Covid-19 has opened Americans’ eyes to a number of oft overlooked healthcare issues. It showed us how vulnerable our pharmaceutical supply chain is. It reminded us why we must start taking behavioral health seriously. It reemphasized the importance of addressing social determinants of health. And, perhaps most importantly, it forced healthcare leaders to see that there’s substantial risk within fee-for-service.
From a population health standpoint, the latter realization is hugely important. For five years, my firm’s annual State of Population Health survey of approximately 500 healthcare executives has found that providers are making very little progress toward improving population health – and in recent iterations, that that progress has altogether stalled.
Now, Covid-19 has brought us to a tipping point; soon after which we will begin to see different results.
While some say the unpredictability of Covid-19 argues against shifting toward risk-based arrangements, hospitals would be foolish to retrench and cling even tighter to a model they know – now more than ever – is dying. Indeed, in my firm’s recently released report, 99% of respondents predict their organization will have some revenue in models with upside gain and/or downside risk in the next two years. And that was before Covid-19 made its way to America.
The fact that we conducted our fifth annual survey not long before the pandemic began means that this could very well be the last report reflecting miniscule progress toward population health. It means that key findings from this year’s report warrant extra attention, as they are likely to become the baseline against which we measure inevitable near-term progress.
Specifically, the following statistics are most likely to change due to Covid-19:
1. Eighty-three percent of healthcare executives say population health will be “very” or “critically” important going forward.
The disparate impact of Covid-19 on the most vulnerable populations has highlighted the need for a population health management approach, so this number should quickly near 100%.
2. The involvement of healthcare organizations in housing and community development has increased significantly since 2016, but even so, less than 30% are working to address this challenge.
Shelter-in-place orders highlighted massive housing disparities that in many cases enabled community spread of Covid-19. Efforts to prevent this from happening whenever the next crisis strikes will become an even greater priority at the local level.
3. Sixty percent of healthcare executives say a significant driver of pursuing population health is an understanding that the “current fee-for-service model won’t last forever.”
We expect this figure to increase substantially. Many healthcare executives have clung to fee-for-service because they’ve perceived greater financial risk in models that make providers accountable for the cost and quality of care. But Covid-19 made two things clear. First, that relying on fee-for-service payment can be catastrophically risky, such as when demand for elective procedures drops unexpectedly. And second, that our current transactional approach to care is completely inadequate for keeping individuals and the broader population healthy.
4. Only 18% of healthcare executives’ organizations have more than 10% of revenue in capitated contracts.
The success of the few healthcare organizations that had capitated payment arrangements before Covid-19, allowing for some financial stability amidst widespread uncertainty, will prompt more organizations to create similar contracts.
5. The majority of healthcare executives say their organizations have less than 20% of revenue in alternative payment contracts.
In addition to capitated contracts, healthcare executives accepting that the end of fee-for-service is near will look to diversify their revenue base. Wise executives will see the writing on the wall. Rather than opportunistically pursue alternative payment arrangements at the margins, they will planfully engage in new payment models early to gain an experiential, competitive advantage over those who wait for the official order from the Centers for Medicare & Medicaid Services (CMS). (Twenty-four percent of healthcare executives who claimed to have experience with an alternative payment contract had “risk” that was upside only, meaning if they didn’t hit a particular target, they weren’t rewarded.)
So far, though under circumstances none of us could have possibly predicted, 2020 has been a year of accelerating change – the rapid adoption and expansion of telehealth tools is proof of that. Will 2021 be the year that progress toward population health breaks out of its recent rut? Only time will tell, but the not-soon-forgotten experience of Covid-19 gives reason to believe the answer is resounding “yes.”