Framing the issue:

• Government and private payers are moving rapidly to value-based risk payment.
• Payments include rewards and penalties for systemwide performance on population-based metrics, such as inpatient readmission rates and preventive care for chronic conditions.
• Managing population health requires systems to reorganize care horizontally, integrating inpatient, outpatient, rehabilitation home and preventive care to achieve specific performance benchmarks.
• Systems must develop specific capabilities to manage on a population basis, including integrated IT with analytics, integrated clinical networks and care coordination.
• These changes may require significant system reorganization.

For Heartland Regional Medical Center in St. Joseph, Mo., the future of risk-based reimbursement is now. All told, nearly half of the 352-bed community hospital's patient revenue already carries some degree of performance-based risk. That's three times the average of 14 percent reported by 1,300-plus hospitals responding to a 2013 AHA survey; it's even well-ahead of the 27 percent those hospitals expect in two years [Fig. 1, Page 31.]

Consisting of the hospital and a network of 173 employed physicians and advanced practice nurses in clinics about 45 minutes north of Kansas City in northwest Missouri, Heartland derives about one-quarter of its revenue from a Medicare accountable care organization contract with both upside rewards and downside penalties for quality and cost outcomes. Another 7 to 8 percent come through commercial gain-sharing arrangements with only upside rewards so far.

Heartland is also at full risk for its employee health plan costs, and considers itself at full risk for self-pay and uninsured patients — many of whom are served through the Heartland Clinic, one of the oldest free health clinics west of the Mississippi and an integral part of the system's mission. "Managing self-pay as well as our own employed population is critically important," says Linda Bahrke, R.N., who administers Heartland's community health improvement program as well as the system's ACO.

Risk-based revenues will soon far exceed half at North Shore-LIJ Health System in New York City, predicts Howard Gold, executive vice president for managed care and business development at the 16-hospital system. While 95 percent of his system's 2013 revenue was straight fee-for-service, "in five to seven years, only 20 to 25 percent will be fee-for-service; the rest will be some form of value-based contract — shared savings, shared risk, full risk, narrow network, bundled pay or pay for performance. Dramatic change is going to occur in 2014, 2015 and 2016."

Yet, rather than shy away from ostensibly more revenue risk, both North Shore-LIJ and Heartland are actively pursuing performance-based contracts with private and commercial payers. That's because they are both redesigning their delivery systems for population health management.

Making the transition

Heartland and North Shore-LIJ are moving away from providing — and billing for — discrete fee-for-service care transactions. Instead, they are refocusing system resources on managing patients' health in all settings. Under performance contracts, they are rewarded for meeting evidence-based population care goals, such as testing and controlling hemoglobin A1C levels in all diabetic patients.

Population health contracts also reward providers for reducing the need for inpatient admissions and other costly interventions, and for reducing overall costs, Bahrke points out. But shifting operations to achieve these goals is financially incompatible with the fee-for-service model, which only pays if patients use traditional services. "It's kind of like you can't be partially pregnant. Once you get started on population health, it is to your advantage to move over to it as quickly as possible."

Heartland executives anticipate the shift will be complete in three to five years, depending in part on how quickly commercial payers embrace the concept. The change will profoundly affect the system's structure, including both physical and human resources, Bahrke says. Heartland's Medicare ACO is part of a strategic plan that executives expect will sharply reduce inpatient and long-term care beds, and greatly increase home support services.

Heartland's plan already is reshaping the role of physicians from providers of office services to supervisors of nurse practitioners and care managers who oversee patients' care plans at home, in the office and in the hospital and rehab. Bahrke anticipates that acute care nurses gradually will take on more responsibility for managing patients before and after they leave the hospital, a transition already under way through greater emphasis on discharge planning and linking hospital and community-based medical and social services. Transitioning provider payment from a fee-for-service model based on billable face-to-face physician encounters to one that pays based on how well Heartland meets defined process and outcome goals for populations with specific risks is essential for making this delivery model work, Bahrke says.

Likewise, North Shore-LIJ executives recognize that adopting population health methods undercuts existing fee-for-service revenues. Many systems identify this as a key hurdle, and worry that they may not have the financial capacity to clear it — and whether their physicians will go along.

The transition to population health management is not easy, even for systems with a long history of risk contracting. Henry Ford Health System, which has operated the 670,000-member Health Alliance Plan for 50 years, anticipates a need to make changes. "Having been clinically integrated for 30 or 40 years, we've in some ways locked into an integrated model that may not be perfectly designed for the future," says Bruce K. Muma, M.D., chief medical officer of the 1,200-member Henry Ford Physician Network in the Detroit area.

