The population health challenge

Fee-for-service medicine is on the way out. That may be hard to believe if most of your income still comes from such payments, which reward physicians for the volume of services they provide. But it’s clear that payers are increasingly emphasizing reimbursement methods that reward value, rather than volume-and that that transition is accelerating.

On March 3, the U.S. Department of Health and Human Services (HHS) announced that it had reached its goal of tying 30% of Medicare payments to alternative payment models (APMs) nearly a year ahead of schedule. By the end of 2018, HHS predicts, about 50% of Medicare payments will be going to APMs such as accountable care organizations (ACOs), patient-centered medical homes (PCMHs) and bundled payment arrangements. Medicare’s new physician payment methodology, which takes effect in 2019, will be another step away from fee for service. Private payers are moving in the same direction at a similar pace. 

Further reading: Why physicians should frame every desicion with the 'quadruple aim' in mind

As reimbursement shifts from pay for volume to pay for value, population health management (PHM) is gaining traction among physicians and other healthcare providers. In this care delivery model, a key ingredient of both ACOs and PCMHs, providers focus on optimizing the health of their entire patient panel, rather than just diagnosing and treating individual patients when they present for care. 

Whether practices are contracting with payers for shared savings or are taking on financial risk for the care they provide, they must learn how to manage population health to succeed under value-based reimbursement. The measures used in determining value-based payments are quality, costs and patient experience; no healthcare organization can do well on those indices unless it can manage population health to prevent people from getting sick or sicker.

In a practice or organization that embraces PHM, physicians and their care teams stress preventive care and proactively manage chronic diseases. Care managers provide extra assistance to high-risk individuals, and physicians work with other providers to improve transitions of care, especially after hospitalizations.

Next: Cultural challenge

PHM requires an organized, planned approach to care both during and between office visits. It also requires improved coordination of care across care settings. Physicians lead care teams that include lower-level clinicians and other professionals, often including behavioral specialists, pharmacists, and social workers. 

Additionally, PHM emphasizes patient engagement to improve health behavior and the ability of patients to care for themselves. Practices reach out to patients who have care gaps, whether or not those people seek care. Access to providers is increased; patients are educated about their conditions and the importance of following their care plans; and care managers check in regularly with chronically ill patients to see how they’re doing.

Cultural challenge

There are significant cultural, financial, and technological barriers to PHM, with culture by the far the biggest obstacle, says David Nash, MD, founding dean of the Jefferson College of Population Health in Philadelphia.

Related: Effective population health management involves more than just data

While payers are pushing doctors into value-based care and alternative payment models, he notes, it is “presumptuous” to maintain that physicians will suddenly start to practice differently than they have for their whole careers. “It’s not realistic. It’s like turning a battleship around inside the Panama Canal.”

Nash ticks off some of the reasons why physicians find it difficult to embrace PHM. First, he says, they’re used to thinking that more care is better, not that less is more. Second, they’re not accustomed to following the latest evidence-based practice guidelines, he says. Doctors must also get used to “heretofore unthinkable levels of public scrutiny and accountability,” such as the comparative reports on medical groups’ cost and quality that are now published in California. Groups cannot score high on these report cards unless they manage population health well.

Physicians must also get used to the idea of being part of care teams, which are fundamental to PHM. Care teams are also central to PCMHs, which play an important role in PHM and are building blocks of ACOs. Doctors have no experience in working in a team setting, Nash notes. Staff members, too, are used to doing things a certain way and don’t welcome change.

Christopher Berard, DO, who practices internal medicine with two colleagues in Babylon, New York, recalls that in 2011, just after his practice acquired an electronic health record (EHR) system, he wanted to seek PCMH recognition from the National Committee on Quality Assurance (NCQA). But the practice wasn’t ready for it.

Next: Medical neighborhood

“It was too much change too fast,” he recalls. “You still need to maintain your volume to stay afloat. And just adopting the EHR cut my productivity to 80% of normal.”

Further reading: Population health's impact on private practice

Berard and his colleagues later delegated some duties to their staff to do PHM. For example, when a patient calls for a refill, staffers now glance through the chart to see whether the patient is overdue for a visit or has had a prescribed blood test. With the help of Beacon Health Partners, the physician-led ACO to which the practice belongs, the group has obtained its PCMH certification.

Medical neighborhood

Another big challenge for primary care physicians is that PHM requires the cooperation of specialists and hospitals in their medical neighborhood. Historically, information exchange between PCPs and these other players has been limited and often not timely. But to manage population health, doctors and their care teams must coordinate patient care with other providers. So they need to know what is happening with their patients at all times.

Whether the PCPs refer patients to specialists or patients self-refer, it is incumbent on the specialists to keep the PCPs informed  and send them consult reports on a timely basis. Similarly, patients’ personal doctors-who, in some cases, may be specialists-should be informed when the patient is admitted to the emergency department or is admitted to or discharged from the hospital. Not only is this information essential to continuity of care, but it is vital to any organization that takes on financial risk.

