The importance of home and community-based settings in population health management Nathan Cohen Dieter van de Craen Andrija Stamenovic Charles Lagor Philips Home Monitoring March 2013 Philips Healthcare 2 Furthermore, the new strategies require Executive Summary technologies to support health care providers in delivering population health. This paper is the first of a series of white papers that Philips has published on population health management. It provides a summary of the The Cost, Quality and Access implications of the health care reform on the financial risks being placed on healthcare Conundrum providers in the United States. It emphasizes Managing Chronic Disease the importance of the home and community- based settings in population health The growth in health expenditures is driven by management. In doing so, it sets the stage for multiple factors. One critical factor is the rising other white papers that describe actual incidence of chronic diseases, which the approaches to leverage remote health Centers for Disease Control and Prevention has management offerings for population health estimated now account for 75% of the cost of management. medical care. Patients with Chronic disease make up only 20% of Medicare patients yet account for 80% of expenditures. These Introduction patients have higher rates of unnecessary hospital admissions and take many Health care expenditures have been rising medications to manage their conditions. unsustainably across the globe. Alone in the Traditional fee-for-service payment models United States, for example, health care that pay for treatment transactions are ill- expenditures in 2010 reached $2.6 trillion, over suited for serving patients that require close ten times the $250 billion expended in 1980. monitoring and treatment tweaking and must Projected growth in costs will outpace growth be managed in a coordinated fashion. The in national income for the foreseeable future. traditional providers of chronic disease To curb these costs, the U.S. government has management, primary care physicians, only passed the health care reform bill that creates touch patients intermittently and rely on incentives for health care organizations to patients themselves to comply with care plans manage more health and financial risks for their and lifestyle recommendations. Patients with patient populations. In managing these risks complex chronic diseases and multiple health care organizations will need to adopt comorbidities may see on average 11 different population health management strategies at doctors a year, creating major challenges for home and in the community. These new communication, information sharing, strategies require a transformation in reconciliation of care plans and patient follow- organizational business models and attention up. to many new factors, including financial incentives, metrics, change management and Reducing Waste the importance of partnerships across the Another key driver of high health care continuum of care from acute care settings to expenditures is waste. A study from the long-term and post-acute care providers. Institute of Medicine found that roughly 30 Philips Healthcare 3 percent of health care spending in 2009, around in a hospital or physician office are insufficient. $750 billion, is wasted due to unnecessary or Providers must build the capabilities to monitor poor quality care and a general lack of patients and proactively intervene wherever coordination between providers. The report they reside. Health systems must finally close acknowledges that no single solution can the last mile of relationships and extend their eliminate this waste, which stems from reach into patient homes. However, providers excessive complexity, a lack of accountability must also avoid adding to the overall cost of and insufficient information exchange in care by applying population management addition to other drivers. Rather, the report interventions inappropriately. To be successful, recommends that new incentives are required providers must have data on the status of the to increase accountability and foster a patients, risk scores to cost-effectively target continuous improvement culture focused on interventions, and technology to proactively longitudinal patient outcomes. In addition, all intervene and coordinate care. participants in the health care system – patients, doctors, hospitals, health systems, New versus Old Payment Models long-term and post-acute care providers, Reducing health care expenditures will require insurers and government agencies – need to major changes in care delivery. To spur action, have usable information available to make health care reform is pushing public and private informed decisions. payers to adopt new payment models that encourage providers to innovate. Rather than dictating how hospitals and doctors should Changes in the Health care deliver care, payers are creating the incentives Landscape and fostering an ecosystem under which providers have the freedom to choose the best Payers are Shifting Risk to Health solution for their specific markets and Care Providers organizations. This approach is a distinct differentiator from a past cost reduction Health care reform in the United States brings attempt: Health Management Organizations about dramatic changes: foremost health care (HMOs). Under HMOs, insurance companies or providers will increasingly carry financial risk in third party organizations dictated limits on a managing their patients. While historically patient’s care plan. Current initiatives put the providers have been reimbursed for delivering burden on providers themselves to create cost- discrete services, payers are now incentivizing effective patient management strategies that providers based on the quality of outcomes and produce better outcomes. Furthermore, in the satisfaction of the patient, which contrast to the HMO model, current initiatives necessitates longitudinal patient management give patients the freedom to choose their and coordination across care providers and provider. This freedom to choose providers is a settings. In order to meet these new incentives major challenge for organizations, which are and expectations, providers must innovate now becoming accountable for the health of a ways to manage the cost and quality of care for population, because while care provided populations of patients. Traditional care outside of their network is not in their control, models that treat patients only after they arrive Philips Healthcare 4 it will affect the overall outcome and Challenges in Adopting New consequently the incentives they receive. Health care Initiatives Opportunity: Incentives Designed to Prior to realizing the benefits of the care Spur Innovations in Care Delivery delivery innovations, health care organizations Under health care reform, the Centers for are likely to face several challenges: Medicare & Medicaid Services drive innovations • in care delivery through a variety of initiatives Financial Challenges : In order to meet (Table 1). Some initiatives are imposed on all the demands of managing risk, providers, such as readmissions penalties, while organizations are likely to face costs for others are voluntary, such as forming consulting, systems, care managers Accountable Care Organizations (ACOs, see and information technology (IT) Table 1). Organizations must not only infrastructure and staff. • understand which initiatives they will adopt, Cultural Challenges : To be successful under new incentive models, but they must engage in strategic and organizations need to have the mindset operational redesign to create care delivery of cross continuum and cross-site models that drive financial and clinical results collaboration as well as patient based on these new incentives. This may entail empowerment. Without strategic forging strategic partnerships between acute partnerships and effective change care providers, such as hospitals and physician management strategies, there might practices, with long-term and post-acute care be resistance to new business cultures. 1 • Operational Challenges : For any (LTPAC) providers. Furthermore, the changes incentive model to succeed, data needs in the reimbursement system put a strong to be shared across diverse care emphasis on patient satisfaction and quality of settings. Chronic communication service. Organizations will therefore monitor disconnects among inpatient, and analyze satisfaction, quality, and outcome ambulatory, long-term and post-acute parameters. The results from analyzing data care settings, including hospice, as well will ensure iterative improvements in the as communication breakdowns between insurers and providers could delivery of care, while at the same time hinder efforts to provide more efficient containing or reducing costs. care. • Legal Challenges : Many providers, including former competitors, may pool resources to create accountable care organizations to improve quality of care potential, but doing so could spur an antitrust investigation. 1 Long-term and post-acute care providers include skilled nursing, rehabilitation, assisted-living facilities, continuing care retirement communities, and home-health or home care agencies. Philips Healthcare 5 Table 1. Cost reduction incentives, related initiatives by the Centers for Medicare & Medicaid Services (CMS) and estimated financial opportunities Incentive Models Example CMS Initiatives Estimated Financial Opportunity Direct payment Medical Home. Primary care physicians that