While the threat of financial loss is the main reason organizations have not moved to risk-based models, the survey report says "COVID-19 has highlighted the inadequacy of a transaction-based approach to care."
While there is nearly unanimous agreement that population health initiatives are important to the future of healthcare, hospital and healthcare system executives say that organizations have failed to keep pace with anticipated progress.
According to The State of Population Health: Fifth Annual Numerof Survey Report, which was released this week, only 16% survey respondents have 40% of their revenue in risk-based agreements. Two years ago, nearly a third of respondents expected to meet that goal by 2019. "What lies at the heart of why healthcare hasn’t changed, is the fact that costs have not been linked to outcomes," the report says.
The survey of 500 C-suite healthcare executives was conducted between June and September 2019 by health strategy consultancy Numerof & Associates in collaboration with David Nash, MD, MBA, founding dean emeritus of the Jefferson College of Population Health, which is part of Thomas Jefferson University in Philadelphia.
This is the fifth year the survey has been conducted, and apparently, the crystal balls executives peered into in the past were overly optimistic. According to the report, in each previous year the survey was conducted, "respondents predicted a dramatic increase in the percentage of annual revenue that would be at risk in the next two years; however, actual progress has failed to keep pace with expectations.
The greatest barrier to progress is the potential for financial loss, the report says. Approximately 1 in 5 respondents cited the threat of financial loss as the primary reason they have not moved to a risk-based model. Other concerns include issues with systems like IT, tracking, and management (15%); uncertainty about when to make the transition from the current model (13%); difficulty in modeling the cost of care across the continuum (10%); and difficulty changing the organization’s culture (9%).
While the participants were polled before the pandemic, the public health crisis may be the driving force needed to accelerate progress, according to the report. "In its relentless focus on disadvantaged subpopulations and others burdened with chronic disease, COVID-19 has highlighted the inadequacy of a transaction-based approach to care," the report says. "Fee-for-service reimbursement reinforces an approach that is fragmented, provider‒ rather than patient‒centric, that has ignored social determinants of health, and that overutilizes and under-delivers as a result. This has created reservoirs of vulnerable subpopulations among the larger society, and we are all paying a price for that."
Rita Numerof, PhD, president of Numerof & Associates said in a news release, “Because of COVID-19, people are realizing that there’s just as much—if not more—risk in staying in an antiquated, fee-for-service model than there is in embracing an alternative. We expect to see the sentiments surrounding risk shift significantly next year, especially as awareness of providers’ success with capitated payments during the pandemic becomes even more mainstream.”
Other key findings include:
- Nearly all of respondents (94%) rated population health between “moderately” and “critically” important.
- Two-thirds of respondents said their organizations were “moderately” to “completely” prepared to be accountable for cost and quality, but when it came to managing cost at the individual physician level, only 35% said their organization was better than average.
- More than three quarters of respondents reported their organization was in at least one agreement with a payer that includes upside gain and/or downside risk.
- Two-thirds of respondents in risk-based agreements said that less than 20% of their organization’s revenue is at risk.
- Nearly one quarter of respondents (24%) in risk-based contracts had no downside risk, only the possibility of a “bonus” if targets were exceeded.
“The healthcare system that brought us to the edge of the abyss cannot be the system that propels us to the future; we have to transform the system,” Nash commented in the news release. “Transforming the system will require new leadership structures, and because of the pandemic’s increased attention on social determinants of health, we anticipate the role of the chief population health officer to evolve to the chief health officer.”
“The healthcare system that brought us to the edge of the abyss cannot be the system that propels us to the future.”
David Nash, MD, MBA, founding dean emeritus, Jefferson College of Population Health
Mandy Roth is the innovations editor at HealthLeaders.
In past years survey respondents predicted dramatic increases in the percentage of annual revenue that would be involved in risk-based contracts, but "progress has failed to keep pace with expectations."
Fears about losing money are the primary barrier to risk-based contracting, followed by issues with IT, tracking, and management systems.
The pandemic has showcased the flaws with the fee-for-service model and may accelerate the pace of population health initiatives.