Care Transformation Center Blog

How math makes population health more digestible

Our clients are at various stages of population health management. Some are currently doing nothing, because their region isn’t experiencing any change. Others are trying to lay the groundwork and plan for a transition, but there’s no significant movement. Then there are more progressive systems that either want to get ahead of the movement, or have competitive issues that necessitate risk-based contracts.

What we’re finding across these health systems isn't a need for innovation in clinical work. Clinicians are doing that.

What the health system needs now is to understand the math behind population health management. Or rather, what's the economic model that will support population health goals without depleting the fee-for-service business that drives margins today?

Understand your population targets

The first step to understanding the right economic model is to identify the right populations—or subsets of your whole population—to target. With that understanding, you can identify the resources you need to respond to the target populations, which includes organizing physicians and other caregivers around their conditions.

We were working with a client in the Southeast—a large health system that serves a population of over 1 million—that was trying to wrap its hands around population health management. We started with one of the most effective ways a health system can begin population health management, which is to look at its self-insured population. But we didn’t stop there.

After digging deeper to better understand and quantify the financial impact of a population health strategy, we discovered the system simply needed to focus on 3.2% of its self-insured population, or just over 400 individuals. That’s a much easier way to think about caring for a population of over 1 million people. When we presented these findings, the response was, "We can deal with that."

Learn how to identify which patients are at risk, why they are at risk, and who would benefit most from intervention. Read How to Prioritize Population Health Interventions »

The health system’s employees are an ideal starting point, because they’re already at risk for those lives and the data for that population is easily accessible. To identify the 3.2%, we leveraged paid claims data to get a comprehensive view of the issues facing the health system, and analyzed that data from a payer, patient, and provider perspective by integrating data on both hospital cost and utilization.

This provided insight into which percentage of the population was responsible for the majority of the health system’s costs. From there, we were able to identify the high-risk patients in that smaller percentage. Again, this exercise was completed on behalf of the employee population, but it was truly representative of the health system’s whole population.

Time your population health strategy

With the right population targets, you can project the financial impact of any demand destruction resulting from fewer inpatient admissions within those populations. That leads to the second objective of the math exercise: to pace the execution of your population health strategy based on what your health system can withstand financially.

The result of our math exercise was an opportunity analysis that showed the impact on the health system’s bottom line if it opted to transition at a slower pace or at a more aggressive pace. This way, the health system could determine when, how much, and where they could invest in developing the physician network, building the technology infrastructure, and adding the operational resources needed.

Impacting these smaller population health management targets lays the groundwork for demonstrating how effective your initiatives are. It showcases your value proposition to payers, employers, and patients who are scrutinizing performance more than ever before. That’s when you can begin negotiating risk-based contracts and reaping financial gains from your progress.

Negotiating for value-based contracts or risk-based contracts is new to many of our clients, and we do a lot of work to help them understand how to accomplish their value-based care goals in a way that is financially manageable.

Design your economic road map to population health

To learn more about managing the financial aspects of value-based care, download our four-step math exercise for population health.