Evaluating a health system's performance in the future will require an entirely new set of measurements and metrics that reflect the new economic reality of systems providing care to a given population. These new measures need to be predictors of future performance that will lead to long-term financial sustainability.

With a few exceptions, the volume of sick care provided to patients drives the operating performance of health systems. Resulting operating profitability is largely a function of the profit margin derived from care provided to those patients with commercial insurance, which subsidizes care provided to noncommercial patients. Future performance will be driven by service value.

Ultimately, the health system of the future will achieve success by managing the health and wellness of a population—very different from just managing sickness and disease. In this system, profitability becomes a function of units of wellness provided instead of units of health services. The pace of developing and adopting these measures will be dictated by the forces of a transforming health care market. As the health care industry evolves both nationally and locally from a model of payment based on admission, visit or procedure to one of bundled payments and performance sharing and, ultimately, to capitated payment for health of a population, adoption of these measures also will evolve.

These new measures will need to incorporate several factors that assure organizational sustainability. Scale and integration, market essentiality, operations that result in leading quality and service outcomes, sophisticated information technology capabilities with high adoption rates, highly efficient resource and cost structures, post-acute linkages and a progressive governance and management team are the most important factors.

Specific metrics will be important in each of the following measurement areas: community benefit, population health, stakeholder engagement, quality performance, IT effectiveness, resource strength and market essentiality. Some of the metrics for resource strength will include a focus on resource efficiency. For example, are care costs 85 percent or greater of total cost and, conversely, are administrative costs 15 percent or less? Other measures will focus on capital investment sustainability, such as whether earnings before interest, taxes, depreciation and amortization are greater than 10 percent and whether annual capital expenditures are at least 5 percent of revenues. Similarly, there will be many metrics that indicate market position. Is the health system one of the top three providers in the market with a market share of at least 20 percent with a gap to the leader of less than 10 points? Does 85 percent of the community live within a 10- to 15-minute commute of an affiliated, primary care provider? Are the number of primary care physicians, specialists and beds balanced relative to population size?

If there is total transformation of health and wellness, we'll see metrics around population health that will be monitored and evaluated. For example, is the care cost performance for the community or managed population trending lower than state and national averages? Are the incidences of high-cost diseases in the community and managed population lower than state and national averages? And, ultimately, perhaps a Wellness Index based on such indicators as vitals, body mass index, aerobic activity and others for a defined population will become a standard metric.

New means to measure successful performance will evolve as the health and wellness industry transforms over the next several years, so stay tuned; there's much more to come.

Frederick A. Hessler is managing director of Citigroup Global Markets Inc.

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