For example, the system's providers operate largely independently from its insurance operations and may have to collaborate more actively. "Population management on the provider side can be much more effective," Muma says. "There is a lot more opportunity to eliminate waste and orchestrate care when the patient is in our possession. What the health plan can do through benefit designs and telephone prompting is not as effective." Henry Ford also is struggling with integrating care managers into its outpatient operations, in part because different insurers have different population management goals, he adds.

Nonetheless, the population health management approach shows great promise in health systems all across the country. For example, Heartland has held its employee health plan costs increases to about 1 percent a year since it began taking a population management approach seven years ago and, as it finishes its first year with a 12,000-member Medicare ACO, total costs are down at least 5 percent, Bahrke says.

Similarly, Metro Health, headquartered in Wyoming, Mich., comprising a 208-bed osteopathic teaching hospital and 204 employed and independent physicians affiliated through a physician-hospital organization, cut its employee health costs by 5 and 10 percent, respectively, in the first year of a narrow-panel network using a population health approach, says Michael Faas, president and CEO. The system also has organized its primary care networks as patient-centered medical homes and has implemented aggressive disease management and care outreach programs for its sickest and highest-risk patients.

Lehigh Valley Health Network, comprising three hospitals and 1,100 employed and affiliated physicians headquartered in Allentown, Pa., also has set up extensive home support services for patients with such advanced and complex illnesses as cancer, organ failure and dementia. Using nurse managers, palliative care specialists and social support personnel, these services have reduced hospitalization and overall costs by 40 to 45 percent in these high-risk target populations, says Sue Lawrence, Lehigh's senior vice president for the care continuum.

As of mid-November, 541 patients were being served at home by the Lehigh advanced and complex illness program. This may not seem like many, but they represent a disproportionate share of health care expenditures for the system and the community. Keeping them out of the hospital actually may cost the system in terms of revenue foregone because, so far, Lehigh has just a few shared-savings contracts with upside rewards only. But Lehigh executives anticipate that as much as 25 percent of revenue could be risk-based in two to five years, much of it from bundled payments for very ill patients, so the investment is worthwhile. "We are developing the infrastructure to manage bundled payments at such time as it comes to fruition," Lawrence says.

Indeed, one thing these diverse organizations share is a commitment to developing the capacity to deliver population health-management services. Whether the system is a single hospital or a diversified network, or the payment mechanism is an ACO contract, bundled payments or full-risk capitation, the same core capabilities are required. What these capabilities are and how these systems are putting them in place are detailed below.

The critical role of IT

Effective population health management requires that providers keep tabs on the health status and utilization of thousands of patients, and respond immediately when they need or request service. Moreover, it requires the ability to predict risk within a patient population so it can be managed with appropriate preventive and early interventions. All this takes substantial IT capability, says Eric J. Bieber, M.D., chief medical officer of University Hospitals Case Medical Center in Cleveland. "IT is a key enabler. You can do a fair bit without it but, to get all the way, you have to have it."

Information essential for population health management comes from a variety of sources. These may include inpatient and outpatient medical records, hospital and physician billing records, insurance records and government sources such as Medicare, Medicaid, community health clinics, public health agencies and even school records. Obtaining each presents its own challenges. Raw data from these sources also must be integrated and transformed into usable information using some kind of analytics, and pushed back out in the form of decision support and predictive risk modeling.

Despite several years of efforts to create interoperable health records across platforms, fully integrating inpatient and outpatient records remains a challenge. Structured data, such as patient vital signs, complaint and condition lists, and medication lists, are formatted differently in systems from different vendors, making it difficult to share.

Many systems try to solve the problem by adopting a single vendor for both hospital and outpatient, as Metro Health has. All of the hospital's employed physicians and the hospital use an Epic record system, as do many independent physicians, says Frank Belsito, D.O., Metro Health's chief medical officer. This enables all payer and patient registries to be updated with incoming clinical data in real time.

However, federal law does not allow the hospital to give independent physicians its record system, so some use other systems, notes Heartland's Bahrke. Heartland physicians can access some data from these systems through a regional health information exchange, including X-ray and other images, as well as progress and discharge notes, and complaint and medication lists. "But there isn't as much depth of information as in our own record system," Bahrke says. Overall, 41 percent of hospitals reported participating in an HIE.

Bieber adds that with about 40 percent of network physicians independent, data exchange is an issue for his system, which includes 10 hospitals and 1,500 employed physicians serving Cleveland and northeast Ohio. Contract physicians can read data from the system's integrated inpatient and outpatient system, but some must enter data manually to include it in the system record. The system is building interfaces so more independent physicians can share data automatically.

