Improving the effectiveness of population health

50% of state health commissioners believe that their programs continue when they should have ended.?

While this statistic applies to broader programs, I can tell you that it certainly also applies to their population health programs.

We have an effectiveness problem in population health right now.

And it’s a problem we caused. In good faith and with great intentions, over the past 10 years we rushed to improve our healthcare system. With the concepts of value-based care, capitated contracts, getting better outcomes all being center-stage in the healthcare industry, this became our obsession.

But do you know the story of the lady who swallowed a fly? She swallowed a spider to catch the fly. Then she swallowed something else to catch the spider?

The solution to the problem has become a problem itself.

We expanded population health efforts to fix our poor value in medical spending. Now, population health has, in some ways, eroded that value even more. We've increased our spending without a return on that investment or outcome. That doesn’t mean all population health spending has been inefficient.

It just means we don’t know and we don’t have a way to think about it.

We don’t know if our population health spending is effective

There are two significant problems that are complicating the solution to this issue. First, we don’t have a common definition of what population health is. Second, we lack a consistent, reliable way to quantify costs. They are not available for analysis.

How is population health management defined by different people?

So what exactly is population health management???I had to do some research and exploration before I could come up with my own definition.

Despite the term’s widespread use, there is no single, clear, agreed-upon definition.?

I started my research in looking at what CMS had to say. In 2015, the leadership of the Centers for Medicare & Medicaid Services (CMS)?described ?PHM as:?

both a clinical perspective focused on delivering care to groups enrolled in a health system and a broader perspective that focuses on the health of all people in a given geographic area and emphasizes multi-sector approaches and incorporation of nonclinical interventions to address social determinants of health.

The two components of that definition are what cause a lot of confusion. On one hand, the definition points to a clinical definition. It is the care delivered to groups enrolled in a health system. "Enrolled" can be an odd word for many providers to conceptualize because no one technically enrolls in a health system. The other definition is about broad health in a geography. I don’t find that this definition provides much clarity to me and has more to do with a public health definition of population health.

I found a different definition that more fits an operational perspective of population health. It defines population health by its outcomes. The outcome is to reduce excessive spending on care to produce a health outcome. This is where population health and the value of care start getting intertwined.?

A NIH metanalysis of healthcare spending found that many studies saw wasteful medical spending as a problem in healthcare. That’s not shocking or insightful.

However, what was the analysis did uncover was that the definition and the amount of wasteful spending were inconsistent. There were three sets of estimates that ranged from $600B all the way up to estimates of $1.9T per year. But almost all studies could categorize interventions into 6 categories:

1. Clinical inefficiencies - time-wasting practices in healthcare. They do not improve patient outcomes. Inefficiencies can include unnecessary tests, delays, poor communication, and redundant paperwork. They raise costs and lower care quality.
2. Missed prevention opportunities - When healthcare providers fail to act. Their actions could have prevented illness or complications. This can include not providing vaccines, screenings, or advice to reduce disease risk. This may worsen health and raise healthcare costs later.
3. Overuse in healthcare - Providing unnecessary medical services, tests, or treatments. They are unlikely to benefit the patient. This can raise healthcare costs, harm patients, and waste resources without improving health. Examples include prescribing antibiotics for viral infections or performing unnecessary imaging tests.
4. Administrative waste - Refers to inefficient processes. They do not help patient care but raise costs and complexity. This can include excessive paperwork, redundant billing, slow claims processing, and complex regulations. Administrative waste takes resources from patient care. It raises costs without improving quality.
5. Excessive prices - They are much higher than the cost of production or the market value of medical services, drugs, or procedures. These inflated prices raise healthcare spending and limit patients' access to care. This drives up costs for individuals and the healthcare system.
6. Fraud and abuse - Dishonest practices that lead to improper profit or misuse of healthcare resources.

Of these, only the missed prevention opportunities fit my view of population health.

So let me sum up my definition of population health.

Population health is the aim to improve the health of large groups. It does this by tackling broad health issues and promoting prevention. It aims to prevent disease, slow its progression, and improve wellness. It does this through efforts shared by healthcare providers, individuals, and the public.

So what do we mean by measuring effectiveness?

We have defined population health. Now, we must measure its effectiveness. I’ll go back to my definition: producing the most health for the costs associated with it.

That means we need to have a way to measure the cost of population health.

The costing discipline of healthcare has eroded. It's like when we moved away from cost-based reimbursement, we forgot that cost is a key measure in healthcare policy. Let me give you a couple of examples.

• The method of the Medicare Cost Report hasn’t modernized to keep up with modern thinking in medicine. It still examines healthcare providers through the same operational lens as decades ago.
• We don't ask physician groups to submit cost reports. Often now, they are large corporate entities. Because of this, we have no idea what the cost of the activities they perform is.
• Most federal, state, and commercial payment policies build on revenue. They assume that if they control revenue, they will also control costs.

I like this video to explain it. But, if you're not patient enough to watch it, we are referring to cost-effectiveness. It means finding which interventions give the best value for their costs. The value that we are referring to here is the health of a broad group of people.

