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Population health is the next big thing

June 5th, 2014

by Jonathan H. Burroughs

Our healthcare system has evolved as an enterprise that profits from the care of sick people. Every one of the CPT or ICD-9/ICD-10 codes represents some form of medical or surgical condition, illness or disease. There are no codes for health, wellness or improvement.

Furthermore, codes that benefit suppliers (e.g., manufacturers of stents, implants, ancillary technology) typically pay higher than codes that reward professionals for complex decision-making. This model incentivizes healthcare providers to search for disease, discover it and treat it, but does little to reward those who prevent disease, mitigate it or come up with nonmedical/nonsurgical approaches that may be far more beneficial.

To compound this issue, as scientific advances progress, diseases that were once acute and intuitive (e.g., tuberculosis, HIV), now have identified causative agents, rule-based treatment modalities and chronic entities that the patient must treat over time. About 90 million Americans currently have chronic medical conditions--that includes 35 percent of young adults, 65 percent of older adults, and 90 percent of those 65 years or older, according to "The Innovator's Prescription-A Disruptive Solution for Healthcare."

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In addition, the treatment of chronic disorders accounts for more than 75 percent of direct medical costs, and of those, five entities (diabetes, congestive heart failure, coronary artery disease, asthma and depression) make up the majority of that cost. Thus, holding on to a failing discounted fee-for-service payment methodology in a business model that concentrates the care of sick people in hospitals and physician offices will not serve our nation's health nor our ability to compete for high-quality, low-cost healthcare services both here and abroad.

Enter population health--a 180-degree flip in perspective in which healthcare practitioners are charged with improving the health, experience and per capita cost of a defined population. Where the incentives are to: not hospitalize, not operate, not send to the emergency department, and not order diagnostic or therapeutic modalities that will not likely benefit the patient.

Unfortunately, doing this in a discounted fee-for-service or bundled payment world does not work, as all of the financial incentives are misaligned. We must accomplish it in some form of capitation with incentives, and this cannot be done within the established business models used to diagnose and treat acute medical and surgical conditions.

Organizations that are set up to do capitation profitably include "disease management networks" such as OptumHealth or Healthways, Inc., or integrated self-insured providers such as Kaiser Permanente and Geisinger Health System, that have their own captive insurance systems to manage actuarial risk for defined populations.

Moving to population health will require a significant and transformational change to our healthcare system including:

  • Conversion of free-standing hospitals and physician offices to integrated healthcare networks connected by a seamless health information exchange and personal electronic healthcare records.
  • Separation of diagnostic (solution shop), therapeutic (value-added process) and chronic disease management (facilitated network) business models so that they can operate effectively and efficiently.
  • Conversion of payment methodology to capitation with incentives and complete integration of healthcare delivery and payment/financing mechanisms.
  • Regulatory guidelines that permit reimbursement and payment only for services that have a beneficial impact on the health or well-being of patients.
  • Significant incentives to patients/beneficiaries/employees to align their financial and healthcare interests by following evidence-based guidelines and recommendations.
  • Delegating healthcare conditions managed through standardized evidence/rule-based approaches to nonphysicians with physician oversight.
  • Emphasizing self-management and behavioral change for patients to both prevent and treat chronic diseases by mitigating causative factors (e.g., smoking, overeating, under exercising, etc.)
  • Decentralizing healthcare so that the majority of diagnostic and therapeutic monitoring can be done within an individual's home.
  • Converting transactional healthcare services (e.g., prescription renewal, healthcare screening etc.) of healthy individuals to 24/7 low-cost virtual cloud-based services.
  • The engagement of key stakeholders (e.g., payers, large employers, CMS) in the creation of quality, safety, service and cost-effectiveness incentives for physicians, healthcare executives and other key healthcare providers.

The challenge for our healthcare system is that most organizations hold on to the traditional fee-for-service system due to the persistence of dysfunctional incentives. This will ultimately be self-defeating as the race for international high-quality, low-cost services through both international and domestic medical tourism is on, and late entrants will find themselves with little if any remaining market share.

Population health is the new national healthcare imperative and every organization must create a strategic plan to redesign and innovate its existing resources so that it can dedicate itself to the health and well-being of the populations it serves.

Jonathan H. Burroughs, MD, MBA, FACHE, FACPE is a certified physician executive and a fellow of the American College of Physician Executives and the American College of Healthcare Executives. He also is president and CEO of The Burroughs Healthcare Consulting Network.

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