Specialists are more likely to cooperate if they have the promise of a stream of referrals, say observers. Primary care physicians will only get the attention of specialists, Nash says, if it’s a pocketbook issue. 

Robert Fortini, PNP, chief clinical officer of the Bon Secours Virginia Medical Group (BSVMG) in Richmond, Virginia, notes, “The specialists at BSVMG are very receptive. They’ve figured out that the medical home team-especially the nurse navigator-is their feeder mechanism.”

Berard and Keith Hoerning, DO, an internist who belong to the same ACO, say that the ACO specialists have been cooperative, in some cases more so than other consultants. But they both practice on the south shore of Long Island, and most of the ACO specialists are on the north shore, making it difficult to send patients to them. Also, Berard says, he still refers to a lot of his old specialists because “you try to use the guys you trust.”

Ken Cohen, MD, medical director of Denver’s New West Physicians, says his primary care group has taken a very aggressive approach to collaborating with specialists. The practice has trimmed the number of consultants its doctors use from about 700 to 250, keeping only those who are high quality and cost-effective. 

“We have narrowed them down to a very small, engaged panel who are willing to work with us on the efficient use of technologies, generic prescribing, and tight communication with the PCPs,” he says. As a result, these specialists receive nearly all the referrals from the group, which has about 200,000 patients.

Next: Financial barriers

Persuading hospitals to cooperate with primary care doctors on PHM is problematic unless the physicians are employed by or affiliated with a healthcare system. When independent doctors join together in an independent physician association (IPA) or an ACO to compete effectively in the market, Nash says, “That’s a threat to the core business of the hospital.”

This might explain the difficulties that the Beacon ACO has had in working with hospitals. For example, admission-discharge-transfer alerts from hospitals are “huge” in PHM, says Simon Prince, MD, co-founder and former president of Beacon Health Partners. But Northwell Health (formerly NorthShore-LIJ), the dominant health system in the area, never supplied the ACO with those alerts. Later, when the ACO formed a partnership with Catholic Health Services (CHS), another health system, CHS began providing those alerts to the ACO. 

Some independent groups have decided not to work with hospitals at all. Early on, Cohen says, New West decided that “hospital priorities will never be commensurate with population health management priorities. There’s too much focus on bed occupancy and the latest technology. It’s just not going to work. So our focus has been to control all aspects [of hospital care] internally and to look at everything we do as a cost center.” As part of this strategy, New West employs its own hospitalists, he adds.

Financial barriers

Although elements of PHM are included in the NCQA criteria for medical homes, a small practice can’t manage population health on its own. Aside from the need to coordinate care across care settings, the organizational, technical and financial demands are too great for a small practice. So many physicians have formed IPAs and/or ACOs to tackle the elements of PHM that they can’t cope with themselves and to pool the necessary resources.

“To do population health well, it will take a larger scale than smaller or even medium-sized practices can have,” notes Lawrence Casalino, MD, professor of public health and chief of the division of health policy and economics at Weill-Cornell College in New York. “You really can’t have a nurse care manager for an eight-physician practice. There’s not enough volume to support him or her.”

But with an IPA or ACO, he says, “it’s possible to share such resources across practices without necessarily having to be in the same ownership structure.” The IPA or ACO also can provide IT support and help member practices become patient-centered medical homes, as the Beacon ACO has done.

Even with this help, PCMHs specifically have to overcome serious financial challenges. For example, this model requires about twice as many support staffers per full-time physician as a conventional primary care practice, according to recent studies. Some health plans support PCMHs with care management fees and/or shared savings. Practices that invest in population health management must either quickly land such value-based contracts-perhaps as part of an ACO-or must find other ways to increase their fee-for-service revenues, or both. 

Securing value-based contracts doesn’t necessarily mean that a practice will be successful with them. A couple of the groups interviewed for this story, for example, have built or joined ACOs, but those organizations have not cut costs enough to receive bonuses under the Medicare Shared Savings Program (MSSP). 

To reduce the pain of this transition, some groups are adding PHM components in ways that can generate extra revenue. For example, they may identify patients’ preventive and chronic care gaps and bring them into the office so they can receive the recommended services. This is not as simple as it sounds, because it involves the use of EHR reports or standalone registries to identify the patients with care gaps. Practices must also deploy staff to reach out to those patients or buy one of the software products that automatically call or email the patients. Nevertheless, this can be an effective transitional strategy.

Next: Chronic care management

“There’s a great ROI for physicians, because it’s feeding the fee-for-service model,” notes John Moore, founder and CEO of Chilmark Research, a company that publishes reports on health IT. “More patients are coming in the door and you’re closing the care gaps, which is a win-win for physicians.”

Chronic care management

Another winner for some practices is Medicare’s Chronic Care Management (CCM) program, which includes a new code (99490) for appropriate non-visit care of Medicare patients with two or more chronic conditions. 

Since that code pays an average of $40 per beneficiary per month and involves only 20 minutes of care management, it has gotten the attention of many physicians. The key drawback of the program is that it requires hiring nurse care coordinators, who are expensive. But Emerald Physicians in Hyannis, Massachusetts, reports that they have that problem licked.

