Hospitals have long provided services aimed at improving the health of their communities, usually as part of their community benefit programs. It's hard to find a hospital that doesn't offer educational sessions, free screenings and other preventive health services, and many hospitals go beyond that. For example, hospitals are increasingly using nurse managers to coordinate care for specific patient populations, particularly those with chronic diseases, and oversee care for a variety of patients outside the traditional walls of a hospital. In the past, care coordination and population health management was relegated to the most sophisticated integrated delivery health networks with significant managed-care contracts or safety-net and other hospitals in low-income communities whose missions are deeply guided by community health improvement. However, healthcare reform legislation and other catalysts are beginning to pressure hospitals to take a broader view toward their role in community health. Systems and facilities of all sizes that have long been focused on providing high quality care in the hospital must now turn toward keeping patients out of the hospital, and the transition won't be an easy one for many.
"Among providers, there is a growing recognition that payment is going to change. There will be less money to go around and how it will be distributed is a dramatically different way than in the past," says Brad Benton, KPMG Healthcare's national account leader. "How hospitals orient away from volume and toward health will be a critical success factor."
Why now?
Efforts to drive down skyrocketing health costs, driven by an aging population and new technologies, came to a head in March of 2010 when President Obama signed into law the Patient Protection and Affordable Care Act. The law most notably includes significant insurance reforms, but also sets in motion several programs that begin to transition the healthcare delivery system away from fee-for-service payments and toward those based on performance. In addition to reimbursement reforms that take into account quality and readmissions, CMS will launch an expanded bundled payment program as well as programs aimed at developing accountable care organizations and patient-centered medical homes. And, it's not just public payors. In fact, many private payors are ahead of CMS in regards to developing shared savings and bundled programs with providers that incent coordinated, high-quality care. While these programs don't go as far as fully capitating payments, they do suggest that greater accountability, and financial risk, will be required by providers. So what does this mean for health systems? For many, it means their role in managing population health will move beyond disparate programs aimed at addressing specific community needs as part of their community benefit efforts to integrated programs that allow the system to oversee, and be financially responsible for, a patient's entire continuum of care.
Hospitals' new role
Being able to take on financial risk for population health management means a number of things for a hospital system: control of partnerships with physicians, post-acute providers and others along the continuum of care; resources and expertise to reduce variability among providers, better coordinate services and reduce readmissions; health information systems to track large amounts of data on care quality and costs; and robust analytics programs to assess risk and price services. Different risk models require different capabilities — for example, shared savings models require less integration and coordination than fully capitated models — but at the minimum this new way of delivery care requires alignment with physicians, evidence-based clinical care pathways and IT systems to track adherence to pathways, quality and patient satisfaction changes and determine any financial incentives. In the future, more robust capabilities may be required if care continues to move toward more fully capitated models built around managing a population's health.
"As we think about the conversation around healthcare reform, one mandate is the move away from fee-for-service, individual care toward assessing and managing the health of a community," says Alan Channing, president and CEO of Sinai Health System on Chicago's lower-income west side.
"Managing the patient appropriately with the best care the first time always is the thing that is going to create the greatest cost savings," says Tamara Sheffield, MD, medical director of community health and prevention of Salt Lake City-based Intermountain Healthcare. "You can't get [adequate cost reductions] with expense management. You have to have a very close relationship with physicians and share both upside and downside incentives." Intermountain, which began as a hospital-only operator, began its journey toward a fully integrated health network in the 1980s. The system's reasoning for the integration, says Dr. Sheffield, was to improve clinical information management, which allowed the organization develop care process models, improve decision-making, coordinate care and drive out costs. Hospitals that plan to take on risk need to be able to consider how their organization will support such systems. "What tools, what prompts do you need? How do you make collective choices?" she asks.
Today every patient that presents to one of Intermountain's clinics or hospitals is enrolled in what the system calls a "care process model," which uses evidence-based guidelines to prompt clinicians toward the most appropriate care. Clinicians' adherence to the CPMs is tracked, and they are rewarded for meeting certain metrics within them. The most common diagnoses have their own CPM, and CPMs aren't limited to inpatient care — they also cover chronic disease management in the primary care setting as well as preventive issues, such as weight management and smoking cessation.
Pre-primary care
While most current care coordination efforts are focused on acute, post-acute and primary care, riskier models that oversee larger portions of the care continuum will require systems to become adept at providing what Mr. Channing calls "pre-primary care" services. Pre-primary care — which Mr. Channing says is where the most cost control can take place — refers to programs and other efforts ranging from nutrition and fitness programs to more coordinated preventive health initiatives aimed at keeping patients healthy.
