Care Transformation Center Blog

Why some care management frontrunners are losing money and losing steam

Over the past few months, I’ve been hearing from some early adopters of care management who are having a harder time than they expected making their efforts financially viable. In certain cases, these care management frontrunners are reconsidering their strategy altogether, pulling back from their ambition to manage care across the continuum—at least for now.

I won’t reveal their names, but these are health systems, accountable care organizations, and large physician groups that my colleagues and I have profiled in the past, organizations whose names you would recognize.

What's going on here? Is health system-driven care management in peril?

A warning sign, but not an emergency

At a high level, the reports I’m hearing should be a warning sign for care management programs, but we don’t see them as a cause of undue alarm. Over the past few years, health systems and physicians have been investing in care management capabilities, in large part in response to financial incentives that make them more accountable for outcomes, not just services.

All signs suggest that those incentives are, if anything, intensifying and accelerating as time goes on. Without care management capabilities, health systems will be hard-pressed to succeed in pay-for-performance programs, shared savings contracts, and other types of total-risk contracting.

And yet some frontrunners are definitely running into trouble.

We surveyed 180 organizations on their contracting, investment, and care management infrastructure strategy to see where providers are on the path toward population health management. Here's what we found

Contracting woes

One reason is that these providers expected to be able to secure enough value-based payer contracts to offset their investment in care management.

In certain markets, payers have been slow to agree to value-based contracts—sometimes because they’re unsure of the payoff (honestly, many payers don’t believe that health systems are capable of—and committed to—population management); sometimes because the dynamics of the market allow insurers to benefit from investments health systems are already making without expressly reimbursing them; and sometimes, as my colleagues Laurie Sprung and Eric Passon have written, because health systems haven’t successfully made the case.

The experience of these contract-challenged frontrunners is a good reminder that even knowledgeable, well-organized care transformation leaders can time the market wrong—and that ongoing conversations with payers, expanding discussions to include employers, conservative financial projections, and an incremental care management investment strategy are important to avoid overreaching.

But most of the struggling care management programs I’ve spoken with are having just as much trouble with the execution of care management itself as they are with value-based contracts.

Care management efficiency elusive

Even the most progressive care transformation leaders are reporting that in practice, care management remains troublingly inefficient. They report duplication of resources across sites and across the system. They tell stories of resource-intensive point solutions to address particular disease states, such as diabetes or CHF, where a single unified care management infrastructure would be far more effective. And they are still having a hard time matching resources to tasks, and fear that they are using expensive labor where less-skilled and less-expensive workers might be equally effective.

To be honest, I’m not completely surprised to have heard these perspectives. Physician practice-based models such as the patient-centered medical home have an important place in care management, but they can’t be the entire solution. Over the past few years, we have recommended that health systems invest in centralized care management infrastructure to scale and coordinate across inpatient, outpatient and physician practice settings and deploy care management resources appropriately to patients depending on their level of risk.

Some health systems are still working on the basics of care management, and their initial efforts often begin with limited and decentralized solutions. But it’s instructive to hear even the leaders of the most advanced care management organizations saying that they have not centralized enough.

What we’re also finding is that while organizations may have set up care management functions, they have haven't changed the internal incentives to encourage population health management effectiveness and efficiency—whether that’s rewarding post-acute providers to provide lower-cost care, or changing physician compensation models to reflect population health outcomes as they take on more risk.

The insights you need to see population health ROI

We're deconstructing the most successful care management initiatives to identify the ingredients that make them financially viable. Health Care Advisory Board members can hear our findings at our 2014-2015 national meeting.