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Population Health Management Necessarily Leads with a Loss

Karen Minich-Pourshadi, for HealthLeaders Media, April 30, 2012

"We fully expect that our revenue is going to go down." That's a statement healthcare CFOs are loath to make, but one that Kevin Vermeer, executive vice president and CFO at Iowa Health System isn't shy about saying when referring to his organization's population health management pursuits.

Population health management—achieving health outcomes for an entire group by addressing a broad range of factors that impact that group's health, such as environment, social structure, and resource distribution—will be important when the value-driven reimbursement model takes hold, but it's financially risky business for healthcare organizations operating under the current fee-for-service reimbursement environment.

Fact is, if patient populations are to be managed by hospitals or health systems, then these organizations must establish a medical home or accountable care organization, create risk-based contracts with providers and payers, and be financially stable enough today to withstand diminishing profits for several years until the reimbursement environment shifts to value-driven.

Iowa Health System, an integrated 26-hospital system headquartered in Des Moines, has taken the population health leap through the expansion of its existing ACO and is using a variety of methods to sustain its decision financially.

"Our [financial] approach is to say we are going to incorporate the ACO into our three-year planning process and set very realistic expectations around what we think will happen with revenue and volume," says Vermeer, noting that those expectations are based on the system's current expense run rate and current volume and the potential gap in revenue over the next two to three years.

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