In an era of value-based care, all providers should be taking steps toward population health management, industry thought leaders agree. 

At a Glance

Steps toward building a population management model of care should include:

  • Identifying the population that would be cared for through a population management initiative
  • Conducting an actuarial analysis for this population, reviewing historical utilization and cost data and projecting changes in utilization
  • Investing in data infrastructure that supports the exchange of data among providers and with payers
  • Determining potential exposure to downside risk and organizational capacity to assume this risk
  • Experimenting with payment models and care delivery approaches
  • Hiring care coordinators to manage care for high-risk patients

Across the nation, major changes to care delivery and care management are being introduced as providers position themselves for success in a value-based future—one that emphasizes improved quality and reduced total costs of
care to the purchaser.

“This shift from volume to value is reshaping American health care in profound ways,” according to HFMA President and CEO Joseph J. Fifer, FHFMA, CPA. “It’s driving a fundamental reorientation of the healthcare system around the quality and cost-effectiveness of care.”

Population health management has been identified as a critical strategy for improving value in an era of reform. It is a model of care management designed to enhance coordination of care and services for specific patient populations, such as Medicare patients or patients with chronic disease, and more actively engage consumers in improving and maintaining their health. This model has the potential to significantly reduce costs for healthcare purchasers and consumers. 

At HFMA’s Thought Leadership Retreat this past October, more than 100 thought leaders from throughout the healthcare industry agreed that population health management—whether through federal or private accountable care organizations (ACOs), capitated payments for a defined population, patient-centered medical homes, or other initiatives—will be a primary strategy for improving value in an era of reform.

All healthcare providers should be taking steps toward population health management, the thought leaders agreed. Such initiatives should include partnerships with employers and payers and an emphasis on both primary care and timely, preventive care.

Notwithstanding the widespread agreement among providers regarding the importance of population health management, however, relatively few providers have initiated significant population management efforts. HFMA’s Value Project research has uncovered wide variations in how providers are anticipating and preparing for population health management. 

Many attendees at HFMA’s Thought Leadership Retreat expressed concern about the amount of time it takes to organize around population management. “We’re all trying to improve quality and reduce costs on top of dealing with major changes in the industry,” said Michelle K. Mahan, CPA, senior vice president and CFO, Frederick Memorial Hospital, Bethesda, Md. “We’re stretched very thin.”

How can hospitals and health systems take steps toward building effective models for population health management? Recently, three organizations shared innovative strategies for managing population health—and strategies that could help other organizations get started. 

A Unique Model for Shared Savings

In October 2010, Advocate Health Care and Blue Cross Blue Shield of Illinois entered into a new and unusual partnership for value. Blue Cross agreed to share savings with Advocate, a not-for-profit, multihospital health system based in Oak Brook, Ill., under two conditions: 

  • Advocate’s clinical integration programs must reduce the cost of care to Blue Cross-covered individuals who are treated by Advocate Physician Partners physicians.
  • Advocate must meet agreed-upon targets for clinical quality, patient safety, and patient satisfaction.

The program came about when, in April 2010, representatives from Advocate and Blue Cross met and found themselves having a familiar argument (“You’re too expensive;” “You don’t pay us enough”). “We realized we weren’t getting anywhere,” says Lee Sacks, MD, CEO, Advocate Physician Partners. 

So Advocate and Blue Cross worked together to develop a three-year shared savings agreement with upside and downside risk for the network, including Advocate’s nine Chicago-area hospitals and a hospital in Bloomington, Ill. The agreement would cover patients under Blue Cross preferred provider organization (PPO) and health maintenance organization (HMO) plans who are treated by the roughly 4,000 physicians who make up Advocate Physician Partners—about 370,000 patients total, representing $2 billion in annual spending for Blue Cross.

Exhibit 1


The two organizations selected a small number of quality, safety, and service measures from each of the Centers for Medicare & Medicaid Services’ clinical quality domains, choosing measures that would apply specifically to commercial populations. The goal was not only to improve quality of care and outcomes, but also to reduce the total cost of care for Blue Cross patients—particularly for high-risk and very-high-risk patients, who contributed to 54 percent of the overall Blue Cross spend on this population.

For the program to work, Blue Cross agreed to share data with Advocate so that Advocate could better manage the health of this patient population. Advocate invested in technologies and staff to support predictive modeling, so the health system could better determine which patients would most benefit from preventive care and interventions that could reduce admissions, readmissions, and emergency department (ED) visits. Advocate Physician Partners also hired care management coordinators to work with high-risk patients in physician offices, improved post-acute care transitions, enhanced patient access to care through expanded physician hours and new outpatient programs, and implemented evidence-based protocols for referrals and prescribing.