The thing is, measuring effectiveness is a tough problem in healthcare. The World Bank is another group that has struggled to measure its effectiveness. If an organization that large has a hard time figuring it out, what are smaller organizations and policymakers to do?

https://www.washingtonpost.com/archive/national/2009/05/01/some-world-bank-health-programs-ineffective-report-says/2af079f9-04ed-4f0f-a71d-d37f1b238b34/

We need to do activity-based costing of population health

The solution to this is to do activity-based costing for population health.

Activity-based costing (ABC) is an accounting method. It identifies and assigns costs to specific activities within an organization. ABC assigns overhead costs based on a systematic analysis of products or services. It traces resource use by identifying the activities that contribute to overhead. It then assigns costs to products or services based on their usage of these activities.?

The process can be complex, but I’ll break it down in a simple way. Here’s how it works:

1. Identify Activities: Break down the organization’s operations into individual activities that incur costs (e.g., nursing care, information technology).
2. Assign Costs to Activities: Determine the cost associated with each activity, including labor, supplies, and overhead.
3. Determine Cost Drivers: Identify the factors that cause the costs for each activity (e.g., patient days, number of lab tests processed).
4. Allocate Costs: Assign the activity costs to products or services based on their consumption of each activity, using the identified cost drivers.

ABC better reflects the true cost of producing a product or delivering a service. It does this by recognizing that different products consume resources at different rates. It is common in industries with high costs and diverse products. Examples are healthcare, manufacturing, and services. This method helps organizations by revealing their true costs. It improves pricing, product mix, and processes.

How could activity-based costing work for population health?

Using the framework of steps from above, I’d like to share how I think about this in the context of population health.

Identify Activities

Of all the steps, this may be the most difficult. It is the only part of the process that requires expertise in population health. Also, it is where you will have to lean on the definition that we created above. If you are a payer or a provider, that should be simple to understand. If you are a state government, you may need to survey the organizations. This is to understand what it means to each of them.

Categorize the services into groups

Try to limit to 5 or so categories. There’s no magic to five. However, based on my experience, focusing excessively on details at the start will hinder the completion of your task. If you need a list, here’s what I’d start with.

• Prevention services
• Chronic disease management
• Behavioral and mental health services
• Health information and data services
• Health promotion and wellness
• Primary care and access to healthcare
• Infectious disease control
• Infrastructure

Define the activities of the services

That means identifying what is involved to complete the task from the beginning to the end of the service. You should ask yourself, what is the trigger that starts the process? And then, when do you know that it is complete? That is one unit of service. Unfortunately, no standards exist to rely on. (This could be a good project for CMS or state governments.) You must use your best judgment to determine what can be counted and maintained with minimal effort.

Each category should contain the service units needed to complete them. For example:

• Prevention services - Number of screenings
• Chronic disease management - Patient encounters
• Behavioral and mental health services - Patient consultations

Assign costs to activities

You’ll use your general ledger to assign direct costs to the activity. The questions that you’ll ask yourself is:

1. Who are the people involved in completing the process? Does it take all their time or only a part of their time?
2. What equipment or supplies do they use?
3. What services do we need contracts to support them?

There are more cost types involved. But the idea is to outline the direct costs involved in the process you outlined.

The second type of cost that you are going to identify is the support costs. People refer to this as overhead. It includes general expenses that support your service, but are not part of it. Examples include finance, HR, and IT. They could also be building costs, interest expenses, or insurance costs.?

Determine Cost Drivers

Determining cost drivers is important for projecting costs in the future. You want to split costs into two categories. One is for costs that change with the number of units of service. The other is for costs that don't change with those units.?

This categorization requires some judgment, which is important to understand. As the number of service units increases, all costs will rise. Yet, we seek costs that change more with increases in service.?

This is where your process maps will come in very useful. Consider, as you have to perform more units of service, where in your process your people’s capacity becomes constrained. The capacity to perform a unit of service is what you are looking to assess.

Allocate Costs

This is a last and critical step. You need to assign each of the services to a person or population. In health plans, this is often simple to complete by using enrollment files. Those enrollment files connect covered beneficiaries to the services that are being used. Health systems and state levels may need new data processes for this level of tracking.

The Path to Improved Effectiveness

Population health spending and management are now inefficient. We must fix this. We have an effectiveness problem. Programs have grown a lot. But we lack a good way to measure their value. No common definition of population health worsens the challenge. Also, there is no consistent way to measure costs. We need to adopt more rigorous tools, like activity-based costing. This will help us identify inefficiencies. It will also help us redeploy resources for the greatest impact.

Our call to action is clear. It’s time to measure the true effectiveness of population health initiatives. We must track and understand the costs and outcomes with greater accuracy. If you are a healthcare provider, payer, or policymaker, embrace this approach. It will ensure that health programs provide real value to the communities they serve. Let's commit to rethinking our approach. Let's invest in smarter, more effective solutions to improve health outcomes. The path to sustainable healthcare starts now.