Non-profit Sinai has offered such programs through its Sinai Urban Health Institute and Sinai Community Institute. The Sinai Urban Health Institute performs translational research and, as part of that, deploys community health workers to educate asthmatic children and their parents about the condition with the goal of reducing ER visits and admissions. Meanwhile, Sinai Community Institute addresses the social issues which have a big impact on health. For example, it runs a peer-education program aimed at reducing unplanned teen pregnancies. Both programs have rigorous evaluations and documented outcomes.
Parkview Health in Fort Wayne, Ind., is another hospital experienced at offering pre-primary care services. Its community nursing program was the recipient of this year's American Hospital Association NOVA Award for improving community health. The program deploys nurses to schools and other locations in the community to educate patients and help manage their conditions along care plans, says Connie Kerrigan, RN, manager of community nursing and women's health at Parkview. In regards to Parkview's community health programs, Ms. Kerrigan says, "We aim to understand what's happening in our community, and then see how the gaps we're witnessing could be filled."
While a future where health systems are financially responsible to provide impactful pre-primary care may seem daunting, those experienced in these efforts say much of a hospital's burden can be lessened through partnerships that may include cost-sharing with the health department, free clinics and other community groups. "A lot of what we do is working with other people in our community and determining how we, together, can have the best impact and what role we play as a community health organization," says Ms. Kerrigan.
Most hospitals currently tend to view pre-primary care programs under the umbrella of "community benefit," but as hospitals take on risk arrangements, the impact of these programs may no longer be optional. As this transition occurs, Mr. Channing cautions hospitals to carefully measure and analyze outcomes from these programs to determine if the level of health improvement is worth the cost. "Across all of our activities, we try to be as rigorous in terms of measurement of outcomes as we can be. We want to know when something we have done makes a difference," he says.
KPMG's Mr. Benton agrees. "Hospitals have to evaluate the depth of these programs [through data]," he says. "Are we meaningfully affecting key cost drivers? What economic successes emerge from these programs?"
Balancing the transition
While no one disputes community health programs and care processes are valuable, developing them can be challenging for hospitals. In order to successful, physicians need to play a role in creating and deploying them, and physicians are already pressed for time. Additionally, reimbursement can be an issue. Health systems with bundled or capitated payments essentially absorb the cost of the programs, but can benefit financially from them if they drive down costs compared to the contracted rate. In fact, KPMG's Mr. Benton says it may be possible for the most advanced systems to actually have higher profit margins under these new models, even with lower revenues.
It gets trickier under fee-for-service agreements, which by far represent the majority of contracts. While some commercial payors and soon CMS will partner with hospitals in fee-for-service agreements that share cost savings in order to incentize care coordination, hospitals without such partnerships face a dilemma: how does it all get paid for? Care coordination takes a significant amount of time and effort, and beyond that, not all services physicians plan to include on care process models may be eligible for reimbursement under current contracts. Health systems face challenging times ahead as they will likely have to manage both fee-for-service and various pay-for-performance contracts at the same time.
"The real question is how do you move from that approach to more of a mainstream funding mechanism [to one] that allows you to think about managing the health of a population more holistically?" says Sinai's Mr. Channing. "We're currently in discussions to incorporate our community health programs in a model within a risk-managed environment. We believe strongly that everyone should have a medical home and access to health education services, but there is a lot of front-end work that has to be done to develop that, and we strongly believe the managed care community has to help us develop it to be successful."
What will the future of healthcare delivery look like?
Most healthcare experts agree that the healthcare delivery system of the future will be very different than the fee-for-service system of today. Rising healthcare costs, growing federal debt and consumers' more active role in seeking out high quality, affordable care will demand it. However, there is a multitude of ways to pay for and create a pay-for-performance-based healthcare system.
The specific ways health systems will adapt are yet to be determined. "I expect we could see a different model in every community," says Sinai's Mr. Channing. "I think there will be a natural coming together of hospitals in the community with post-acute care providers and others to think about how to allocate resources, save money and generate a margin that can be reinvested in the community. The differences will come out depending on who has the resources and passion to drive it forward."
KPMG's Mr. Benton predicts that in some markets it may be payors or other intermediaries who are driving care coordination, either on their own through acquiring providers or through collaborative partnerships with health systems to care for certain patient populations. "In order to manage risk effectively, certain assets are required that, in many cases, are not currently present in all but the most integrated provider systems," he says.
Even if provider organizations desired to develop these assets, the capital costs associated with them could be too much to bear. "A health system really has to look in the mirror and understand what its appetite for risk is," says Mr. Benton. "After they have a very credible assessment of its [risk] appetite, systems need to examine their current ability to manage that risk, identify any gaps and see how these ideas fit with current business planning."
No matter how the final arrangements flesh out, Mr. Channing worries that determining how to divide payments among providers will be a major stumbling block. "It's going to be a contest between the various players over who gets what dollars and who invests what," he says. "It will be a distraction, but we have to get past that and think instead about how we are going to make a difference in the health of the community."
