Healthcare delivery is experiencing transformational change through population health management (PHM). It’s no secret that healthcare spending has grown exponentially, and spending is concentrated, as just 10% of patients account for 66% of healthcare costs. In an attempt to control costs, efforts are underway to identify and manage the most costly patients, and reimbursement arrangements are shifting from volume-based to value-based. These shifts are the underlying themes of PHM, and it’s changing how care is delivered, how providers are incented, and how results are measured.
Providers are aware of the concept of population health management and many have strongly embraced it—including hundreds of major hospitals and health systems across the country which have formed accountable care organizations (ACOs) that typically involve some form of risk-sharing and/or shared-savings arrangements. Yet few are fully prepared to implement population health management. In general, while providers see PHM as the future, they currently lack essential tools and capabilities to prosper in this new environment due to the complexity and novelty of this approach to care delivery.
To assist providers in implementing population health management, an entirely new ecosystem of solution providers is rapidly developing, with emerging companies in areas such as population analytics, provider risk contract management, quality measurement, and patient engagement. To support population health management, we see significant and sustained growth in multiple segments.
This report highlights changes in healthcare delivery taking place, new opportunities that are emerging, and specific segments where growth and consolidation are likely in coming years.
Improving the health of populations calls for population health management—a new care model that aims to keep communities of patients healthier through collaboration among providers, reduction in expensive interventions, tests, and hospitalizations, and more active involvement of patients in their own wellness. The PHM approach to care aims to reduce cost of care for the entire population, and ultimately encourage preventative health and optimal clinical outcomes. The concept of “PHM” has been increasingly discussed and implemented over the last several years. Stax defines "Population Health Management" as:
"A shared-accountability arrangement between healthcare delivery systems wherein providers have financial incentive to manage, measure, and optimize medical outcomes for a designated population at the lowest necessary cost."
PHM requires infrastructure and advanced IT systems that were not available 20 years ago. When the concept of capitated payments was introduced in the mid-1990s, capitation efforts were not as successful as intended, largely due to unpreparedness and lack of necessary data and technology required to make the model work. Whereas capitation in the past entailed essentially no more than a contractual agreement, today’s population health management requires fundamental reengineering of the care delivery model. Proactive interventions, care coordination, and patient engagement fueled by data will serve as the foundation of this redesign. Today, healthcare delivery systems have access to better technology, “big data,” and advanced analytics that enable providers to strategically coordinate and provide the right care, at the right time, to reduce costs.
Stax believes the accelerating growth of ACOs and the overall trend towards population health management will create significant opportunity for population health support solutions, advisory services, and healthcare IT vendors. The market for PHM solutions today is highly fragmented. While there are a number of players in the space, many offer solutions tailored to health plans, as payers have traditionally been the bearers of risk, or niche point solutions for providers. We believe there will be a significant increase in demand for PHM solutions among providers and employers, in addition to payers.
The market for PHM solutions is substantial and growing quickly, with an influx of new entrants. The following are snapshots of PHM capabilities required. Within each segment there is growing demand for third-party solutions and services:
Stax has identified a number of specialized PHM vendors—offering technology, analytics, and consultative services—that are well-positioned to grow in this space. Vendors currently in the market with PHM offerings come from a variety of backgrounds, such as HIE, RCM, EHR, clinical point solutions, and claims-centric solutions. This market is in its early stages, and Stax expects the market will grow significantly over the next few years.
Demand for PHM solutions will grow as population health covered lives increase. Providers express desire for a “bundled” PHM solution—but healthcare executives planning to implement PHM solutions realize that in today’s market a comprehensive PHM solution would be extremely expensive and they may need to work with multiple vendors for specific capabilities (e.g., one vendor for risk analytics, a different vendor for patient outreach, a different vendor for data warehousing, etc.). Stax expects over time that the players in the market will consolidate to some extent such that individual vendors will eventually offer more complete PHM solutions—much like we have seen over the last decade in the RCM (revenue cycle management) space.