Metro Health also is working to integrate disparate independent physician systems, says CIO Bill Lewkowski. However, as payers move to payment models favoring integrated care, some physicians who felt the Epic system was too expensive are reconsidering. "If they don't have the connection, they can't participate in these value-sharing programs."

Insurers are another source of crucial data, providing historical utilization and current claims, even from providers outside the network. This can be critical for detecting readmission outside the hospital, a key performance outcome for Medicare and some commercial contracts. Only 6 percent of hospitals say they can do so virtually all the time [Fig. 5].

Obtaining data from insurers in a usable format also can be a challenge, says Dan Anderson, president of community hospitals and COO of Fairview Health Services in Minneapolis, which includes seven hospitals, 47 senior housing locations and about 3,350 affiliated physicians. "Insurance data are designed to manage premium risk and are not necessarily formatted the way you need them for managing provider operations." However, insurers increasingly recognize that sharing data with providers is in their own interests, and will work to provide that data in a usable format on a timely basis.

Data from various sources also must be integrated. The best way to do this is through a data warehouse that draws data in from all sources, Lewkowski says. Metro Health currently uses the Epic data warehouse, but is installing one that will better integrate other data flows. Lehigh uses a data warehousing system that draws from several sources, including inpatient records, outpatient records and claims data, Lawrence says. "It gives a pretty robust picture. You can drill down to individual patients or a provider panel and look at outcomes."

However, the payoff comes not from looking at the past, but in using what you've learned to predict the future, Bieber says. "You need to move it upstream. How do you drive health and wellness? That is what you are talking about with predictive ability."

A variety of data analytics programs are available. UH Case operates three separate ACOs, one for Medicare, one for commercial patients and a Medicaid pediatric program. UH Case takes a "best of breed" approach, which led it to select a different package for its pediatric population. The diagnoses and codes are different for children and adults, and different vendors have different levels of expertise with each. The system's management structure, in which the three population-specific ACOs report up through the umbrella ACO, provides flexibility to structure each to best meet its population needs.

Information also is helpful only if it is pushed back to the point of care. This is done through decision support and clinical alerts built into clinical record systems, and also through assembling case management lists, performance improvement reporting and identification of at-risk individuals and populations. This requires hands-on involvement of medical staff. At Heartland, the 12,000 Medicare ACO patients each are assigned a risk rank, from 1 to 12,000. "When a physician sees someone with 300, they know they are among the 300 patients most at risk and they treat the patient accordingly. That kind of awareness is a real accomplishment," Bahrke says.

Advanced analytics such as natural language processing can further increase predictive power by extracting data from the narratives that make up about 80 percent of the record, says Dan Riskin, M.D., CEO and co-founder of Health Fidelity, Menlo Park, Calif. "How can you make good predictions without accurate medical records?" Statistical analysis allows such systems to identify subtle trends and possible causes for outcomes that are not captured in structured data.

As critical as data analytics is, its use remains limited. In 2013, only 18 percent of hospitals said they used predictive analytic tools for care coordination widely or hospitalwide [Fig. 4].

Clinically integrated networks

Delivering care in the most efficient and effective manner is where the rubber hits the road in a population health network. Doing it requires both clinically integrated networks and care coordination.

At a global level, clinical integration means that a range of providers across the continuum, typically including physicians, hospitals, labs, diagnostics, home care and nursing services, agree on certain clinical standards and protocols to care for a given population, Anderson says. This network then contracts with a third-party payer to provide services to the population.

All or any part of this network may be owned by one system, or networks may be assembled by contract as needed to cover specific geographic areas or population needs. "Sometimes you may need to offer more accessible care or a broader breadth of care than your own network can provide," Anderson says.

Without an integrated network, controlling utilization, predicting costs and meeting quality standards are difficult. Even so, slightly less than one-third of hospitals reported having a clinically integrated network in place in 2013.

Building an integrated network requires physician leadership to design and implement team-based care models that make full use of available care resources. Heartland began developing its model about three years ago. It involved educating physicians on concepts including patient-centered medical homes and care coordination. Physician champions began implementing the model, which makes extensive use of advanced practice nurses to deliver routine care in the office and check on patients at home. The goal is to move to two or three nurse practitioners for each primary care physician. Some physicians resisted at first, but clinical and financial results are good, and support is growing, she says.

Physician committees with primary care and specialty care representatives were established to develop care protocols for targeted high-risk patients in cardiology and oncology. Next up are joint replacements in orthopedics.

