A practical approach to population health: Report from the front-lines of healthcare transformation

Based on extensive client work and research, this article describes the journey towards population health — cutting through the hype and buzzwords to offer practical advice.

The health system described in this article ("Integer Health") and its leader ("Martha") are based on several health systems and executives Strategy& has supported recently in a transition towards population health.

Inside mission control
Martha, president of Integer Health, a 10-hospital system in the Midwest, used to have a routine. She would start every morning with a large coffee and a report showing her bed census, discharges and the utilization of her operating rooms. This routine has now been upended.

Martha now begins her day by walking into her population health command center. The "command center" is a repurposed conference room with several desks and big-screen monitors. Large-scale maps, timelines and dashboards change in real time; seated around the table are experts in care management, network configuration, predictive modeling and contracting. The experts and analysts in the room greet Martha with updates on performance against a range of clinical, operational and financial targets – giving her not only a look into the past but a sense for what is coming today, this month, this quarter and next year. For example, a change in ground-level ozone tells her to anticipate a spike in asthma-related ED visits today – and prepare accordingly. There is also plenty of fresh coffee — at least this part of the routine has not changed.

Over the past several years, Martha has seen Integer go through a quiet transformation. Without too many ribbon-cuttings and press releases, the health system now derives nearly a third of its revenue from population-based contracts. While other systems still talk about it, Martha has been able to take Integer down the population health path without taking her eyes off the operations, by integrating the system's physician partners into the plan, and without taking a financial hit — a major consideration in an industry in which, for many players, "no margin" equals "no mission." Martha is also comforted when she looks at the timeline on the wall of the control center — it tells her where Integer Health is headed next and calls out the things to watch out for along the way.

Getting there
Integer's journey began approximately four years ago, independently of the ACA or other reform efforts, and it began by looking in rather than out. As a large employer, Integer was spending $200 million per year on its own healthcare costs. The system took three straightforward steps: It asked the employees to actively engage in their own healthcare (beginning with a health risk assessment), created a benefit plan and clinically integrated network that delivered the vast majority of care in-network, and created the first of many chronic care programs.

The initial chronic care focus was on low back pain — a major source of clinical, productivity and disability costs. That year was the first year Integer's healthcare costs did not go up. A year later, the system had clear indications of improvement — measurably lower utilization and cost, fewer days missed and fewer incidences of re-injury.

With hard results in hand, Martha was able to approach the system's payer partners — the local Blue Cross, a new Medicare Advantage plan and the teachers' union trust. The proposal was simple. In year 1, the system would treat these populations on a fee-for-service basis, at a discount using the tools it created for its own employees. If there were savings derived from the strategy, Integer and the payers would share those savings (similar to a CMS model). At the end of year 1, based on the data, Integer and the payers would agree to an appropriate global budget, with Integer committing to a per-member per-month rate for three years and promising a measurable improvement in member health.  

The shift from shared savings to a global budget was not a comfortable one, but Integer had built in some safety net for itself based on a good understanding of the conditions that drove most of the variability in cost — and its internal experience of managing those conditions. Integer ended up hiring several actuaries to analyze the utilization data, make projections based on health risk assessments, and help the system determine the necessary amount of reinsurance to buy to cover exposure to catastrophic, multimillion-dollar cases. Integer also contracted with a local TPA to process the claims. After year 1, the claims would no longer need to be sent, but they would still be a useful internal tool to track utilization.

As time went on, Integer found new ways to improve care and its bottom line. It worked with physicians to create better access through a system of primary care medical homes. It instituted the first steps of virtual health with e-visits and the first steps of mobile health. It created a fully integrated care management unit that follows customers through the total journey of healthcare. And it focused resources on the 3 percent of its populations that were using 30 percent of the services.

Encouraged by success, Integer put together targeted programs for diabetes, asthma and low-acuity visits to the ED. Again, the approach was low-key — a physician versed in MUMPS put together a basic dashboard and several nurses became chronic care coordinators. The care coordinators, armed with dashboards, disease registries and electronic care plans, reached out to the patients who came in to the ED the night before, missed their annual check-up or forgot to pick up their prescription after being discharged. Care coordinators drew on their decades of experience to make a personal connection with the patients, educate them and help them do the right thing. They also knew the health system well enough to reach for pharmacists, social workers, case managers and physicians as needed.

Tackling the thorny issues
After a year of operating under the PMPM basis with three payers and showing solid financial and clinical performance, the Integer team felt they were ready to tackle the next challenge — implementing population health across its continuum. It knew that to be successful it had to transform its organization. Out went the hierarchically integrated organizational chart. In came the flat management structure that featured clinical leaders, elevated ambulatory positions and the new chief patient engagement officer.

