What the heck is Population Health Management?

Looking at the name “Population Health Management”, we can at least tell that it has something to do with the overall health of a population. But the questions that still linger in the mind are what kind of population we are talking about? how does this model work? what are its benefits? and why is it important?

In a nutshell the Population Health management is a system that proactively provides care for a specific set of population through some kind of a risk management application.

The big idea is to reward prevention and wellness by using data to identify and provide care for patients according to their risks. The benefits of Population Health Management comes in the form of reduced costs and shared savings. In some instances these savings are shared among physicians, health plans, hospitals, patients and employers.

Why do we need Population Health Management?

We need Population Health Management because we want to decrease medical costs without adversely affecting patients; in other words without denying them medical care. The current healthcare model in the United States is a “reactive” one. The reactive model is a system under which we provide care once one has already gotten ill instead of preventing the patient from getting sick in the first place. A typical reactive care model consists of a patient displaying certain symptoms and then going to see a physician, getting a treatment and then receiving a bill for care services.

Noteworthy points under reactive models:

  • Employers pay health insurance companies premiums for their employees, while individual subscribers pay for their individual premiums.
  • Hospitals and physicians get paid by insurance companies when they treat the sick.
  • Depending on the type of health plan, the patient is also sometimes responsible for part of the treatment bill.
  • Physician income is directly proportional to the number of patients they treat.
  • The more the insurance companies pay for the care, the higher their premiums go.
  • Insurance companies can predict the cost of care they will incur and thus adjust their premiums accordingly.
  • Self-funded employers follow the same planning and logic as health insurance companies.
  • There is no such thing as “reducing the future risk of sickness” because there is no reward in “preventative care;” (i.e. if there are no sick people, there will be no income).

Given the above points, it is easy to conclude that under the current care model, the healthcare costs have nowhere to go but upwards; and this is where Population Health offers a way out.

How Does Population Health Management Work?

The core strength of Population Health Management comes from the cost savings that are shared among various stake holders. I place high value on savings because without any cost savings and shared savings there would be no reward and would only produce a non-sustainable Population Health model.

Here is how the model works:

  1. Select a group of individuals (the population) for which the system will provide care.
  2. Using the medical history of the population, determine how much money they were spending on healthcare.
  3. Using analytical softwares, determine Population Heath status and calculate individual risk levels. (Do this on a regular basis)
  4. Depending on the delivery model (PCP, PCMH, ACO, CIN etc.), assign individuals to physicians who will coordinate their care. Pay these physicians a fixed PMPM amounts for each individual they care for.
  5. Based on the risk profile created in (step 3), determine who needs care and proactively treat them to reduce or eliminate any future ER or doctor visits.
  6. Benchmark the risk profile to check whether the Population Health was improved and their medical activity reduced.
  7. Reduction in medical activity of a population would bring the total medical cost down (comparatively to the figure determined in the step 2).
  8. Finally, calculate the difference between the original (step 2) and the final medical costs (step 7). These are the medical savings.
  9. Share the savings derived in (step 8) among physicians, health plans, employers and patients (depending on whoever had stake in the game by assuming the risk).
  10. As this cycle continues, the overall cost of care would decrease over time and health status of the population would increase.

Health risk and wellness score calculations

Health risk and wellness scores are essential under Population Health because we would need to know where each participant stands. Depending on how the risk scores are trending, we can help individuals with getting the care and treatment they need. An example of such a system would be a report showing individuals who are at risk of certain diseases or a report categorizing group’s health as being healthy, at-risk, acute-illness, chronic illness or catastrophic illness.

Typical risk calculation systems function by collecting data from clinical, financial and administrative sources. The collected data is then aggregated, normalized and converted into actionable records. These records are used by care delivery platforms to proactively manage patient population. This availability of information across the continuum is what makes Population Health effective.

On average the actionable data gives the following information:

  • Predictions on who within the population needs care.
  • What kind of care is needed.
  • Customized care plans based on individual patient details and risk analysis.

Reducing costs by reducing the potential medical activity

It is important to note that the goal of Population Health is NOT to deny care but rather to improve one’s health such that any health complications in the future could be avoided. Although my dentist is not part of any Population Health system; he is the prime example of what Population Health is trying to do. Whenever I visit him for dental cleaning, he checks me for any cavity signs and if found, treats me right there and then. This saves me from waiting until my situation worsens and I would end up needing an extraction or a root canal treatment.

Similar to my dentist, the Population Health deals with things like reducing re-admissions, heart disease risk or complications in diabetes.

Assuming Risk through Capitation

If all physicians start treating their patients proactively as described in the previous section, then wouldn’t they be hurting their own business? After all, treating a patient for any foreseeable condition before it would get complicated would mean less revenue for the doctor. The answer to this question comes in form of “capitation.”

In the IT field we sometimes have a practice known as “capping projects through time or money.” In such a practice, consultants are given a set amount of money to complete the project regardless of time. This creates their self-interest in completing the project sooner than later so that they can move onto something else without an impact to their finances. 

Similar to the IT caps, the insurance companies could capitate payments to physicians for their patients on PMPM basis thus letting them assume risk and giving them initiative to work harder towards the health and wellness of their patients.
Whilst these capitated payments make physicians assume financial risk for their patients, they also give them the chance to increase their revenues.
In short, the capitation promotes emphasis on wellness and improved health of a population.

Bottom Line

There is still a lot to evolve for Population Health to work, but so far it appears to have a promising shot at reducing healthcare costs. It is time that we stop looking at patients in terms of isolated episodes of care and instead look at them across the continuum of care. In order words we should shift focus from singular events to overall patients.

The crux of this system lies in how we encourage patients who we want to help? How do we promote their wellness effectively? And how do we identify patients before their situations escalate?

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