Hospitalists also were brought in. About 75 percent of emergency services and inpatient admissions, and 80 percent of Medicare risk services now are provided by Heartland-employed physicians. "If you can get collaboration among the emergency department, the hospital and specialists, you have come quite a way toward achieving your goal," Bahrke says.

Working with physicians to understand and practice within a team-based model is essential, says Ira Nash, M.D., medical director of the 2,500-member North Shore-LIJ physician group, noting that "changing incentives does not automatically create the capability to deliver coordinated care." Before new protocols or insurance programs roll out, the group educates physicians on the concepts, supporting evidence, incentives and, most important, the physicians' role. "The new world is new for doctors as well," he says. "You can't explain it too many times."

Nash emphasizes the need to engage physicians financially, too. Payment must be structured so that physicians share in any bonuses. Otherwise, it may look as though the system is benefiting at physicians' expense — not good for collaboration.

Several North Shore-LIJ primary care practices have adopted the patient-centered medical home model. Nationally, about 30 percent of systems reported doing so [Fig. 6].

All of Fairview's 43 primary care practices are certified as medical homes, Anderson says. He credits the team-based approach the model adopts with helping to shift the system's culture toward care coordination and risk-sharing.

However, refocusing services on giving patients a seamless and positive experience is more important than adhering to the medical home model per se. Some aspects of the model, such as care management and coordination, cross practice boundaries and are handled at the system level at UH Case.

Developing effective integration protocols also requires great skill in process development and improvement. To develop those skills in physician leaders, nearly two-thirds of hospitals reported that they formally trained clinical leaders in continuous quality improvement in 2013. Lean, Six Sigma and Baldrige were the programs most frequently used.

Practical steps to coordinating care

Making the best use of clinically integrated services requires ongoing care coordination. Half or more of system health care expenditures typically go to care for the 5 to 10 percent of the sickest patients. Reducing unnecessary hospitalizations and urgent care in complex populations provides the greatest economic returns, and this is typically accomplished through intensive case management, disease management and coordination of home and outpatient care.

While more hospitals have been developing these capabilities since 2011, overall less than one-third reported assigning nurse managers to high-risk patients or to outpatient services, providing disease management, prospective patient management or chronic care programs [Fig. 3].

One reason may be that in many cases care management and coordination protocols are fragmented, Muma says. At Henry Ford, case management is built into inpatient operations, where the system long has been at risk for costs. But on the outpatient side, physicians aren't paid for it so it is mostly provided by health plans — and their various approaches are often inconsistent. The Michigan Blues have 24 case managers operating in Henry Ford clinics, the United Auto Workers health plan has four, and other payers pay for services, but all have different approaches, greatly complicating care delivery. The system is trying to coordinate inpatient and outpatient case management and to come up with a consistent way to pay for it. "Some plans pay fee-for-service and some pay $1 or $2 per member per month. The model is still developing," Muma says.

Care managers and visiting nurses are one way systems can go beyond the medical model to address social health determinants, including patient education, poverty and other barriers, Belsito says.

Case managers are also invaluable for detecting and addressing issues such as transportation or patients who can't afford co-payments for medications,

Lehigh recently added social work to its case-management mix. Case managers coordinate extensively with community and volunteer groups to provide rides to clinics, groceries or whatever patients need to stay healthy, Lawrence says.

Lehigh case managers also are experimenting with new models for less ill patients, including extended intake interviews and periodic calls to make sure patients are following up on any needed chronic or preventive care. In its first year of applying the program in its employed population, 70 percent of enrollees improved or held steady on key long-term health indicators including body mass index and hemoglobin A1C.

Disease management is also a fruitful approach. At Metro Health, care packages have been developed for the 5 percent of sickest patients, and care navigators are assigned to help patients with congestive heart failure access needed services on an ongoing basis.

At Lehigh, high-risk patients are identified by means of algorithms' examining patient data aggregated in disease registries, and case managers intervene when abnormal test results pop up. Root-cause analysis helps to develop new programs to keep patients healthy. The system's program for advanced and complex disease also checks up on oncology patients after chemotherapy for dehydration and connects them with outpatient infusion if they are at risk, a practice that has cut hospital admission considerably.

"What we do in the hospital is really crisis work," says Donna Stevens, director of palliative care. "Cancer patients are going to continue on chemo and follow up and need long-range support over the journey of advanced illness." Lehigh's palliative care team doesn't just concentrate on end-of-life care, but actively follows patients with cancer, dementia and other long-term illness, she notes.

Overall, about 28 percent of hospital systems report using disease management widely.

