Building a Performance-Based Value Model to Drive Population Health Strategies

On Sept. 20, I had the honor of presenting to a standing-room-only crowd at Becker’s Hospital Review 4th Annual Health IT + Revenue Cycle Conference in Chicago. I spoke about how clinical and finance leaders need a data-driven value model to plan the scale and pace of investments into a population health strategy and to move confidently into value-based contracting.

Most healthcare leaders understand the importance of population health and building the most optimal strategy to position their organizations for success in value-based care. Building the tools to manage patient populations is key to improving outcomes while bending the cost curve in American healthcare.

At the same time, executives are concerned about the cost of population health initiatives. What level of investment is needed to effect change? What is the right pace for transitioning from fee-for-service (FFS) to value-based reimbursement? Finance leaders in particular are concerned about preserving margins during this transition. How can healthcare organizations maintain profitability as spending increases on population health initiatives while FFS revenue decreases?

The only way to answer these questions is to use a data-driven value model to manage the pace of change required under a population health strategy. Such an approach will help to anticipate the total financial impact of population health initiatives. An ideal value model accomplishes three goals:

1. Quantifies the output of population health interventions, including shifts in utilization and changes in cost of care.
2. Enables finance leaders to identify population health investments that will move the organization forward while retaining margin.
3. Allows finance leaders to predict future cost and quality outcomes in support of value-based contracting.

At Lumina Health Partners, my colleagues and I have begun using a value model to help organizations build appropriate population health strategies and position organizations for risk-based contracts. Understanding the data elements and building a population health information ecosystem provides an easy-to-understand framework for making strategic decisions around population health. This approach enables finance and clinical leaders to answer three key questions:

1. What population health initiatives should we invest in?
2. How much should we invest in these initiatives, programs, and technologies, and how quickly?
3. How do we ensure our initiatives achieve targeted outcomes based on new economic drivers such as position for risk-based contracts, managing the cost of care, and improving the care that’s delivered to patients?

The value model contains three components: an economic equation that functions as an ROI calculator for population health initiatives, a set of statistical cost-of-care tools used to analyze how population health initiatives affect utilization, and a set of predictive analytics approaches that enable prospective evaluation of provider and payer costs. Used together, these tools provide a much clearer line of sight as organizations pursue value-driven care and organizational transformation.

However, the biggest challenge of population health is appropriately planning and managing an orderly transition to value-based reimbursement. With net margins at 2 or 3 percent for most health systems, healthcare leaders have little room for mistakes in program selection and investment as they build their capabilities within population health. The value model is a powerful tool for planning and navigating a pragmatic approach to enabling a population health strategy and building internal capabilities to achieve high performance in the world of value-based contracting.