.

How do we get there?

Helping Payers and Providers

Eighty-three percent of providers and payers surveyed indicated they are at least somewhat familiar with the value-based model, but providers are clearly behind schedule and it’s going to be an uphill battle to bring value-based portfolios to the 50% mark in the next two years.

Sixty-seven percent of payers and providers indicate they are taking a “wait-and-see” approach toward the transition to value-based care. We’ve seen this before with other healthcare regulations – organizations assume the requirements will evolve or be postponed. This is not a prudent approach in this case. CMS mandate aside – as the industry moves toward value-based care, customers are at stake.

With that said, the challenges are real. Sixty-nine percent of payers and providers surveyed are uncomfortable with the risks of value-based care, and 77% agree that some providers are losing money by adopting this approach.

When asked about their major concerns with value-based care, payers and providers indicated the top three were measuring healthy outcomes (83%), followed by cost containment (81%), and the ability for providers to make the journey combined with poorly optimized physician networks (80%).

Payers and providers also indicated that they need at least some help with handling the challenges of implementing value-based care. Some are looking for outside solutions to help move to a value-based model across a wide range of functions, from software to services and technology.

The Way Forward

As the payment mechanisms shift, so do the risks. Financial risks are shifting away from payers to other stakeholders such as Accountable Care Organizations (ACOs), as well as consumers who have purchased high-deductible plans.

Population Health Management (PHM) will likely be the way forward as a vehicle to minimize risks across stakeholders. While PHM isn’t a new concept, it’s experiencing a resurgence in the healthcare industry, due to the push to tightly control the cost and quality of healthcare delivery.

PHM solutions offer the ability to manage clinical information, roles and workflow functions at every level – from administrative to para-clinical to clinical – and deliver actionable insights that enable payers and providers to improve both clinical and financial outcomes. These solutions help providers adapt to this new way of working by managing the health of patient populations so they are compensated for successful outcomes.

Value-based care is already a reality – and so is PHM. But unless radical changes are set into motion, the stakeholders may very well miss the 2018 deadline set by CMS. They are historically set up by process and infrastructure to support a fee-for-service model, not value-based. It’s analogous to playing baseball on a football field. It’s just not going to fly.

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