Population Health Management (PHM) is a trending buzzword for many in the healthcare industry. As healthcare organizations face the new challenges of today’s dynamic marketplace, it will become increasingly important for them to adapt to this new method of thinking. It will no longer be enough for healthcare organizations to know about PHM but choose to ignore it. In fact, the organizations who begin looking today for meaningful solutions to embrace PHM will ultimately end up most successful in the new frontier approaching, while the less adaptable organizations face the possibility of being edged out of by their more adaptable competitors.
Compensation is one of the biggest issues that physicians express concerns about when it comes to PHM. Many of them worry about the risk of their compensation being impacted by entering the PHM market, and consequently, so do the organizations they work for. Many of these organizations could easily envision a situation in which physicians depart the organization for financial opportunities elsewhere.
Thus, the question becomes: how should organizations attempting to shift to PHM address the issue of compensation when embarking on their PHM journey? The choice to expose them to the business risk is one option, but it’s perhaps the worst one an organization could make—even exposing them to a limited risk could have severely negative consequences.
A better choice is to continue to pay the physicians as they have been paid without exposing them to the gains/losses under a PHM business model—but with quality-related incentives. In other words, the best course of action is to consider upside gain opportunities that are largely consistent with existing compensation plans. Adding measures to incent behaviors that achieve the needed quality goals would be a strong step in the right direction. Further, steps to limit or de-emphasize patient care production would also help.
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Population Health Management (PHM) is a complicated topic, and knowing the best path forward is not always obvious. But one thing is certain: it’s an issue dominating headlines, and one that will continue to do so—in fact, it will likely be the single biggest change facing the healthcare industry over the course of the next decade. Medical groups and practices will have tough decisions to make over the next few years, as they determine whether or not to embrace PHM. The groups and practices that choose not to will likely be left behind by their more adaptable competitors.
For medical organizations that decide to embark on their PHM journey, it will be important for them to understand that in an ACO shared risk model, controlling expenses is critical—and as such, they will need to decide where to concentrate their efforts on expense control. This decision will come down to one of two choices: Hospital Inpatient expenses or Practice Operations and Patient Flow expenses.
While it’s true that all areas of the healthcare delivery system are important to control medical expenses, the largest impact with expense control is Hospital Inpatient, Hospital Outpatient Procedures, and ER Utilization. Reducing inpatient lengths of stay (LOS) and admissions can result in significant savings quickly.
Consider that in 2010, the average bed stay cost for non-profit hospitals in the United States was $2,025 per day. In 2012, the hospital bed day utilization in the U.S. was 591 bed days per 1,000 population. For a patient population of 10,000, a reduction of only 1% in this bed day utilization would result in savings of almost $120,000 per year. Therefore, it is clear that controlling institutional healthcare cost is critical to success when it comes to PHM.
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The shift from treating symptoms to managing health will be one of the biggest changes of the next decade for the healthcare industry. It is not enough to simply hope this issue will go away—in fact, going forward, it will be key that healthcare leaders know and understand the complicated topic of Population Health Management (PHM), or they will risk being left behind by their more adaptable competitors.
There is little debate that this is an important issue the healthcare industry is facing, but the more complicated question is how physicians should respond. It is not uncommon to see medical groups of practices comprised of physicians with divergent opinions on the matter; While some believe it is important to the future of their medial group of practice, there are others who disagree—and both typically have strong opinions regarding the business lines they are considering entering.
So the question then becomes: should the entire group enter the PHM business, or should the business establish a single practice site for a subset of physicians interested in PHM? For practices with a bimodal mix of physician age groups, it is likely that highly experienced physicians will want to avoid PHM, while physicians with more recent training will be more likely to embrace this type of healthcare delivery model. A reasonable alternative to the controversy about entering the PHM business is to establish a startup practice site as a PHM laboratory. In this way, willing physicians work on a smaller scale to establish the PHM business, allowing the non-participating physicians to observe and learn about the opportunity.
For more insights like these, take our PHM quiz and download our free whitepaper: "Population Health Management: The New Frontier."