Advocate and Blue Cross also established financial penalties that would take effect if Advocate’s performance on quality for Blue Cross patients worsened or failed to improve in specific areas, and the two groups agreed to a formula for shared savings if quality targets were met.

The first year and a half of the initiative yielded significant improvements:

  • Reduced ED use and inpatient admissions resulting from enhanced care management
  • A lower-than-average rate of skilled nursing facility (SNF) readmissions (13.6 percent, compared with a national average of 20.3 percent) and length of stay (19.2 days, compared with a 27-day national average)
  • A 26 percent reduction in readmissions among acute care patients who worked with a transition coach
  • Positive utilization trends in seven out of eight categories, particularly when compared with market averages
  • A 3.4 percent expansion in PPO in-network use
  • A 2 percent growth in HMO membership, with PPO-attributed patient growth of 11 percent

“We’ve reduced costs while maintaining or improving quality and patient satisfaction,” Sacks says. “Our primary care costs have increased significantly—and that’s good: Most of our primary care visits are going to replace expensive ED or specialty visits. And now that we have data that can show us where there are opportunities to enhance care and reduce cost, we’re finding things we never really understood before—and that is improving care management and outcomes. For example, we’ve used the data to develop practice report cards and a hospital alignment report card that hospital leaders can use in working with physicians to enhance outcomes, safety, and service and keep care in network.”

For a shared savings agreement such as this to work, the financial arrangement has to be a win-win for both the provider and the payer, Sacks says. “Financially, an arrangement such as this doesn’t pencil out if the insurance plan doesn’t facilitate adding new members,” he says. Under the Advocate-Blue Cross shared savings arrangement, Advocate’s HMO enrollment grew by 10,000 members, with the health system’s HMO market share increasing from 17 percent to 21 percent in one year.

Sacks and H. Scott Sarran, MD, vice president and chief medical officer, Blue Cross Blue Shield of Illinois, agree that continued success under the Advocate-Blue Cross shared savings arrangement will require continual redesign of primary care and advanced care models, IT connectivity, enhanced in-network care coordination, the discipline to create a standard approach for care, management/governance succession planning, and a focus on improving the patient experience. 

Ultimately, the arrangement positions both the provider and the payer well in an era of reform. “This kind of network design is going to be integral in a value-based business environment,” Sacks says.

Using Technology and Data to Drive Change

A southern Wisconsin health system’s commitment to developing a value-based model of care management has saved the organization more than $44 million over the past four years. Dean Health Systems Inc., an aligned integrated system based in Madison, Wis., has tremendous experience in population risk management, having operated a health plan since the 1980s. The health plan, which is now jointly owned by SSM Health Care of St. Louis, represents more than half of Dean Health’s revenue, says Steve Caldwell, CPA, senior vice president and CFO. 

“We have been at risk for a substantial portion of our business for a long time,” Caldwell says. “Essentially half our business is capitated. When you consider that Dean Health is now a Medicare ACO and you add those patients to the mix, nearly 70 percent of our business is now risk-based.”

In 2009, Dean Health embraced a population management model of care that would focus more intently on providing the right care at the right time in the right place for patients—not only patients in the health plan, but for all patients. “We’ve taken this approach because it’s the right thing to do,” Caldwell says. The health system developed a medical value program (MVP) in which clinicians and staff across the continuum of care work with data analysts to identify opportunities to improve clinical processes and care management. The goal is to enhance quality of care, improve outcomes, and achieve higher levels of satisfaction among patients, physicians, and staff.

Using claims data from the health plan as well as data from electronic health records (EHRs) maintained by Dean Health and Madison-area hospitals owned by SSM Health Care, teams of clinicians and data analysts look for ways to improve value across care settings. They estimate the financial impact of redesigning care delivery or care management as well as the potential impact on quality of care and patient outcomes. Then, the teams prioritize the initiatives that will be undertaken through the MVP, oversee implementation, and track specific metrics to ensure that the desired outcomes are being achieved. Finance leaders participate on the steering committee for the MVP. 

Exhibit 2


“Over time, we’ve developed a greater degree of sophistication in our ability to mine the data and in compiling the data in a central repository,” Caldwell says. “Now, we’re mining data from all components of our system in a much more granular and timely way. Our tools for mining data are evolving as well—we’re able to mine data in real-time, and in a less batch-oriented way. This will enhance our ability to perform predictive modeling, assess clinical variation, and analyze the financial impact of acting on specific opportunities.”

Since 2009, Dean Health also has adjusted incentives for its physicians to hold them accountable for metrics that support the health system’s increased focus on value by promoting improved quality of care and continuity of care and containing or reducing costs. These metrics include total cost of care, panel size, and patient satisfaction scores.

