We’ve all been hearing more and more about hospitals and health systems making moves to take on population health. In doing so, they often fill shoes that health plans used to fill.

It’s great that providers want to get more proactive about managing the health of the communities they serve. However, providers must also guard against overextending themselves, or trying to do too much too quickly.

Providers have traditionally taken responsibility for defined populations in exchange for limited rewards. Overall patient wellness is always the goal, but it has been elusive thus far under such arrangements. For example, back in the 1990s, many providers launched initiatives to promote wellness but found they lacked the integrated delivery systems and coordination needed for their programs to be truly effective. Almost all providers that chose this approach quickly found it untenable and went back to the old way of doing things.

Times have, of course, changed. We now see hospitals and health systems taking interest in maintaining the overall health of their populations. As payers, providers, and physicians increasingly align, it’s clear that achieving population health targets will be everybody’s concern, at least to some degree, as it should be. But as providers prepare to take on managing these risks, they should be careful to set aside adequate capital for the task.

Because hospitals and health systems have traditionally been paid for patient care on a fee-for-service basis, many have had little incentive to build the relationships, facilities, and pricing mechanisms needed to cover a patient population. I probably don’t need to remind you, but managing population health and wellness requires very different tools from those needed to provide acute care.

New arrangements to serve population health will likely involve some sort of capitation. Thus, risk management will largely depend on providers’ ability to be efficient in the treatment process and to lower the total costs of entire episodes of care. These results are completely attainable—with the right tools. Providers must develop a reach far beyond their ED services and touch all aspects of the community. They must encourage enrollees to access primary and preventive care services, and not wait for conditions to become chronic before they see a provider. This effort will take an investment in resources and a firm commitment to changing how we do business. Most crucial, hospitals will want to ensure that they have all of these assets in place before they commit to assuming more population health risk. Providers that jump the gun may find themselves struggling to play “catch-up” in a situation where being underprepared has significant costs.

As we read in the papers each morning, waves of change are descending over our industry. The time for action is now. Making the move to managing population health may well create the path to financial success for providers looking to thrive amid reform, while achieving the more important goal of improving outcomes and the health of those we serve. No one should start this process without fully understanding the investments that will be necessary and the risks that may come with it.

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