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Driving Change from Within the Legacy Payer/Provider Model

The current payer financial model is a barrier to population health. What can providers do to address social determinants of health and transition towards impact-driven care?

Over the past serval years, it has become evident that health is not simply an individual matter. While personal choices play a significant role in wellbeing, there are external population-level factors that impact the health of whole groups. Despite this, the current payer financial model in US healthcare is not designed to facilitate population health.

Population health refers to health outcomes concerning a group of people rather than one person at a time.1 The vagueness of the definition is by design. Population health can vary between different organizations and groups. One thing, however, remains true across the board: population health is concerned with more than clinical diagnoses and treatments. Social determinants, like housing, addiction, childhood trauma, and systemic trauma, influence the health of people and communities. Understanding the health of a given population, including the broad range of non-clinical factors that affect the group, is a fundamental component of value-based, impact-driven care.

Our current healthcare system is unequipped for addressing social determinants of health and improving health outcomes at scale. Care providers are compensated solely based on the number and kind of appointments, tests, and procedures rendered, leaving no model of compensation for non-clinical health care and prevention.2 Moreover, the lack of health tracking data means that those affected by social determinants of health go unnoticed unless they visit a clinic and receive a formal diagnosis.3 As a result, the system maintains a myopic view of health with intermittent and disconnected capacities for care, which leads to an inability to understand the health of a population at large and create transformational changes.

We need a new system. But the reality is, we can’t throw away every model and process in use and reinvent the entire thing at the drop of a hat. Nor can providers wait around for systemic change while people’s health is at stake.

Instead, we need to make improvements within the preexisting systems and models of care.

Many providers are working to drive more ethical and value-based systems, but payers are resistant to change and slow to incorporate transformations that align with those outcomes.

The payer financial model is a significant barrier to population health. As it stands, payers compensate care providers on a fee-for-service basis. When a provider performs a specific service, like a test or procedure, they enter a code in the system that represents the service. Each code is associated with a monetary value based on several factors, including the average cost of the service. Care providers are then reimbursed for the services they provide.

There are two main problems with this model.

First, fee-for-service compensation doesn’t foster high-impact care. By compensating providers based on the services they provide, the model focuses exclusively on treating people with a clinical diagnosis, without incentivizing ways of preventing healthy people from becoming sick in the first place.4 Moreover, compensation doesn’t reflect the quality of service. The pay for doing a procedure well is undistinguished from the pay for doing the procedure poorly and potentially harming a patient.

Second, the code system doesn’t leave room for innovative or non-medical treatment options.2 With our current compensation model, only those services that have an associated code are covered. If there are emergent treatments, or non-medical treatments that can lead to positive health outcomes, the provider must pay out of pocket. Some do, at the risk of undermining the financial viability of their practice. Others don’t, preventing patients from accessing care options that may indeed be more impactful.

The only exception to this standard is an annual reimbursement that providers can seek for the alternative services they’ve provided.2 The provider organization is burdened with carrying the costs of those services until the payer evaluates the request at the end of the year. If, and only if, the payer approves those costs, does the provider get compensated for the services they provided and paid for throughout the year.

Care providers are burdened with the risk of instituting innovative care models and demonstrating their efficacy before the financial structure catches up. What then, can providers do to foster population health within a system that compensates their work primarily on a fee-for-service basis?

One of Concord’s health leaders, Madeline Bjorklund, developed a population health maturity model to help organizations navigate the transition towards value-based care within the legacy payer/provider compensation structure. The model categorically evaluates a provider’s population health systems, providing insight into what can be done to drive value-based care given the nuances of the provider organization and their population.

The model’s 32 components are broken into four main quadrants: organizational acceptance, alignment, and activation; population intelligence; managing the care continuum; and data and performance improvement. It helps organizations build on the work they’ve been doing to address social determinants of health, in a direction that aligns with their goals for high impact care.

Each quadrant speaks to the cultural, processual, strategic, and information technology shift necessary to facilitate value-based care despite the legacy payer/provider compensation model. It’s important to note, however, that just as there is no single way to evaluate population health, there is no single way to achieve value-based care. The care model that delivers the highest impact to a given population depends on the needs and circumstances of the population, as well as the current state and capabilities of the provider organization.

True value-based care is inherently bespoke.

The steps that can be taken by payers today are necessarily tailored to the specific provider organization and the population they serve.

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