Population Health Adoption Has Stalled, But Health Care Is on the Brink of Change

The writing is on the wall: Today’s health care system is antiquated and inefficient, and industry leaders can’t shy away from change.

Alongside local, state and federal officials, consumers and business owners outside the health care sector are demanding answers — questioning outrageous hospital bills and prescription drug prices, plus wondering why they pay so much for “sick care” that keeps them coming back.

Hospital systems are feeling the pressure. And though they understand that change is inevitable, the majority have stopped making significant progress toward adopting the payment models they know are the future. They’ve grown comfortable in the traditional fee-for-service system in which patients are charged for each individual procedure or service they receive.

So instead of accepting that fee-for-service is a thing of the past and moving toward risk-based arrangements that link costs to outcomes and hold them accountable, many C-suite hospital executives are clinging to their current business model. They’re hoping that all this talk of change will either blow over or take place long after they’ve retired.

They’re also under the impression they have time. The cancellation of the Centers for Medicare and Medicaid Services’ mandatory bundled pricing programs has only reinforced decision-makers’ reluctance to commit to alternative payment models. If government isn’t sufficiently committed to require providers to assume more accountability, why would hospital systems voluntarily take on such a radical transformation?

However, whether leaders like it or not, population health management that provides patients with the right care, in the right setting, for the lowest price is where health care is heading — slowly, but surely. Our fourth-annual State of Population Health survey shows this.

In our survey of over 500 C-suite industry leaders, we once again saw almost all respondents agree that population health is the future, and that in two years’ time, payment models with upside gain/downside risk will account for some of their revenue. Despite this, the median percentage of revenue in such models has remained the same for three years now — a mere 10 percent — falling short of respondents’ previous predictions.

We shouldn’t be surprised, nor discouraged by this lack of movement. Few people change unless they are either given some sort of incentive or are forced to do so, and executives remain extremely wary of assuming financial risk. They also view “difficulty in changing the organization’s culture” as a barrier to their adoption of risk-based arrangements, up three spots from last year’s report as their number-two barrier to implementation.

It’s no secret that brick-and-mortar hospitals are failing to meet 21st-century patient needs — everyone knows it, including health care leaders. And even though it would set them up for future success and sharpen their competitive edge, few are ready to discard the current model while it’s still throwing off cash.

So while some hospital systems remain reluctant to change, nontraditional players are seizing this opportunity to enter the health care market. In the last year, we’ve witnessed multiple disruptive events from such outside innovators — the CVS-Aetna merger and the announcement of Amazon, JPMorgan and Berkshire Hathaway’s joint venture are only two examples. These companies are laying the groundwork for new health care businesses that could leave traditional providers behind.

As public patience wears thin, consumers grow more receptive to innovations that promise to meet their medical needs appropriately and affordably — regardless of their pedigree. Health care leaders know that population health is the future, but to date, they’ve taken limited action on that understanding. Outside players will continue to turn up the competitive pressure, and in coming years, we will see which health care organizations rise — and fall — to the challenge.

Rita E. Numerof, Ph.D., is president of Numerof & Associates, a firm that helps businesses across the health care sector define and implement strategies for winning in dynamic markets.

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