More than 50 MVP initiatives have been implemented over the past few years—with outstanding results:

  • A greater than 20 percent increase in the number of 90-day prescriptions written by Dean Health physicians since 2009 (Such prescriptions have the potential to reduce costs and enhance outcomes by supporting improved medication adherence.)
  • A 5 to 10 percent, month-over-month reduction in unnecessary emergency department (ED) visits in 2012 compared with the previous year’s figures
  • A reduction in the number of patients who have undergone knee replacement surgery being admitted to SNFs after hospital discharge, as a result of improved discharge processes for these patients
  • A limit on the rate of increase in per member per month costs to 6 percent annually, thereby avoiding an 8 percent annual increase in these fees, which would likely have occurred had the MVP not been implemented
  • Effective controls on inappropriate use of antibiotics in several areas (e.g., just 22 percent of adult patients with bronchitis were prescribed antibiotics—considered inappropriate for this condition—in 2012, compared with 51 percent of patients statewide and 75 percent nationally)
  • A 10 percent or greater increase in diabetes preventive care screenings since January 2010 in three areas as a result of nurse outreach efforts

“It’s a matter of clinicians and our ‘project engineers,’ so to speak, coming together to determine ways that we can provide higher-quality care and service at reduced cost,” Caldwell says. “It’s about engineering care in a much more thoughtful way, recognizing the potential to create better outcomes for patients and to achieve financial benefits—some of which are higher than we expect.”

Acting Upon Data to Improve Value

At Fairview Health Services in Minneapolis, a care model innovation project is transforming the ways in which care is managed and delivered, by redesigning primary care, defining care packages and approaches for 12 conditions, deploying innovative use of technologies to support virtual care and sharing of data, and building collaborative relationships with payers and employers.

Since adopting care model innovation in 2009, this not-for-profit, six-hospital system has reduced the total cost of care growth rate and has realized a number of other value improvements:

  • A significant increase in primary care visits and a reduction in hospital admissions and ED visits
  • A limit on the rate of increase in per-member-per-month fees to 1.7 percent annually, avoiding a 12.2 percent annual increase, which is what Fairview would likely have experienced without this model
  • Significantly lower claims paid per member per month across four service categories—primary care, inpatient and outpatient care, and specialist care—compared with clinics that did not;utilize this model
  • A 40 percent increase in the number of patients cared for by primary care physicians
  • A 40 percent reduction in ED utilization and inpatient admissions for 600 high-risk patients

In 2009, Fairview set a strategic goal of becoming a population health management company. “We wanted to be a catalyst developing new models of patient care and financing mechanisms centered on managing the health of populations in ways that would dramatically add value to purchasers and consumers of health care and would be sustainable in the long run,” says Daniel Fromm, senior vice president and CFO for Fairview. “We recognized that to do so, we were going to have to fundamentally change aspects of our care delivery and support system.”

In 2009, Fairview adopted a multiyear plan to enhance its capabilities for population health management through gradual changes in payment approaches, technology, and care delivery and management. 

Exhibit 3


The health system began by working with Medica, one of the largest payers in the Minneapolis area, to design a two-year risk-based contract that would base payment on the achievement of quality metrics for Medica plan members cared for by Fairview’s network of primary care physicians as well as primary care clinics’ success in containing total cost of care for plan members. An analysis of claims showed that plan members served by Medica’s primary care clinics already had lower total costs of care than the market average, but Fairview’s primary care physicians believed they could continue to reduce costs and improve outcomes by developing innovative ways to deliver primary care.

Four of Fairview’s primary care clinics took the lead in redesigning primary care. “Our clinicians came together to explore new ways to deliver care that could make a difference in quality and patient outcomes while reducing cost,” Fromm says. Physicians, nurses, and staff organized into teams, looking at ways to more fully engage patients in their care, increase efficiency, and use technology to drive improved value. They developed 12 care “packages”—including packages for low back pain, diabetes, hypertension, and prenatal care—to provide more consistent, higher-quality care, improve the patient experience, and better manage costs. They expanded the use of social media to engage patients in care management; integrated access to caregivers such as behaviorists, health coaches, and medication therapy management pharmacists; and provided options for virtual care, nurse-only appointments, and group appointments. And they worked with payers and employers to offer improved care coordination and care packages under risk-based contracts while benefitting from expanded access to patient data that could be used to find opportunities to further improve value.

Today, the redesigned primary care model has been implemented in all 42 Fairview primary care clinics. Fairview’s success in managing population health positioned the health system to become a Medicare ACO in 2011—and to succeed in an era of value-based business models for care.