Intermountain's Dr. Sheffield sees yet another challenge: patients are largely left out of the incentive equation. Both providers and payors have an inherent incentive to bring down costs under new payment models, but most reform efforts don't provide incentives to the patient for healthy behavior. "I think hospitals need to find ways to incentivize patients to make appropriate choices for themselves," she says. In her experience, close partnerships with a health plan are needed to coordinate such an incentive.
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"Among providers, there is a growing recognition that payment is going to change. There will be less money to go around and how it will be distributed is a dramatically different way than in the past," says Brad Benton, KPMG Healthcare's national account leader. "How hospitals orient away from volume and toward health will be a critical success factor."
Why now?
Efforts to drive down skyrocketing health costs, driven by an aging population and new technologies, came to a head in March of 2010 when President Obama signed into law the Patient Protection and Affordable Care Act. The law most notably includes significant insurance reforms, but also sets in motion several programs that begin to transition the healthcare delivery system away from fee-for-service payments and toward those based on performance. In addition to reimbursement reforms that take into account quality and readmissions, CMS will launch an expanded bundled payment program as well as programs aimed at developing accountable care organizations and patient-centered medical homes. And, it's not just public payors. In fact, many private payors are ahead of CMS in regards to developing shared savings and bundled programs with providers that incent coordinated, high-quality care. While these programs don't go as far as fully capitating payments, they do suggest that greater accountability, and financial risk, will be required by providers. So what does this mean for health systems? For many, it means their role in managing population health will move beyond disparate programs aimed at addressing specific community needs as part of their community benefit efforts to integrated programs that allow the system to oversee, and be financially responsible for, a patient's entire continuum of care.
Hospitals' new role
Being able to take on financial risk for population health management means a number of things for a hospital system: control of partnerships with physicians, post-acute providers and others along the continuum of care; resources and expertise to reduce variability among providers, better coordinate services and reduce readmissions; health information systems to track large amounts of data on care quality and costs; and robust analytics programs to assess risk and price services. Different risk models require different capabilities — for example, shared savings models require less integration and coordination than fully capitated models — but at the minimum this new way of delivery care requires alignment with physicians, evidence-based clinical care pathways and IT systems to track adherence to pathways, quality and patient satisfaction changes and determine any financial incentives. In the future, more robust capabilities may be required if care continues to move toward more fully capitated models built around managing a population's health.
"As we think about the conversation around healthcare reform, one mandate is the move away from fee-for-service, individual care toward assessing and managing the health of a community," says Alan Channing, president and CEO of Sinai Health System on Chicago's lower-income west side.
"Managing the patient appropriately with the best care the first time always is the thing that is going to create the greatest cost savings," says Tamara Sheffield, MD, medical director of community health and prevention of Salt Lake City-based Intermountain Healthcare. "You can't get [adequate cost reductions] with expense management. You have to have a very close relationship with physicians and share both upside and downside incentives." Intermountain, which began as a hospital-only operator, began its journey toward a fully integrated health network in the 1980s. The system's reasoning for the integration, says Dr. Sheffield, was to improve clinical information management, which allowed the organization develop care process models, improve decision-making, coordinate care and drive out costs. Hospitals that plan to take on risk need to be able to consider how their organization will support such systems. "What tools, what prompts do you need? How do you make collective choices?" she asks.
Today every patient that presents to one of Intermountain's clinics or hospitals is enrolled in what the system calls a "care process model," which uses evidence-based guidelines to prompt clinicians toward the most appropriate care. Clinicians' adherence to the CPMs is tracked, and they are rewarded for meeting certain metrics within them. The most common diagnoses have their own CPM, and CPMs aren't limited to inpatient care — they also cover chronic disease management in the primary care setting as well as preventive issues, such as weight management and smoking cessation.
Pre-primary care
While most current care coordination efforts are focused on acute, post-acute and primary care, riskier models that oversee larger portions of the care continuum will require systems to become adept at providing what Mr. Channing calls "pre-primary care" services. Pre-primary care — which Mr. Channing says is where the most cost control can take place — refers to programs and other efforts ranging from nutrition and fitness programs to more coordinated preventive health initiatives aimed at keeping patients healthy.
Non-profit Sinai has offered such programs through its Sinai Urban Health Institute and Sinai Community Institute. The Sinai Urban Health Institute performs translational research and, as part of that, deploys community health workers to educate asthmatic children and their parents about the condition with the goal of reducing ER visits and admissions. Meanwhile, Sinai Community Institute addresses the social issues which have a big impact on health. For example, it runs a peer-education program aimed at reducing unplanned teen pregnancies. Both programs have rigorous evaluations and documented outcomes.
