An Introduction to Population Health Management
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1 An Introduction to Population Health Management James J. Pizzo, Managing Director, Kaufman Hall Robert W. York, Senior Vice President, Kaufman Hall 2015 Kaufman, Hall & Associates, LLC. All rights reserved.
2 This webinar is brought to you by the American Hospital Association s Center for Healthcare Governance. Backed by the knowledge and resources of the AHA, the Center for Healthcare Governance provides state-of-the-art education, research, publications, tools, and other resources to help you achieve excellence throughout your governance program. Our community is dynamic and diverse, representing board members, executives, and governance advisors who are nationally recognized as the foremost voices in the practice of hospital and health system governance. We share a common goal to advocate and support excellence, innovation and accountability in health care governance. Learn more about the Center at Or contact us at (888) Kaufman, Hall & Associates, LLC. All rights reserved. 1
3 The Changing Healthcare Business Model Fee for Service (FFS) Business Model Hospitals Doctors Fee for Value (FFV) Business Model Customers Select Health Company Content Patients Hospitals Doctors Outpatient Care 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 2
4 Payment Model Evolution Is Underway National market today Market tomorrow System Controlled Commercial Payers Government Payers Jointly Controlled Health System Physician Controlled C PCP EMR Outreach C C Ambulatory Quality Reporting Specialty EMR Outreach Market Evolution Cross-Continuum Cost Accounting Service-Line Care Coordination Market Evolution Readiness/ Capabilities Development Common PCMH Protocols Referral Management F Risk-Based Payment Distribution Care Pathways Case Review F Population Analytics Community-Based Health Management Cross-Continuum Care Coordination F Actuarial Analytics Notes: EMR = electronic medical record; FFS = fee for service; MSSP = Medicare Shared Savings Program; P4P = pay for performance; PCMH = patientcentered medical home; PCP = primary care physician; PMPM = per member, per month; PQRS = Physician Quality and Reporting System; VBP = variable-based purchasing 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 3
5 The Importance of Scale Will Be Greater and Different Under This New Model Scale in a Value-based environment will focus on covered lives rather than fee-for-service patients Illustrative Diagram Scale Covered Lives FFS Unique Patients Fee for Service Business Model Fee for Value 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 4
6 Strategic Imperatives for Population Health Management/ Value-Based Care Differentiated value proposition on cost, quality, outcomes, and service Vertically (purchaser) and horizontally (provider) integrated care delivery and financing model Scale in attributed population and optimized delivery network (both physical and virtual, across the continuum) Real time and comprehensive clinical and business intelligence capabilities Sufficient depth and breadth in leadership at all levels and nimble and efficient governance model A strategic plan that is appropriate for its market 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 5
7 Population Health Management: What Is It? PHM is an approach to improving health and quality of care while managing costs. This is the direction healthcare is moving, and all stakeholders will need to get on board Kaufman, Hall & Associates, LLC. All rights reserved. 6
8 PHM: A Clinically Oriented Definition PHM is the identification and surveillance of individuals at risk of developing disease, or those with chronic disease within populations, and the intervention in early stages of disease processes in order to improve health outcomes and reduce costs by preventing illness or slowing progression of chronic illness to acute stages. PHM also considers the health outcomes of a group of individuals, including the distribution of such outcomes within the group. Source: Kindig, D., and Stoddart, G.: What Is Population Health? Am J Public Health 93(3): , March Kaufman, Hall & Associates, LLC. All rights reserved. 7
9 PHM: A Services Delivery-Oriented Definition Population health management occurs when a healthcare system or network of providers works in a coordinated manner to improve the overall health, health outcomes, and well-being of patients across all defined care settings under risk-bearing arrangements. The healthcare system or network of providers may work under contractual arrangements with another entity such as an insurer. Source: Hill, G., Sarafin, G., and Hagan, S.: Population Health Management Hill s Handbook to the Next Decade in Healthcare Technology. Citi Research, May 14, Kaufman, Hall & Associates, LLC. All rights reserved. 8
10 PHM Requires New and Aligned Functions and Capabilities Drawn from Traditional Health Systems and Insurers Traditional Health System Delivery System Competencies Scale/essentiality Brand identification Financial strength/capital capacity Physician integration Service distribution system Care coordination Information management Cost management Payer relationships/contracts PHM / Care Management Leadership and Governance Clinical Integration Clinical and Business Intelligence Operational Efficiency Quality and Care Management Financial Strength Network Development, Configuration and Relevance Purchaser Relationships Brand Strength, Customer Service and Engagement Traditional Insurer Financing/Distribution System Competencies Business intelligence Product development Actuarial services Financial performance Marketing and communications Regulatory readiness Claims management Network management Customer service Technology/Infrastructure (Clinical Information-focused) Technology/Infrastructure (Member Informatics-focused) Technology/Infrastructure (Claims-focused) 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 9