“Our evolution toward becoming a population health management company began cautiously, starting with a small group of passionate and committed individuals who had a vision for a different, more meaningful healthcare delivery system,” Fromm says. “We designed, implemented, measured, and adopted, cycling through several iterations of change as we learned better ways to improve value, and then disseminated that learning out across the continuum of care as we saw the impact we were having. And we continue this evolution today.”

Learning how to analyze and act upon patient-level claims data and longitudinal quality and total cost data has been one of the keys to Fairview’s success—and one of its greatest challenges.

Timely and accurate access to data is critical, and Fairview has leveraged both internal and external data sources. Some payers have provided Fairview with longitudinal data; others have provided more detailed aggregated statistics. To use the data effectively, Fairview created an analytics function to broaden the health system’s data reporting and analysis capabilities and deepen its understanding of clinical and financial patterns within attributed populations, especially among higher-risk patients. Staff within this area work with these data to assess opportunities for improving care management and care processes, reducing total cost of care, and managing capacity at particular locations.

“To be successful, we needed new roles and functional expertise, including actuarial capabilities to help us understand risk characteristics differently than we had in the past,” Fromm says. “As we have expanded the population for which we are accountable, we’ve also expanded our data analytics staff. Additionally, we’ve added tools to help us aggregate, mine, and report data so that we can review data with more of a longitudinal perspective, irrespective of whether care was provided in a hospital setting or in a clinic. These tools allow us to be more proactive and enable our health analytics and reporting team to provide feedback to clinicians, care managers, and other stakeholders on a real-time basis.”

Also key to Fairview’s success in population management: the use of multidisciplinary teams, which include finance professionals, to review opportunities to improve value holistically. “That’s been a differentiator for us,” Fromm says.

Lessons Learned

With intense pressure for providers to adopt population management coming from the private sector—particularly employers and commercial payers—hospitals and health systems should consider the following strategies for building an effective model for population management.

Identify the population that would be cared for through a population management initiative. Has your organization cared for these patients previously? What services would these patients require that your organization does not provide? How much of these patients’ care is currently provided outside your network?

Conduct an actuarial analysis for this population, reviewing historical utilization and cost data and projecting changes in utilization. Based on the analysis, determine whether the additional costs associated with a population management model—including those related to enrollment management, claims processing, care management, and communication with beneficiaries and payers—can be taken on by the hospital or health system. 

Invest in data infrastructure that supports the exchange of data among providers and payers. Analytics capabilities that can pinpoint opportunities to enhance care delivery and drive improved value also are critical. For example, in 2011, Advocate invested in a population health management system that tracks the total healthcare expenses of each attributed patient across providers, both within and outside Advocate’s network. Data analysts then mine the data to look for ways to deliver care or manage high-risk patients in more cost-effective ways. The analyses are shared with care managers, who work with patients and physicians in developing a plan of care that supports improved health and outcomes at reduced cost.

Determine potential exposure to downside risk and organizational capacity to assume this risk. There are several issues providers should consider related to their organizations’ capacity to assume risk.

One consideration, for example, is the organization’s financial strength and resources. According to Michael P. Freed, CPA, executive vice president of corporate resources and CFO, Spectrum Health, and president and CEO, Priority Health, whether a provider should enter into a value-based payment arrangement that involves potential downside risk comes down to some important questions: How much risk can the organization afford to take? And how much can the organization afford to lose in any given year? “You want to get the answer to those questions right, because if you don’t, it will affect your organization for years to come as you try to change your risk-sharing arrangement with the payer, while it tries to reprice its insurance products,” Freed told participants of HFMA’s Thought Leadership Retreat. 

Another consideration is the organization’s ability to engage clinicians and other staff in driving the performance improvement changes necessary to produce high-quality care at reduced cost. For example, physicians must move from an “independent expert” mindset to a team-based approach to improving care management and delivery, while nurses and other staff will need to become more involved in enhancing care processes and care delivery, communicating with patients and families, and improving the patient experience as a whole, Thought Leadership Retreat participants agreed.

Hire care coordinators to manage care for high-risk patients. Each of the organizations featured in this article uses care coordinators to work with high-risk patients in some fashion, such as enhancing these patients’ access to physicians and other care specialists, ensuring that evidence-based protocols for care management are followed, and providing post-discharge support.

Experiment with payment models and care delivery approaches. Engage patients, physicians, and purchasers in experiments with payment and care-delivery transformation, and apply the lessons learned across the continuum of care. Share risks and rewards with physicians, and seek ways to partner with other organizations to improve value.

Jeni Williams is managing editor, content development, in HFMA’s Westchester, Ill., office.

Publication Date: Friday, March 01, 2013

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