Parkview Health in Fort Wayne, Ind., is another hospital experienced at offering pre-primary care services. Its community nursing program was the recipient of this year's American Hospital Association NOVA Award for improving community health. The program deploys nurses to schools and other locations in the community to educate patients and help manage their conditions along care plans, says Connie Kerrigan, RN, manager of community nursing and women's health at Parkview. In regards to Parkview's community health programs, Ms. Kerrigan says, "We aim to understand what's happening in our community, and then see how the gaps we're witnessing could be filled."
While a future where health systems are financially responsible to provide impactful pre-primary care may seem daunting, those experienced in these efforts say much of a hospital's burden can be lessened through partnerships that may include cost-sharing with the health department, free clinics and other community groups. "A lot of what we do is working with other people in our community and determining how we, together, can have the best impact and what role we play as a community health organization," says Ms. Kerrigan.
Most hospitals currently tend to view pre-primary care programs under the umbrella of "community benefit," but as hospitals take on risk arrangements, the impact of these programs may no longer be optional. As this transition occurs, Mr. Channing cautions hospitals to carefully measure and analyze outcomes from these programs to determine if the level of health improvement is worth the cost. "Across all of our activities, we try to be as rigorous in terms of measurement of outcomes as we can be. We want to know when something we have done makes a difference," he says.
KPMG's Mr. Benton agrees. "Hospitals have to evaluate the depth of these programs [through data]," he says. "Are we meaningfully affecting key cost drivers? What economic successes emerge from these programs?"
Balancing the transition
While no one disputes community health programs and care processes are valuable, developing them can be challenging for hospitals. In order to successful, physicians need to play a role in creating and deploying them, and physicians are already pressed for time. Additionally, reimbursement can be an issue. Health systems with bundled or capitated payments essentially absorb the cost of the programs, but can benefit financially from them if they drive down costs compared to the contracted rate. In fact, KPMG's Mr. Benton says it may be possible for the most advanced systems to actually have higher profit margins under these new models, even with lower revenues.
It gets trickier under fee-for-service agreements, which by far represent the majority of contracts. While some commercial payors and soon CMS will partner with hospitals in fee-for-service agreements that share cost savings in order to incentize care coordination, hospitals without such partnerships face a dilemma: how does it all get paid for? Care coordination takes a significant amount of time and effort, and beyond that, not all services physicians plan to include on care process models may be eligible for reimbursement under current contracts. Health systems face challenging times ahead as they will likely have to manage both fee-for-service and various pay-for-performance contracts at the same time.
"The real question is how do you move from that approach to more of a mainstream funding mechanism [to one] that allows you to think about managing the health of a population more holistically?" says Sinai's Mr. Channing. "We're currently in discussions to incorporate our community health programs in a model within a risk-managed environment. We believe strongly that everyone should have a medical home and access to health education services, but there is a lot of front-end work that has to be done to develop that, and we strongly believe the managed care community has to help us develop it to be successful."
What will the future of healthcare delivery look like?
Most healthcare experts agree that the healthcare delivery system of the future will be very different than the fee-for-service system of today. Rising healthcare costs, growing federal debt and consumers' more active role in seeking out high quality, affordable care will demand it. However, there is a multitude of ways to pay for and create a pay-for-performance-based healthcare system.
The specific ways health systems will adapt are yet to be determined. "I expect we could see a different model in every community," says Sinai's Mr. Channing. "I think there will be a natural coming together of hospitals in the community with post-acute care providers and others to think about how to allocate resources, save money and generate a margin that can be reinvested in the community. The differences will come out depending on who has the resources and passion to drive it forward."
KPMG's Mr. Benton predicts that in some markets it may be payors or other intermediaries who are driving care coordination, either on their own through acquiring providers or through collaborative partnerships with health systems to care for certain patient populations. "In order to manage risk effectively, certain assets are required that, in many cases, are not currently present in all but the most integrated provider systems," he says.
Even if provider organizations desired to develop these assets, the capital costs associated with them could be too much to bear. "A health system really has to look in the mirror and understand what its appetite for risk is," says Mr. Benton. "After they have a very credible assessment of its [risk] appetite, systems need to examine their current ability to manage that risk, identify any gaps and see how these ideas fit with current business planning."
No matter how the final arrangements flesh out, Mr. Channing worries that determining how to divide payments among providers will be a major stumbling block. "It's going to be a contest between the various players over who gets what dollars and who invests what," he says. "It will be a distraction, but we have to get past that and think instead about how we are going to make a difference in the health of the community."
Intermountain's Dr. Sheffield sees yet another challenge: patients are largely left out of the incentive equation. Both providers and payors have an inherent incentive to bring down costs under new payment models, but most reform efforts don't provide incentives to the patient for healthy behavior. "I think hospitals need to find ways to incentivize patients to make appropriate choices for themselves," she says. In her experience, close partnerships with a health plan are needed to coordinate such an incentive.
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