Our healthcare system is built upon a managing healthcare framework for treating conditions and providing services. The framework for treating conditions is aligned to reimbursement for diagnostic services (lab test, MRI, physician office visit, etc.) and the associated treatments (medication, therapy, surgery, etc.). The framework for providing services is based on clinical diagnosis codes to justify acute (i.e., ER visit, hospital stay), sub-acute (i.e., skilled nursing, home health) or ambulatory services.
To be successful with new population health payment models (performance-based payments, alternative payment models, capitation), a new framework for managing health needs to be created. Managing Health is complicated. It often requires going beyond the managing healthcare framework and numerous value-based quality measures to address the 80%-90% of health determinants outside of the healthcare system.
The new managing health framework will not replace the traditional managing healthcare framework, it will complement it. We are finding about 3-6% of healthcare system revenue and 3%-15% of physician practice revenue are tied to the new population health payment models or care management services (i.e., Annual Wellness Visit). While this revenue continue to grow, many organizations are in the early stages of developing their enterprise-wide managing health frameworks to deliver needed focus, understanding and alignment.
Unfortunately for physician practices, healthcare systems and other providers, they’ll need to be successful with both frameworks for the foreseeable future. They must continuously improve the effectiveness and efficiency of their managing healthcare framework, as it’s still 94%-97% (healthcare systems) or 85%-97% (physician practices) of their revenue. Healthcare systems and physician practices that perform well in both frameworks will likely thrive and be preferred by patients.
A managing health framework must address the following tightly integrated major pillars:
- Operating Model
Healthcare systems and Physician Practices will need to evaluate and develop each of these framework pillars. They will need to closely monitor changes (i.e., new contracts, regulations) or insight (i.e., understanding of patients, what works?) to determine their impact the other components of the framework. An evaluation & change management process can help guide decisions on how to continuously improve their managing health framework.
Patients are typically attributed to Primary Care Physicians (PCPs) and Healthcare systems based on having most of their primary care services provided by them in the past 12 months or through a qualifying bundled payment (i.e., Joint Replacement, Oncology Care). The attributed populations are the denominators in calculating any value-based payments, incentives or gain share from alternative payment models or bundled payments. Healthcare systems and physician practices will need to be intimately familiar with their attributed patients, their unique set of needs and how to keep them satisfied and loyal. Organizations will need to align their competencies to improving overall health outcomes of their individual patients.
PCPs and Healthcare systems are typically involved in 10-20 initiatives that require managing health, yet they often manage initiatives within silos. They include Medicare (Medicare Advantage contracts, ACOs, MACRA for physicians, value-based and penalties for Hospitals), Commercial Health Plans (quality incentives, narrow networks, CINs, Exchange Plans, etc.), Medicaid (Medical Homes, Managed Medicaid, DSRIP, ACOs), Self-Insured (Employees, Employer Direct, Administrative Services), Care Management Codes, Leakage, Bundled Payments, Patient Loyalty and many more. The operating plan requires on integrated enterprise-wide approach that embeds each of the initiatives into hospital and physician workflows.
PCPs and Healthcare systems require new competencies and training within their managing health framework. This includes Payer Relations (data exchange, partnering, contracting), Physician Workflow (additional staffing, performance reporting, team-based process redesign), Care Management (attributed population management, health coaching, care coordination, new team members such as pharmacists or social workers), Technology (integrating EMRs and payer data, normalizing, reporting, actionable intelligence creation) and Performance-Based Contracting (with physicians, affiliates, payers, vendors, partners, social services, life sciences).
PCPs and Healthcare systems leadership and management are currently organized around the managing healthcare framework which may still represent 95% of their current revenue. While PCPs and Healthcare systems need to be successful within both frameworks, their current operating margins typically don’t support hiring people dedicated to the new managing health framework. At a minimum, a managing health committee or an evaluation and change management process is required to ensure decisions are not made without input from each of the impacted leaders and managers. Physician and management performance reporting needs to be developed to understand individual and team effectiveness in managing health and gain insight into how to improve.
The operating model begins with a revenue forecast based on the populations, initiatives and implementing new competencies over 3-5 years. It quantifies the performance-based and care management revenue within the healthcare system and physician practices. It provides detailed, flexible financial budgets tied to worst, likely and best case performance-based revenue scenarios. The budgets detail the cost and assumptions to create and maintain each of the identified competencies and to achieve desired performance levels within each initiative. It includes detailed implementation, training, reporting, governance, incentive and staffing plans.