It’s clear that the U.S. health care system is in need of significant change. Despite modest successes in “bending the cost curve,” health care spending is expected to expand from 17 to 19 percent of GDP in less than a decade1, 2, 3. What’s worse is that we’re generally not getting our money’s worth. According to a 2014 study from the Commonwealth Fund of 11 developed countries, the United States ranks last in overall care quality, while spending about twice as much per capita as high-ranking countries like the United Kingdom, Sweden and Australia4.

In response to soaring costs and lagging quality, payers now are actively looking to deliver better outcomes at lower cost. This includes shifting risk to providers through alternative payment models and limiting access to, as well as reimbursement for, products and services that don’t show sufficient economic and clinical value.

The Centers for Medicare & Medicaid Services has made clear its intention to move from the current fee-for-service payment model — which encourages volume with little concern for outcomes — to one that links payment with performance. In early 2015, Health & Human Services announced a goal of increasing Medicare payments through value-based models — including bundles and accountable care arrangements — from 20 percent in 2014 to 50 percent in 20185. More recently, CMS released a plan that would require more than 800 hospitals in 75 geographic areas to participate in a new bundled payment program for hip and knee replacements6.

The private sector is also urging change. The Health Care Transformation Task Force, a 28-member alliance of providers, payers, employers and various other partners, recently committed to transitioning 75 percent of its members’ health care payments to value-based arrangements by 20207.

At the same time, the expectations of consumers, who are paying more for their care, are evolving. According to America’s Health Insurance Plans, more than 17 million Americans now are covered through high-deductible plans, up from 3 million in 20068. They are sure to raise their expectations for the products and services they pay for9.

Emergence of Population Health

Although a universal definition for “population health” hasn’t yet arisen, it’s generally focused on managing the health of a defined population by providing the right intervention at the least costly time and place.This is a significant departure from the current fee-for-service model that incentivizes high-cost procedures like imaging and surgery. The goal of population health management is to keep patients out of acute care settings, lowering overall costs and redefining “health care” as more than just “sick care”10.

Although population health management has garnered significant attention, there has been little effort in tracking the actual progress that’s been made toward value-based models of care. Recognizing the critical need for this work, our firm has partnered with David Nash, M.D., and the Jefferson School of Population Health on a multiphase study to define and track the “state of population health” in the United States.

In the first phase of this work conducted between October 2014 and June 2015, we interviewed more than 100 executives and decision-makers at a wide range of provider organizations. We gave special consideration to collecting a variety of viewpoints based on such factors as region, organization type, organization size and individual role.

To further explore insights from the interviews, we launched an online survey in June 2015. The findings from the survey are expected in late 2015. We will conduct the survey annually to track the evolution of population health management over time.

Key Insights from Interviews

Based on the interview phase of our study, the following key insights emerged:

Definitions of population health vary greatlyInterviewees provided various definitions of “population health.” Some defined it more narrowly (e.g., primarily focusing on wellness), while others saw it as a much broader initiative that includes full accountability for patient populations. Several interviewees even reported that multiple definitions are being used internally, resulting in heightened confusion across the organization. Talking about her recent struggles, a senior vice president of a large hospital system said, “There are many different definitions of population health in the organization, and this is part of the challenge.”

Overall, how population health is internally defined has real implications for the pace at which the organization can advance its value-based initiatives as well as what specific initiatives are prioritized. Not surprisingly, organizations with a focused approach to population health management are generally much further along than those without one.

Culture is critical for successInterviewees reported numerous reasons for engaging in population health management [see Figure 1], and the leading reasons could be broadly classified into concerns over the shifting landscape (threat of regulation, current model won’t last forever) and alignment with the organization’s mission or culture.

Those belonging to the latter group typically have made the most progress toward value-based models of care, given that they’ve often been engaged in these efforts for many years. Discussing this culture, the president of one of the leading medical institutions in the country said, “Historically, we’ve been a leader in addressing the challenges facing health care — it’s part of our culture and mission statement.” These organizations also tend to face fewer challenges in achieving clinician “buy-in” on population health management, given that it’s widely viewed as “the right thing to do.”

In some cases, organizations are even able to make significant strides toward value in markets still dominated by fee for service. In the words of the chief executive of one such system, “Currently, only a small percentage of revenue is driven by at-risk agreements — most of the market is still fee for service … [but it’s] part of our mission to provide the best care for patients.”