“When CCM was first announced, it was like manna from heaven,” says Cormac Coyle, MD, founder and medical director of the Cape Cod group, which includes 24 physicians and 26 midlevel providers. “We had been waiting for something like this for 20 years. Now there was a true ability to focus on prevention and to get paid to do it.”

Emerald Physicians has created a CCM unit that includes 15 nurses and will soon expand to 25. “CCM is producing a direct return on investment,” Coyle says. “By the second or third month, the average nurse is breaking even on that, and by month four or five, they’re making a small profit.”

There are other ways to support care coordinators. For example, the nurses could provide services in Medicare’s Transitional Care Management Services program, which allows physicians and certain non-physician practitioners to bill for improving post-discharge care. They could also do the bulk of annual Medicare physicals. But ultimately, the key to making the PHM infrastructure pay is to take financial risk, says Fortini. Full-risk capitation, he says, “is where we have to go. We might as well gear up for it.”

Bon Secours Virginia Medical Group has been doing just that for the past several years, reversing, for example, its ratio of primary care doctors to specialists so that the former are now the majority. But the 624-provider group still hasn’t garnered shared savings in the MSSP. It has had some success with commercial contracts, netting $800,000 in shared savings from Cigna last year. But Fortini says the group isn’t ready to accept downside risk yet, although it has discussed that with some payers.

Next: Setting priorities

It takes a long time to build the infrastructure and the know-how needed to assume risk. For example, New West Physicians, which holds Medicare risk contracts and commercial shared savings pacts, has a very strong financial base. But it has been developing its PHM capabilities for more than 20 years. It had to trim its specialist panel, start a hospitalist program that provides 24/7 coverage for its hospitalized patients, and create a case management program for post-acute care and high-risk patients, among other changes. In the past few years, the group has also learned how to use its EHR to improve chronic disease care. 

One of the keys to New West’s success is how it compensates physicians. “A lot of it is alignment of incentives,” Cohen says. “If you do population health management well, it aligns very well with the Institute of Medicine Triple Aim, which is optimal patient service, optimal quality of care and optimal efficiency. By doing that, the bonus revenues are such that you can design compensation incentives that reward physicians for actively managing their panels. When that happens, everything works. The incentives are there and the funding is there to account for the extra work involved.”

The New West compensation package encourages physicians to work hard, but also rewards them for other things. The ratio of incentives is 60% for production, 30% for controlling utilization of resources, and 10% for quality of care, Cohen says. The group does so well financially that its primary care physicians earn significantly more than the average generalist. Not surprisingly, the group’s physicians are pretty happy, according to a study done by independent researchers

Setting priorities

With so many moving parts, PHM is a complex mechanism to grasp in its entirety. Different groups have set different priorities as they tackle what Nash calls “an amazing transformation” of healthcare. One basic issue is whether to focus on managing high-risk patients who generate the majority of health costs, or to manage the entire patient population to prevent people from getting sick or sicker.

Experts are divided on this question, Nash notes. “Some say you should focus mainly on the 5% of patients who drive about 50% of health costs. Others say you should raise all boats, you’ve got to tackle everybody and look at the social determinants of health.” Nash falls somewhere between these two camps. It’s very important to manage high-risk patients, such as those who have hepatitis C or who have bone-marrow transplants, because they drive a big chunk of the cost, he notes. But he also understands the argument for taking better care of the whole population.

BSMVG is in the “raising all boats” party. Fortini summarizes the argument in favor of whole population health this way: “It’s a no-brainer under value-based payment. The colonoscopy avoids the bowel resection. That’s where the money is.”

New West Physicians also addresses the needs of its entire population, Cohen says. But it has put a lot of effort into improving outcomes for hospitalized patients to lower the readmission rate. All its patients are contacted within 24 hours after discharge, and the hospitalists communicate directly with the PCPs to pick up any hospital-related issues, he notes. 

As a result, he says, the group’s 30-day readmission rate for Medicare patients is 6.7%, compared to Medicare’s average rate of 18%. “It’s a matter of organizationally designing a system so you’re touching all of your patients all the time.”

It’s hard to do that without using health information technology. Nevertheless, while Cohen’s group relies on its EHR to support its PHM effort, he feels that the value of health IT has been overrated. A more critical factor, he says, is leveraging the doctor-patient relationship to improve outcomes.

Other physicians express similar sentiments. “Technology is important,” says Gretchen Hoyle, MD, of Twin City Pediatrics in Winston-Salem, N.C. “But the technology is a tool for the humans who do the real interaction.”

Nash doesn’t dispute this, but he emphasizes that data is indispensable for some purposes, including providing doctors with performance data so they can improve. “All of population health comes down to appropriate use of the data,” he says. “If you don’t have the data, you can’t compete. The only way we’re going to close the feedback loop down to the individual doctor or group of doctors is with good data. Once you have the data, you can leverage the data to change the culture.”