PHM & APMs: What Comes First?

This blog/newsletter features an excerpt from an upcoming iProtean course featuring Dan Grauman from Veralon. Dan discusses the concepts and payment mechanisms that gained traction from the Affordable Care Act.


As is often the case during times of changes in health care, many terms and concepts are used. Population health management is conceptual. It’s an idea where you take responsibility in a more holistic way for all the care for a population. You can define that population in different ways.


On the other hand, accountable care organizations (ACOs) and bundled payments are actually payment mechanisms. These are specific, defined contractual arrangements between a group of providers and the Medicare program or a commercial insurer. These contracts dictate financial incentives, payment arrangements and provide incentives consistent with population health management.


Why Population Health?

Population health management has become important since the passage of the Affordable Care Act. That legislation set forth a clear mandate, a doctrine or incentive if you will, for hospitals and doctors to take greater responsibility for the care provided for the population.


Historically, because of the way our healthcare, delivery and financing system has evolved, it has become siloed and fragmented, especially where it’s highly specialized. But the needs of the entire population have fallen through the cracks. We needed to take a broader perspective about those needs and to coordinate care in a better way between hospitals and physicians.


The rate of increase in care costs has just been astronomical. Those who believe population health management is important are focusing on trying to improve the coordination, delivery and quality of care, while trying to abate the rate of increase in health care costs.


Alternate Payment Models

There are various payment models that hospitals and physicians are experimenting with, and that Medicare and other health insurers are experimenting with during this transition towards population health management.


Providers embracing the population health management concept have a keen interest in gaining experience with these different payment models, called alternate payment models or APMs. The options may be participating in bundled payment programs, in the ACO program, or what’s alternatively referred to as the Medicare shared savings program (MSSP), pay-for-performance programs where you have the opportunity to earn bonuses when you hit certain quality or clinical metrics or goals. Finally, the most difficult and most challenging is capitation—providing care for a person irrespective of what he/she will need over an entire year, and doing so under a fixed budget. However, there certainly are hospitals and doctors willing to experiment with capitation.


Just to clarify, ACOs are for all the care needed for a patient throughout the whole year, regardless of setting—hospital, doctor, outpatient, radiology—it doesn’t matter. A bundled payment program is really for a defined episode of care, typically around a surgical or an inpatient experience or procedure for a defined period of time—a few days prior to admission to the hospital and 30, 60 or 90 days post discharge. And global payment involves being paid on a per enrollee per month basis, completely disconnected to the services that are provided. And, of course, fee-for-service, the other end of the spectrum, is still with us and will be for a while.


During this transition period, where hospitals and doctors are experimenting with different payment models, as is Medicare, we are actually adding some administrative complexities, and requiring hospitals and physicians to have things in place they haven’t had before—coordination, information technology and the like.


Eventually, once we’re through this transition period and these payment models evolve and some of the shakeout happens—because they won’t all stand the test of time—it’s certainly anticipated there will be administrative benefits and savings and economies of scale. But I think we are a ways away from being able to conclude that that’s the case.





iProtean subscribers, the advanced Governance course, Committee Effectiveness, is in your library. This course features Barry Bader and Pam Knecht, who cover committee structure and task forces, ideal committee size and composition, independent members, the committee charter, information and reports, and committee evaluation.



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