11 Future Payment Model Provider Roles for PHM Vary Across a Broad Spectrum Prepaid Population Health Manager: Integrated delivery system and/or health plan with the ability to provide and/or contract for a full continuum of services across all levels of acuity; well positioned to develop own insurance products and/or manage full provider risk Population Health Comanager: Regional provider organization, clinically integrated with other organizations, that forms a value-based delivery system; well positioned to participate in PHM and risk-bearing arrangements, in a delegated and/or direct fashion Multiproduct Participant: Provider organization that works within a network(s) managed by a Population Health Manager/Comanager to provide a defined set of services for a broad population base comprised of both government and private-pay patients; critical role in future delivery system Single Product Participant: Provider organization working within a network managed by a Population Health Manager/Comanager, to provide specified and targeted services and/or population; these organizations will be critical components of narrow networks FFS Contracted Participant: Smaller niche providers, some of which may serve rural communities, that provide population access points under contractual arrangements; they face significant risk of commoditization 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 10
12 Key Characteristics of Future Population Health Managers, Participants, and Contractors Characteristics Contracted Participant Single Product Participant Multiproduct Participant Risk/Payment Model None, FFS payment Blend/episodic Blend/episodic Population Comanager Full or partial provider risk; unlikely to assume health plan risk Population Manager Full provider risk; may take health plan risk Clinical Integration No Maybe Likely Yes Yes Network Adequacy/ Market Essentiality Contracting Relationship Insurance License Ownership Low Low Low to moderate Moderate High Under contract Under contract Under contract No No No May contract/ subcapitate other providers Limited or no license May contract/ subcapitate other providers Maybe, but not required Membership Ownership No No No Maybe, but unlikely Yes Examples Critical access hospitals Safety net hospitals Community hospitals Academic medical centers Children s hospitals Specialty hospitals Community health systems Integrated delivery networks with risk bearing capabilities (e.g., Kaiser, Geisinger) Large IPAs (e.g., DaVita HealthCare Partners) Clinically integrated networks (Advocate) 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 11
13 Observations on Early-Stage PHM 1. Sustainable results in population health improvement have yet to be quantified on a large scale 2. Early stage investments often take 5+ years to show positive ROI 3. Stakeholder behavior change (physicians, hospitals, patients) takes time to stabilize 4. New partnerships likely will be required to cover new services and/or geographies; making progress through such arrangements will take time 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 12
14 Leadership Imperative: Define Your PHM Focused Strategic Roadmap 1. Understand and Organize Around PHM 5. Determine Scope of PHM Network/Role 2. Determine Market Stage 4. Identify PHM Market Opportunities 7. Identify Path Build, Buy and/or Partner 3. Evaluate Position and Gaps 6. Define PHM Contracting Strategy Context-Setting Value Proposition The PHM Plan 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 13
15 Discussion Questions How well positioned is your organization to provide clearly differentiated value within your market based on cost, quality, and service? How broad and well-integrated is your delivery network across the continuum of care? Is your scale great enough to influence a sufficient population size to accept financial risk for a segment s health? Do you have sufficient information about your population to segment it according to intensity and type of health needs? Is your leadership structure and decision-making process suitable to the kinds of new competencies and significant strategic shifts required for population health management? 2015 Kaufman, Hall & Associates, LLC. All rights reserved. 14
16 About the Speaker James J. Pizzo Kaufman, Hall & Associates, LLC 5202 Old Orchard Road, Suite N700 Skokie, Illinois fax Jim Pizzo is a Managing Director of Kaufman Hall, responsible for directing the firm s Physician Advisory practice, an integral part of the Strategy practice. With more than 30 years of healthcare consulting experience, Mr. Pizzo has held leadership positions as a Partner with Accenture, Cap Gemini Ernst & Young, Ernst & Young LLP, and Ernst & Whinney. At each of the firms, he led the Physician Services and Finance and Planning practices. Mr. Pizzo first assumed the role of Partner and Practice Leader in At Accenture, Mr. Pizzo also was responsible for the Great Lakes Region, working with diverse clients, including freestanding hospitals, academic medical centers, physician and ambulatory providers, more than 20 of