Achieving Financial Success In Healthcare — Yes, It Can Be Done!


Financial Sustainability and Opportunity: The Risk-based Population Health Model

Achieving Financial Success In Healthcare — Yes, It Can Be Done! by Dave Amin – I travel around the country and speak to groups of decision makers in healthcare organizations.  CEOs and CFOs all have the same question:

“How does our organization make the change from a fee-for-service model to a risk-based population health model?  We all agree wellness is a good thing, but if I implement the wellness philosophy of healthcare, I am not going to fill our 1,000 beds.  And the better I am at implementing this new philosophy, the fewer beds I am going to fill.  How do I drive a return on investment in value-based medicine that actually makes us financially sustainable? And perhaps more importantly, how do I navigate my short-term economic needs with my long-term future in value and risk?”

This is a reasonable and realistic question. In a system built on fee-for-service and treating illness, how does a healthcare leader transition to a system that is built on patient health and wellness?

However, I am much more interested in the deeper and more existential question: What happens to a healthcare organization that does not transition?  Where will a fee-for-service organization be 3 years, 5 years or 10 years from now? 

Global Capitation

Value based medicine and risk-based contracts are here today. Global capitation is coming tomorrow.  Medicare Advantage programs are the fastest growing segment of healthcare, but capitation is coming across all payer segments.  Those healthcare providers who rely on a fee-for-service delivery model are going to be financially challenged as full capitation contracts continue to expand.  They will be in a position of financial weakness and will be targets for low-cost acquisition by more agile and forward-thinking competitors.  Alternatively, they will be bankrupt and cease to exist.

Who will these agile and financially stronger acquiring organizations be?  They will be the healthcare providers who adopt and successfully transition to a risk-based population health model.  The sooner an organization adopts a risk-based population health model, the stronger and more survivable it will become.

Risk-based Population Health Model Implementation: A Cultural Shift

“But Dave, we’ve tried some of these preventive programs, and they haven’t worked, either financially or in terms of patient outcomes.”

This is not a concept similar to buying a new MRI scanner or adding a new vascular surgery suite.  Risk-based population health models work ONLY when implemented with 100% effort across a defined patient cohort.  That is, the model does not have to rolled out instantly across an entire organization, but it does have to be rolled out at 100% effort across a specified population. Many, many organizations have tried to implement these programs in a fragmented and piecemeal fashion.  I have yet to see any partial efforts succeed

What is the underlying message?  This must be a cultural shift across the organization.  This requires a new approach to patient engagement, a patient centered experience which defines work flow, embedded preventive care in the physician practice, new training, new personnel, and new billing/coding methodologies.  Providing patient wellness requires a shift across practices, protocols, and processes.  Getting paid requires novel reimbursement strategies. While the impact across cohorts can be rolled out gradually, the effort will require re-framing around patient engagement, care delivery and billing/coding.

Value Proposition

This is achievable – but it’s only achievable if a provider enters this cultural shift with the goal of bridging the chasm between fee-for-service and risk-based population health quickly.

Immediate financial upside comes from leveraging reimbursement codes that favor population health strategies.  If an organization is not currently billing against preventive health reimbursement codes, it is leaving money on the table.  Providers must redesign their clinical practices to leverage this money.  This delivers an immediate cash flow for the work that the organization is already doing.  Billing codes include medical nutrition therapy, remote patient monitoring, chronic care management, behavioral health counseling, intensive behavioral therapy for obesity (IBT), and more.  In my experience, when this redesign is effective the financial rewards can be very large.  Some organizations have captured net increases of 10X within 12 months – simply by leveraging existing reimbursement codes and making modest adjustments to their care delivery processes.

Achieving Financial Success In Healthcare — Yes, It Can Be Done!

In terms of measuring success, healthcare providers should start capturing information to drive sophisticated data analytics. These analytics can track overall annual patient spend and validate ROI for cohorts participating in preventive care programs.  Building and communicating actionable data metrics should be part of every organization’s culture shift. Data collection, analysis and actionable communication of data to providers demonstrates the organization’s commitment to a coherent population health strategy.

From a strategic perspective, provider organizations should develop plans to create formal, long-term strategies around population health.  Based on analytics, programs should be initiated to close out gaps in care and leverage financial incentives from commercial payers that come with these care gap closures.  Achieving care gap closures of even 75% nets providers substantial payment from commercial payers, while 50% closures may generate nothing at all.  If a provider organization can establish processes to leverage all existing preventive fee-or-service reimbursements and care gap closure incentives, the provider can generate a strong cash flow today while positioning itself for risk tomorrow.

The Opportunity

As of today, surprisingly few provider organizations have transitioned to a risk-based population health model.  And the ones that have, are not yet close to realizing all the financial benefits that come with current programs and reimbursement opportunities – let alone what will be available in the future. Currently the opportunity is open for providers to redesign their practices risk-free. Provider organizations should consider this moment in time as a training ground with the goal of aggressively acquiring market share as less prepared competitors weaken.  There will be some eventual loss of income around fee-for-service, but success in population health will position provider organizations in a commanding position to expand market share as the transition to value continues and global capitation comes into effect.

Achieving Financial Success In Healthcare — Yes, It Can Be Done! by Dave Amin