Pop health fig 1

However, culture is a significant roadblock for many organizations. Without a strong existing culture, modifying behavior can be challenging, especially when the organization is still profitable under fee for service. Talking about culture, the CEO of a large academic system said, “People will say ‘We don’t have time for a culture change!’” On this same topic, another CEO stated, “Internally, people have to change their way of thinking, especially those who have been focused on filling beds for many years. The waste in the system is someone’s revenue.”

Organizations are still waiting to take bold actionMost organizations haven’t made significant progress in transitioning to alternative payment models. In our interviews, 60 percent of organizations reported that they’re not participating in any at-risk arrangements with payers or employers [see Figure 2], and a majority of these are still “thinking, talking or planning” internally (vs. talking to payers or employers).

Pop health fig 2

Although some organizations in the thinking, talking or planning group have made notable progress — including creating internal education programs for clinicians and establishing clinically integrated networks — many haven’t done much outside of a handful of meetings or some small internal experiments.

Even among organizations currently in at-risk arrangements, progress is mixed. Most arrangements include only upside potential, and deployment often is limited to pilot programs such as CMS innovation pilots.

Managing variation in cost and quality remains a significant hurdle. Although organizations typically don’t mention that managing variation in cost and quality is a key challenge, further investigation indicates that it is a critical roadblock. When prompted to discuss how well they were performing on activities like establishing care paths, building these paths into order entry systems and developing processes to track cost and quality at the physician level, many organizations stated that progress has been slow. As one senior vice president of a well-known health system said, “[Managing variation] is at a stage of infancy, and we’re just starting to do some of this work within treatment areas. … Traditionally, we’ve been inpatient-focused. Yet even here, we’ve struggled to understand variation in cost and quality.”

Collaborations are keyAlthough some larger health care networks “own” the entire continuum of care, many of the organizations that have made the most progress rely heavily on partnerships. These organizations commonly are able to forge deep relationships along the care continuum and have developed an infrastructure for monitoring and measuring the performance of partnering facilities.

Relationships with payers complicate the transition to new payment models. According to the chief operating officer of a major health care network, “Most payers we’ve engaged are not enthusiastic to partner with us on population health.” In some ways, this is indicative of the often antagonistic relationship between providers and payers. However, providers that are able to build collaborative partnerships with payers typically are in the best position to create mutually beneficial arrangements.

Taking Action

Transitioning to population health management involves a completely new mindset. Unlike the current model, providers must focus on the entire care continuum — from preventive care programs to post-acute care facilities. For most organizations, this requires building strong partnerships with entities outside of their direct control and developing processes for ensuring that partnering facilities meet contractual obligations.

Providers also must establish strong relationships with key stakeholders, including payers and employers. As the focus on cost and quality intensifies, providers will need to develop compelling value stories for their services that are appealing to these audiences. They also will need to identify, collect and analyze the data to support these value claims.

In addition, it’s critical for providers to take an active role in managing variation in cost and quality, both inside and outside the organization. Providers need to have the processes and infrastructure to ensure that care paths are established and followed, key benchmarks are tracked, and outliers are identified and appropriately addressed.

For most organizations, population health management requires a radical shift. However, there are steps that can be taken to improve today’s bottom line, while also preparing for tomorrow — including managing cost and quality better and developing strong collaborations across the continuum. Given the rapidly evolving market, adopting a wait-and-see approach has become exceedingly risky. In our opinion, the time to act is now.

Copyright © 2015 Numerof & Associates. All rights reserved.

Michael N. Abrams, M.A., is the managing partner, and Rita E. Numerof, Ph.D., is the president of Numerof & Associates Inc., St. Louis.



1. Consumer Price Index data from the Bureau of Labor Statistics,




5. "Succeeding Today While Preparing for Tomorrow" (published by Rita Numerof in H&HN Daily as “How to Succeed at Fee-for-Service While Preparing for Value-based Payment,” June 9, 2015)




9. "Considerations for Risk Sharing Agreements" (published by Rita Numerof in eyeforpharma, June 23, 2015)

10. "Getting to Population Health" (published by Michael Abrams, Rita Numerof and Christen Buseman in Texas Healthcare Trustees' Trustee Bulletin, June 9, 2015),