In this episode, we are joined by Michael Abrams, Managing Partner at Numerof & Associates, to discuss the state of population health in the United States.
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Highlights of this episode include:
- Background on Numerof’s study on the evolution of population health management in the United States.
- Reasons why the implementation of population health in the US has appeared to stall.
- Why population health is still seen as a model that will drive healthcare, despite it’s slow progress.
- Why the risk of financial loss is commonly cited as a top challenge for organizations.
- And more…
Mike Passanante: Hi, this is Mike Passanante. And welcome back to the Hospital Finance Podcast®.
As US government policy grows more focused on moving to a value-based model, population health management will be increasingly seen as a key part of the solution for realigning the healthcare industry to deliver better care at lower costs.
Recently, Numerof & Associates completed their 4th consecutive State of Population Health Survey which looks at the evolution of population health in the United States.
To share the findings of that survey, I’m joined by Michael Abrams who is co-founder and managing partner of Numerof. Over the last 25 years, Michael has built a portfolio of strategy and business performance successes as an internal and external consultant to Fortune 500 corporations.
Michael, welcome to the show.
Michael Abrams: Thank you, Mike. I appreciate it.
Mike: Mike, could you start out by just telling us a little bit about what you do at Numerof & Associates?
Michael Abrams: Okay. So Numerof is a strategic management consulting firm. We work with clients across healthcare to develop and implement strategies and tactics that address the challenges of business model change.
Our clients include academic and community healthcare systems, pharmaceutical, medical device and diagnostics companies, and insurers as well.
So, we have a 360 degree view of what’s happening in healthcare.
We tend to focus on challenges of growth and commercialization in this market—which is changing, as I’m sure your listeners know, very rapidly.
Mike: Indeed! And as I mentioned in the intro, this is your State of Population Health Survey. Michael, what were you looking at specifically with this research?
Michael Abrams: Well, Mike, this is the fourth year in which we have partnered with Dr. David Nash, Dean of the Jefferson College of Population Health to study the evolution of population health management in the US.
Over those four years, we’ve been tracking the adoption of this new model of approaching healthcare in order to try and quantify progress of the industry in changing its business model and to identify the challenges and success factors in making that transition.
So, our survey looked at both global perceptions of capability and concrete results, if you will, in terms of making progress in the population and health paradigm.
Mike: Michael, could you briefly explain the methodology that you used to arrive at the survey results?
Michael Abrams: Sure. So annually, we send out an online survey to over 10,000 C-suite executives across the US, provider organizations that include healthcare systems, hospitals, academic medical centers, and some large physician groups.
We received over 500 surveys back from delivery organizations across the country representing urban/suburban/rural delivery organizations, some standalone facilities, small systems, and IDMs. And that was the basis for most of the findings that we have reported.
Mike: And you did find several key items. So why don’t we walk through those in turn?
First, you found that progress toward implementation of population health as a model for organizing healthcare delivery appears to have stalled a bit in 2018. Can you tell us about that?
Michael Abrams: Yeah, I think after four years of tracking both global perceptions of population health and objective measures of its implementation, it’s hard to avoid saying that it has stalled.
We’ve seen four years of very, very small, rather marginal progress in most of the measures that we’ve been looking at. And so, at this point, we haven’t seen the kind of acceleration that we might have expected.
That’s how we got to the characterization of the progress on this issue having stalled out which I think should be concerning for all of us because, nationally, we are on the path to spending 25% of GDP on healthcare costs, and the burden of those healthcare costs is weighing heavily both on individuals, employees, and employers. We are saddled with a level of healthcare inflation that, for decades, has been far in excess of consumer inflation.
Mike: And what’s interesting is, even though progress slowed, you found that most people surveyed agreed that population health really is the future…?
Michael Abrams: Yeah, it is interesting that most of—you know, an overwhelming majority, 82% of respondents said, basically, population health as the model that will drive healthcare is virtually inevitable and is very important or critical to the success of their institutions. But the survey has also shown only small, non-significant changes in real measures of implementation over this four-year period.
So, it’s a bit of a conundrum. Everybody agrees it’s important. Everybody agrees it’s the future. And the question is: “So why are they moving so slowly?”
Mike: Right! And perhaps risk comes into that. And your next finding was specifically around risk-based agreements, which perhaps, not surprisingly—maybe you feel differently—seemed to be more difficult for smaller institutions to say yes to something that included a risk-based agreement as part of the collaboration.
