Why population health management matters to employers

Value should be the framework for performance improvement in health care

Population health can be summed up as initiatives designed to increase the value businesses derive from their health care investment. It’s an evolving concept generating increased interest in business and health care settings. These initiatives can improve health care and reduce costs, regardless if an organization is self-insured or fully insured.

Population health seeks to improve the health outcomes of people who are part of a larger group, whether that group is a company’s own workforce or members of a particular community.

Consumers today seek value, and so do the payors who expect and demand value for the financial investment made in their covered population.

One definition of value is supported by Harvard Business School professor Michael Porter, PhD, who writes extensively on this topic. He describes value as “health outcomes achieved per dollar spent” or as an equation: Value = Quality + Service, divided by Cost.

In this context, health care “quality” is defined as a composite of patient outcomes and safety, while “service” is defined as a composite of patient experience and satisfaction.

Porter explains that value is neither an abstract ideal nor a code word for cost reduction. Rather, it should be the framework for performance improvement in health care. He believes that it’s not the number or volume of different services provided that matters—but rather the value.1

Porter stresses that more care (and more expensive care) is not necessarily better care. It’s the health outcomes achieved that matter to both patients and payors, relative to the cost of achieving those outcomes.

Recognizing value in health care

Historically, third-party payors (insurance companies and the government) reimbursed providers for procedures performed or services rendered, rather than for the outcomes achieved. There is a growing shift away from “doing more to earn more” toward reimbursement models based on “greater reward for better outcomes.”

For example, the Centers for Medicare & Medicaid Services (CMS), the federal agency that runs Medicare, is changing the way Medicare pays both doctors and hospitals by rewarding providers for delivering services of higher quality and higher value. Medicare has been very innovative is this regard, with private insurers following Medicare’s lead.

Data driven

Effective population health management requires an in depth look at the population’s current health, risk factors, patterns of care and a better understanding of the social determinants of health. Data analysis is key. This includes gathering and using relevant data from both traditional and non-traditional sources (e.g., activity trackers such as Fitbits, survey data from Health Risk Assessments, biometric reporting and using claims data and/or electronic medical records).

Detailed data analysis helps to develop personalized risk profiles for certain patients and identify potential areas where intervention, coaching, disease management and clinical integration could improve their health outcomes. Data is also used to track performance, over time, on key metrics outlined in a health management plan.

Moving from “sick care” to wellness

Other fundamental shifts are on the health care horizon. Health care is moving away from a “sick care” mindset to a “wellness and well-being” mindset. Previously, patients sought medical care when they were sick, injured or had an immediate medical problem. Today, the health care continuum begins with wellness and prevention and continues through diagnosis, treatment and beyond.

Engaging health care consumers

Today health care consumers increasingly drive their own care and want to be active partners with health care providers. Population health strategies are designed to keep people at optimum health throughout the lifespan, focusing on preventive care and managing chronic conditions for all members of the population group, thus reducing overall health care costs. These efforts encourage employees to better manage conditions such as diabetes, COPD, hypertension and high cholesterol. Maintaining consistency and repeatable practices improves the overall health of the entire population, patient by patient.

The key takeaway?

Population health management initiatives are starting to change the way we view health care and the way it’s delivered. One thing is clear: Having a well designed, flexible, targeted population health management strategy can yield improved health outcomes for a given population group, while improving an organization’s bottom line.

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  1. What is Value in Health Care?, Michael Porter, PhD, New England Journal of Medicine, December 23, 2010.