the largest health systems, and other healthcare organizations. His areas of focus included financial, strategic, and operations planning, and physician operations and ventures. As hospitals and health systems face the challenge of developing and sustaining physician relationships in a rapidly changing environment, Mr. Pizzo brings solutions to help organizations align with their physicians. The Physician Advisory practice includes: physician growth planning; hospital-physician integration strategy development and implementation; physician work-effort allocation; physician performance optimization; physician-related mergers, acquisitions, and joint ventures; and comprehensive planning for academic physician enterprises and physician affiliates. Mr. Pizzo is an active speaker on current healthcare trends, frequently presenting on financial and physician issues and their impact on the healthcare industry to groups including the American Hospital Association, the Medical Group Management Association, The Governance Institute, and other industry associations. Mr. Pizzo received an M.B.A., with concentrations in Finance and Marketing, from the University of Chicago Graduate School of Business and a B.S. in Business Administration, with concentrations in Finance and Accounting, from the University of Illinois at Urbana-Champaign Kaufman, Hall & Associates, LLC. All rights reserved. 15
17 About the Speaker Robert W. York Kaufman, Hall & Associates, LLC 5202 Old Orchard Road, Suite N700 Skokie, Illinois fax Rob York is a Senior Vice President of Kaufman Hall and leader of the Population Health Management division in the firm s Strategy practice. He provides strategic services for a range of healthcare clients, including large healthcare systems, public/safety-net providers, academic medical centers, and community hospitals. Mr. York s responsibilities focus on developing strategies to help providers remain relevant and viable in the new healthcare environment. Such strategies are based on rigorous market analysis, population and payer segment and demand analysis, and strategic partnership evaluation. He regularly speaks to Boards and at meetings of professional societies, and has published numerous articles in industry journals, including Health Affairs, Spectrum (a publication of the American Hospital Association s Society for Healthcare Strategy and Market Development), and Strategic Financial Planning (a newsletter from the Healthcare Financial Management Association). Prior to joining Kaufman Hall, Mr. York was a consultant with KPMG LLP s West Coast and Midwest Healthcare Practices. Mr. York has a B.S. in Business Administration with honors from the University of Arizona and an M.B.A. from the University of Notre Dame Kaufman, Hall & Associates, LLC. All rights reserved. 16
18 Qualifications, Assumptions and Limiting Conditions (v ): This Report is not intended for general circulation or publication, nor is it to be used, reproduced, quoted or distributed for any purpose other than those that may be set forth herein without the prior written consent of Kaufman, Hall & Associates, LLC ( Kaufman Hall ). All information, analysis and conclusions contained in this Report are provided as -is/where-is and with all faults and defects. Information furnished by others, upon which all or portions of this report are based, is believed to reliable but has not been verified by Kaufman Hall. No warranty is given as to the accuracy of such information. Public information and industry and statistical data, including without limitation, data are from sources Kaufman Hall deems to be reliable; however, neither Kaufman Hall nor any third party sourced make any representation or warranty to you, whether express or implied, or arising by trade usage, course of dealing, or otherwise. This disclaimer includes, without limitation, any implied warranties of merchantability or fitness for a particular purpose (whether in respect of the data or the accuracy, timeliness or completeness of any information or conclusions contained in or obtained from, through, or in connection with this report), any warranties of non -infringement or any implied indemnities. The findings contained in this report may contain predictions based on current data and historical trends. Any such predictions are subject to inherent risks and uncertainties. In particular, actual results could be impacted by future events which cannot be predicted or controlled, including, without limitation, changes in business strategies, the development of future products and services, changes in market and industry conditions, the outcome of contingencies, changes in management, changes in law or regulations. Kaufman Hall accepts no responsibility for actual results or future events. The opinions expressed in this report are valid only for the purpose stated herein and as of the date of this report. All decisions in connection with the implementation or use of advice or recommendations contained in this report are the sole responsibility of the client. In no event will Kaufman Hall or any third party sourced by Kaufman Hall be liable to you for damages of any type arising out of the delivery or use of this Report or any of the data contained herein, whether known or unknown, foreseeable or unforeseeable Kaufman, Hall & Associates, LLC. All rights reserved. 17
19 2015 Kaufman, Hall & Associates, LLC. All rights reserved Old Orchard Road, Suite N700, Skokie, Illinois phone fax
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