Integer also knew that the economics had to change at a macro and micro level. To support the infrastructure, necessary fee for service contracts would be phased out and Integer made a commitment to value-based contracts. P&L responsibilities were transferred from facilities to populations. New capability investments were made, focused on big data, care management and virtual health. At the micro level, physicians and administrators were now rewarded for keeping people healthy and managing outcomes instead of performing transactional care.

Still, making the numbers work presented a challenge. The global budget was designed to help the employers lock in a rate while preserving the current reimbursement level for Integer. This meant having to find savings every year to offset the growing costs of salaries, technology and facilities.

The savings came from three areas. First, the system reduced utilization of unwarranted medical care, such as low-acuity ED visits, unnecessary MRIs, off-label drug use and preventable hospitalizations. Second, the system set an annual operational efficiency target, supported by initiatives such as staffing, to demand and consolidate procurement. Finally, the system was able to reduce some of the administrative complexity related to pre-authorizations and claims processing by hard-coding many of the rules into the EMR.

As these changes were rolled out, Martha was faced with increased capacity — and the ongoing need to offset fixed costs. Working with her marketing team, she went on the offensive — touting the increased access to physicians, procedures and ED the system now provided — and was rewarded with an uptick in volume. Martha also partnered with a telemedicine company to give her physicians broader geographic reach and fill their schedules.

Finally the care model itself had to change. No more inpatient, outpatient and ambulatory. Now the focus would be on congestive heart failure, diabetes, cancer and chronic obstructive pulmonary disease integrated services. Integer set up one of the Midwest's first at-risk population health centers that combined clinical, behavioral and social services. And it began to see the home as a point of service on the continuum of care.

Three keys to success
Integer's journey toward population health was by no means easy or error-free. For a period of time, the system found itself operating under two operating models aimed at different populations, causing significant discomfort to Martha and driving her to put forward a unified, efficient way of working. Not everyone in management or the physician enterprise was prepared to make the "leap of faith," no matter how well-planned — and some ended up leaving the organization. Finally, once the organization decided to move in the direction of population health, it was inundated with inquiries from payers, employers and vendors — requiring discipline and focus to navigate.

All in all, as Martha reflected, she felt there were three things the system managed particularly well. When colleagues across the country ask her about her experience at conferences, these are the things she tells them:

First, the transformation required clarity of purpose. The leadership team, in a discussion with the board, articulated a set of objectives to achieve over the coming years in terms of outcomes, market share and margin. Everyone agreed that the only way to achieve these objectives was to change the care and reimbursement models. This change had to be controlled tightly, with the system learning and transforming, gradually and profitably. Since that initial conversation, the leadership team would hold a bi-weekly 6 a.m. breakfast meeting, tracking progress and inviting key staff members to report on clinical, operational and financial performance for the target populations. From these naturally data-intensive meetings grew a "command center," helping the leadership team make more informed and timely decisions.

The second requirement was leadership and ownership. The success of the transformation was enabled when the physician leadership of the system embraced and took ownership of the change. They saw it as an opportunity to enhance patient care, increase community impact and attract like-minded practitioners to Integer. Key physician leaders led the charge for greater internal transparency of outcomes and costs, using peer pressure and crafting appropriate incentives to help their colleagues achieve higher performance. Similarly, the nursing leadership took ownership of reducing waste in clinical operations. As with any fundamental change, Martha observed conflict and even departures of individuals who could not see themselves working under the new "regime." However, those who stayed made an explicit commitment to change, and they stuck with it.

As Integer rolled out its population management programs and built its capabilities, Martha was reading a lot about the cultural changes that had to take place. Interestingly enough, this aspect of transformation was relatively smooth. Martha and her colleagues found a way to build on the Integer's strengths — its roots in the community, its charitable mission, its historical focus on the health of women and children and the long tenure of its staff. "We have been doing population health all along" — was the message to the team — "before there was even a name for it. Now we can be a regional leader in population health if we hold ourselves and each other accountable and push ourselves daily to make small but meaningful improvements." Through surveys, focus groups and employee forums, Martha and other leaders in the organization helped define a set of behaviors they needed everyone to exhibit. In the coming year, they will change their compensation philosophy to make sure they retain, attract and engage employees who value and exhibit these behaviors.

The ringing of her phone shook Martha out of her reverie. Refilling her coffee cup, she headed back to her office. She was ready for whatever the day would bring.


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