Sustainable Population Health -- Catcher or Pitcher?
Sustainable Population Health:
Part B – Catcher or Pitcher?
Part B of this article addresses how growth plans of healthcare systems distinguish population health management from community and public health.
Part A of this article clarified the terminology and implications of Community, Public and Population Health. So what does all this this mean for healthcare system leaders’ growth plans?
Healthcare providers have historically played catcher, “receiving” patients who sought care. Access meant being available when and where patients sought them. The transition from volume-based care to population health management requires a role change of providers from catcher/receiver to pitcher/initiator. The transfer of utilization and intensity (and possibly actuarial) risk to providers requires providers to be economically accountable for care and the health of a population. The good news is that this is a better alignment with the societal view of healthcare as a service (in economics, a ‘good’ with a cost) that is necessary but not a value-add. The bad news for providers is that this is contrary to traditional culture and payment incentives. This change is not a transition, but a transformation that involves many transitions.
Is Less Healthcare Better?
From a community and public health perspective, success involves preventing disease and reducing the demand for healthcare services. Success for providers often means growth in healthcare services. Traditional revenue growth for providers involved price and quantity (P & Q). Providers feel conflicted: more P and Q meant economic success, but now, with increasing “value-based” care (more-risk, if not full risk), less P and Q means success.
Studies have called out pricing as the primary reason why costs in the U.S. are significantly higher than in other developed countries (Uwe Reinhart, ‘It’s the Prices Stupid’). Increasingly transparent societal forces are serving to limit growth in P. And the ascendance of population health management is serving to put downward pressure on Q – the quantity of health services provided.
Provider growth, aka, healthcare spending, in the United States decreased once again in 2017 to a growth rate of 3.9%, nearly a full percentage point lower than in 2016, according to data released by the Office of the Actuary at the Centers for Medicare & Medicaid Services (CMS) and published in Health Affairs. This is the second consecutive year that healthcare spending (provider growth) has slowed, keeping healthcare’s share of the nation’s gross domestic product at 17.9% or $3.5 trillion ($10,739 per person), and it grew at a slightly slower rate of the overall GDP. The lower rate is attributed to slower growth in the use and intensity (decreased ‘Q’) of services in hospitals, clinics and physician offices, which make up 63% of healthcare spending.
So given that population health management requires providers to play pitcher, initiating plans to reduce demand for healthcare services (e.g., prevent disease and injury for attributed lives/persons in addition to providing needed care), how does a provider grow? For healthcare providers, the traditional business imperative of P x Q = revenue growth must be either achieved in a different way or abandoned…or both.
While there may still be some opportunity to grow service revenue in the traditional sense, e.g., with population growth, much of health system future growth needs to occur in less-traditional areas. Only a few decades ago, many health systems derived the majority of their revenue from acute services via fee-for-service payor agreements. Now the majority of revenue typically comes from non-acute services and value-based payor agreements. The real challenge is to achieve revenue growth from non-acute services and value-based payor arrangements faster than acute service revenues decrease. The pace of diversification beyond traditional healthcare services does not necessarily have to be fast – but it needs to be deliberate, value-added and in progress.
This is classic service cycle portfolio management: harvest mature business while planting, nurturing and growing newer businesses. It is this economic ‘going concern’ of provider entities that most distinguishes population health management from community and public health terminology. For population health to be economically sustainable, healthcare systems must increasingly adapt their service offering of yesterday and align it with more non-acute services and value-based payment agreements of tomorrow. For health system leaders, the catcher may be tempted to signal for more of the same. But you are now the pitcher: the ball is in your hand.