How population health management makes capitation the natural successor to fee for service

Guest blogger Rich Williams is a principal at the Advanced Plan for Health a national provider of population health management tools for employers, hospitals, healthcare systems, and health plans.

After years of academic incubation the concepts of population health management (PHM) have moved to the forefront in the delivery of American healthcare. The aggregation of clinical databases and the digital tools of “big data” have brought PHM to life. Rather than just data, we now have information.

Here’s how it works. PHM providers assemble clinical data from multiple sources to cover the clinical experience of patients in a defined population. This data includes claims, biometrics and other information including Health Risk Assessments. The data is then stratified by clinical and financial risk. This allows the sponsoring organization to identify its exact clinical and financial risk by individual. In the hands of PHM trained case managers and physicians the data is used to create and track interventions that help improve the patients’ health and reduce the risk of medical misadventure over time.

PHM tools are also used by medical directors to oversee and evaluate the clinical effectiveness of physicians in a value-based network that have contracted to care for a defined population. Such data was once the exclusive province of health plans and Medicare. Today employers can access population health management data to help direct and determine the effectiveness of their employee based health plans.

The growing availability and success of PHM tools has brought the concept of capitation back to the forefront in healthcare payment. Where fee-for-service could encourage duplication and even excess treatment, capitation produces the opposite effect. Capitation fell out of favor in the past because it was believed to succeed financially by suppressing care even when treatments were necessary. Combining PHM tools and capitated payments reduces the risk of withholding services as the accountability is swift and transparent. Given the new value-based contracts, the financial incentives among providers are fully aligned with identifying patients at risk in a population and providing them with timely and appropriate treatment.

No other form of healthcare reimbursement has so successfully combined the power of population health management tools with appropriate incentives. While we do see examples today of population health management being used in fee-for-service or bundled contracting circumstances, the true power of the tools becomes apparent when combined with capitated health plans. That’s why some of the brightest minds in health care now see the industry moving towards the combination as the natural successor to fee-for-service.

Reducing the temptation to do more to earn more, providers will do right, whether that involves more or less care. It’s a sea change and a change for the better.