Infrastructure to handle payments

As with any complex enterprise, an infrastructure is required to administer the finances of a risk-bearing care plan. It must be legally and functionally structured to contract with health plans and for services, establish payment terms and performance criteria, and track performance by provider and distribute payments accordingly. It must also be able to set rates based on expected utilization, and monitor ongoing costs. Overall, 42 percent of hospitals have established a legal structure to do so.

Common structures include physician-hospital organizations, management services organizations, joint ventures and physician- or health system-sponsored plans. Whatever the structure, technical capabilities are key, says North Shore-LIJ's Gold. Many functions of a population health management plan, such as predicting utilization and managing risk, traditionally have been done by insurance companies. His system has added actuaries, financial analysts and risk managers.

These skills have allowed North Shore-LIJ not only to partner with forward-thinking insurers as an at-risk provider, but also with a third-party administrator, to offer its own insurance product, Gold says. The plan is offered on the New York health insurance exchange and is on track to achieve its goal of capturing 1 percent of the local insurance market.

While the initial investments in IT, risk management professionals and physician education are high, Gold predicts the risk contracting model will break even within two years and not only will be sustainable, but also necessary over the long term. "We moved the ball pretty far down the court even before the ACA was put into law. The handwriting was on the wall. Value-based and risk-based contracting is the only way we will survive, and this is what it takes to do it."

Howard Larkin is a freelance writer in Oak Park, Ill.

What is Population Health?

One widely accepted academic definition of population health is: "the health outcomes of a group of individuals, including the distribution of such outcomes within the group." It was formulated a decade ago by David Kindig, M.D., of the University of Wisconsin-Madison School of Medicine, and Greg Stoddart of McMaster University, Hamilton, Ontario. Managing population health involves improving health outcomes of the group as a whole by identifying, monitoring and addressing the health need of individuals within the group.

What this means in practice depends on how "group" and "outcome" are defined. Is the group or population all the individuals living in a geographic area? Or those served by or enrolled with a specific provider? Or is it all those with a specific medical condition? Or those with particular demographic characteristics, such as age or gender? Or those covered by a type of insurance or a specific insurance contract? Are outcomes clinically defined? Do they include things like functional status, well-being or specific health behaviors like diet and exercise or smoking cessation? Do they include nonmedical health determinants like economic or housing status?

These distinctions are important both philosophically and practically. Philosophically, by embracing a mission of caring for uninsured and indigent patients, a system also adopts a broad definition of the population whose health it intends to manage. From a practical view, identifying, monitoring and serving the needs of this population require developing outreach and social-service capabilities and interventions well beyond those traditionally associated with a medical care provider. These include things like arranging transportation, and pharmacy and nutrition support for many patients or at-risk community members.

At the same time, defining subpopulations according to specific conditions, diseases or health risks is essential to implementing targeted, evidence-based treatment protocols. And economically, defining populations as enrolled or allocated provider panels or by insurance class is also essential — particularly when financial incentives or outcome measures differ among contracts. Identifying, monitoring and serving patients by specific needs require information systems that track both clinical and utilization data in real time, and integrated delivery systems capable of responding immediately with appropriate interventions. These also go beyond traditional acute care to include prevention, telemedicine and home care to keep patients out of the emergency department and hospital beds when possible.

In many ways, the approach, with its emphasis on keeping close tabs on patients' conditions, recalls earlier delivery models. "It's what a lot of us called general practice 30 years ago," says Frank Belsito, D.O., chief medical officer at Metro Health, Wyoming, Mich., which is organized around patient-centered medical homes. "We focus on accessibility and availability of the primary care physician. That's what primary care is all about — being the provider of choice for the majority of what people need around health care. It is about re-embracing the values of the days of family practice."

Population health management also recalls managed care, Belsito says. "Conceptually, you are responsible for a segment of the population; for high quality, low cost and patient satisfaction."

But today's population health management transcends managed care in important ways, says Eric J. Bieber, M.D., CMO at University Hospitals Case Medical Center, comprising 10 hospitals and 1,500 employed physicians serving Cleveland and northeast Ohio. For one thing, it really can be held accountable for quality based on meaningful and measurable performance metrics. "In the early 1990s, there was less focus on quality, in part because we didn't have good quality metrics and we didn't have the ability to benchmark," Bieber says. "We didn't have the IT infrastructure and we didn't have real-time data needed to manage care processes."

Even more important, accountable population management puts the patient at the center and builds out based on patient needs, rather than forcing the patient to conform to a rigid network, adds Bieber, who is also chair of the UH Coordinated Care Organization, the system's umbrella ACO. "Accountable care is about care across the complete continuum and that is a different focal point. We had some of the pieces in place and the ACO brought them together. This is a work in progress, but we have the infrastructure and analytics to drive quality and value." — Howard Larkin