Why the Pharmaceutical Industry Should Commit to Population Health
Our company has measured progress throughout the population health journey during 7 years. This progress has been painfully slow. While the pandemic has shed light on why we need a predictable revenue model in the delivery of health care focused on prevention and primary care, bailouts and bailouts have maintained a pay-as-you-go model. the dying act on sustaining life. Population health represents a real opportunity for providers to improve not only the health and well-being of those they serve, but also their own financial health.
However, and despite general agreement with this outlook among industry insiders, our research highlights that most vendors have yet to commit to a new model. Instead, the general theme has been blaming others for their predicament. At the top of the list is the pharmaceutical industry, which accounts for about 15% of total healthcare spending in the United States. While no one is blameless, a 15% solution to the health care problem is no solution.
At the macro level, the persistence of the status quo is not so difficult to explain. Healthcare organizations, in general, like fee-for-service. They have understood this and have upgraded their management and operating infrastructure to optimize margins.
Institutionally, most do not understand what it takes to be transparent, truly patient-centric, and financially accountable for cost and quality, as these ideas do not fit easily into a pay-as-you-go framework. ‘deed. As a result, most organizations have done little more than experiment with population health.
At the same time, industry players continue to be more concerned about healthcare spending. Payers, under fire from consumers and employers frustrated by unsolvable increases in premiums and deductibles, would prefer to see health care costs moderate. However, the consolidation of provider organizations across the country has improved survivors’ bargaining position, making it much harder for payers to push provider organizations to do what they don’t want to do. In the absence of clear solutions from the market, politicians are getting more involved in proposing new legislation, adding new layers of complexity to an already over-regulated industry.
In this context, the crucial question is: “How to resolve this blockage? The greatest burden falls on CMS, given its immense market and regulatory power.
As the nation’s first payer and responsible authority for approximately half of the nation’s insured lives, CMS has a vested interest in improving the quality and reducing the cost of care. This unique positioning allows CMS to push the industry toward concessions without fear of competitive backlash, which commercial payers rarely can do.
But, CMS is constrained by politics. Health care organizations across the country are often among the largest employers in their state, with a significant voice in state and national politics. Additionally, the AMA, AHA and other health industry representatives have made it clear that if political pressure is not enough, they will use the courts and any other means necessary to block efforts to change the rules. of the game, just as they are done with price transparency.
Therefore, CMS avoided actively driving the industry towards value and instead took a passive approach. CMS allowed healthcare inflation to outpace reimbursement increases for expensive hospital services and introduced specific policies such as site-independent payment practices to motivate providers to scale. Although this strategy has resulted in cost and/or quality improvements in some areas, there is as yet no clear indication of a fundamental change in the way health care is delivered in this country. Rather, CMS’s approach has resulted in simple cost shifting, where delivery organizations, leveraging their increased bargaining power, impose higher prices on commercial payers. And in turn, payers pass those costs on to consumers and employers in the form of higher premiums, deductibles and cost sharing, leading to even stronger consumer calls for change.
As evidenced by the rise of new industry entrants large and small, these calls are being heard by leaders outside of traditional healthcare delivery. However, the entrenched fee-for-service model proved too big of an obstacle for any of these innovative companies to convince incumbents to abandon the status quo. And until CMS is ready to show decisive leadership and disrupt this status quo, little is likely to change, and the ultimate losers will continue to be consumers.
In the wake of the pandemic, there has never been a better time for CMS to step in. Indeed, Covid-19 has taught many lessons, but the two most relevant to population health are: 1) Society as a whole is as vulnerable as the most vulnerable subgroup within it; and 2) When you sell what you make individually, if customers can’t or won’t buy, your income is zero.
People with chronic conditions and multiple comorbidities bore the brunt of the infection. Disadvantaged populations and many “essential workers” have had a disproportionate share of infections and deaths. And these sub-populations make it all the more difficult to control Covid-19. If a population health approach had been the organizing principle of the entire industry, we would all have been better prepared to meet this onslaught.
With the suspension of elective procedures, hospitals across the country have suffered a major blow to their balance sheets. Without government bailouts, many organizations would have been forced to close at a time when their services were needed most. On the other hand, those few institutions with large capitalized contracts could rely on predictable revenue independent of demand to remain solvent, but such organizations were few and far between.
For years, healthcare organizations have ignored the wisdom that all other businesses understand, that predictable recurring revenue is greater than transactional revenue. This neglect was made possible by a lack of leadership on the part of CMS, which chose political expediency over public welfare in its approach to regulating the industry.
Covid-19 is not the first pandemic to hit our society, nor the last. Will this experience be enough to convince leaders to adopt a population health approach?
Time will tell… And pharmaceutical companies that are committed to bringing life-saving medicines to patients have an important role to play in promoting a new model.