Michael Abrams: Yeah, I think it’s understandable in some measure that risk-based agreements seem more intimidating for smaller institutions. Many hospitals and systems across the country are operating on thin profit margins. And smaller institutions have smaller reserves to cushion any loss that they might be forced to absorb. So it is understandable that they could be more reluctant to enter into such agreements than larger organizations—although, again, the majority of our respondents reported less than 10% of their revenues actually come through risk-based agreements. So it’s pretty nominal to say this has a long way to go before it becomes a dominant model in healthcare delivery.
Mike: And your next finding kind of indicated that in a way. It looks that hospitals are really still experimenting with risk-based contracts generally…?
Michael Abrams: Yeah, many of the federal programs that have been out there (and are still out there) were designed to encourage delivery organizations to build capability to deliver care within a population health model.
But judging by self-assessment of readiness in actual percent of revenue that is at risk in these models, most organizations are just dipping their toes in the water.
So, as they said, the majority of respondents reported that 10% or less of their revenue comes from risk-based contracts. And those aren’t even all two-sided risks. Many of them, the only risk is that they won’t get a bonus.
So, this measure of how much revenue comes through risk-based contracts has not only remained flat relative to prior surveys, but it’s also less progress than respondents in prior years had expected would take place by now.
And the bottom line is you just don’t learn to swim by dipping your toe in the water. That’s what we see happening.
Mike: Yeah. And your next finding sort of underlines I think what you just said, and that’s the risk of financial loss is still a major barrier to the implementation of population health. So there’s still a fear at organizations that they will lose out, even though it seems like, most of the time, it really has to do with whether or not they’re going to receive something on the upside.
Michael Abrams: That is the most common challenge that’s been cited consistently. More than a quarter of respondents, which is, far and away, more than any other challenge, pointed to the risk of financial loss as the major obstacle.
But the underlying issue here is that organizations are not moving fast enough to build the process infrastructure that would support taking on risk.
I mean, if I asked you to drive down the street with a blindfold over your eyes, you’d say, “Well, I’m concerned about the risk of crashing into something.” Well, a lot of these organizations are in the same position. They’re being asked to be responsible for the cost and the quality of the outcomes that they produce without necessarily having the process infrastructure to give them feedback along the way about how they’re actually performing.
I mean, this is a legacy of decades, during which time, hospitals were not concerned about the margins on individual kinds of procedures that they were performing. They, in many cases, had very little capability to understand what was profitable and what was not except in a very global sort of intuitive way.
And the truth is that many of these organizations haven’t yet built the capability to get more precise about profitability of various kinds of work that they do. And more specifically, what physicians, what surgeons are driving both profits and losses and are delivering at the cost level and the quality level that they need. Without that, they only find out how they’ve done after the fact—and then, it’s too late.
Mike: Yeah, it is a business like no other, I think we can agree. And the last key finding you mentioned in the report, you sort of dove into a little bit, and I think as you peel the onion away, it becomes more evident—there is that fear of their inability to manage cost and quality. And that sort of puts that barrier up for them wanting to move forward with anything that involves risk.
Michael Abrams: Right, right. I mean, over half of the respondents in 2016 had predicted that they would be at least very prepared to take on risk in 2018. But in the current survey, barely 25% felt they had actually achieved that level of capability.
So, they had historically expected that the adoption of population health would take place more rapidly than in fact it is taking place. And their predictions about what things will look like two years from now are less robust than they were two years ago. So, they are projecting, if you will, from their recent experience, and they are looking around and seeing that progress has been slow, slower than they expected it would be, and they’re projecting that future progress will also be slow.
Now, I have my doubts about that. I think that what’s missing from the picture that many in the industry have is the fact that competitive pressures are on the cusp of becoming much more consequential. The entry of non-traditional players into the healthcare business is a very profound factor in where we go from here.
Amazon, for example, I think dominates a lot of the dreams for healthcare professionals who don’t really know what shape that entry is going to take. But I do feel pretty confident that it will happen.
There are a number of organizations who are coming from other healthcare-related sectors who already understand the consumer revolution, if you will, understand what it’s like to build a process that is structured around the consumer experience; and in that regard, are far ahead of most healthcare delivery organizations in being able to compete effectively.
And the promise of a $3 trillion market with a hugely dissatisfied customer base is one that organizations like Amazon, Apple, CVS, others are not going to ignore very much longer.
Mike: Yes, disruption is the order of the day in healthcare, no question about it. Michael, if someone would like to get a copy of the full report, where can they go?
Michael Abrams: The Numerof website is NAI-consulting.com. And if you put a slash in Numerof, State of Population Health Survey after that, that gets you right to the white paper that we have developed that goes into more detail about what we have found in this most recent survey.
Mike: Michael Abrams, thank you so much for joining us today on the Hospital Finance Podcast.
Michael Abrams: My pleasure, Michael. Thank you.