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New Model Helps Find Missing Link Between Financial and Clinical Health Care Management: Population Health Value Model targets patient health and cost control. (Informatics).


U.S. health care is missing a link between the financial managers and clinical health managers of defined patient populations. Utilization and cast management try to bridge the gap by focusing an restricted access to care or tightly managed provider reimbursement to control casts. But frequently, they do not take clinical outcomes or health status into consideration. Take a look at another method based an the science of epidemiology that brings a mare balanced knowledge of the clinical world to financial managers and mare financial insight to clinicians.

Consumer dissatisfaction, provider unrest, rising claims costs, higher premiums and employers upset by the costs of employee health benefits are all signs that the current model of health care management -- based on resource and financial restrictions -- is in its death throes.

This model created a chasm between clinical decision makers and health care finance decision makers. There was little apparent common ground between the goals for health care and how to control the related costs.

Under this restrictive model, there is little real opportunity to align decision making of these two groups other than some financial-based attempts such as provider capitation or risk assumption.

The financiers want to control health care costs. They need to ensure that health care benefits will continue to be available to their customers and simultaneously hit organizational financial goals and make a profit.

They believe clinicians should be accountable for the financial aspects of their clinical decisions.

Clinicians say the health of their patients is their top concern. They claim financial restrictions can adversely impact the ability to provide appropriate care.

These groups commonly converge in the area of provider contracting and utilization management. Providers dislike these standard managed cost initiatives, financial managers feel they are necessary.

In spite of the intentions of the early theorists of health maintenance to merge health and finance, the two groups essentially remain at odds with each other. Because of the two seemingly disparate focuses and strategies, the patient is frequently caught in the middle and left wondering who has their health interests in mind.


The results of all the cost management efforts aren't sterling, even from a financial perspective.

Though health care costs were controlled for several years over the past decade, they are on the rise again as this model becomes increasingly less effective. The failures include wholesale premium increases and increased provider refusals to accept reimbursement strategies. Provider unrest with health care finance is probably at an all-time high.

And what of the patient's health?

It is still unclear if a patient's health is even considered as part of the current approache, let alone monitored and measured to determine the impact of various health care management strategies.

From the health perspective, accreditation organizations like the National Committee for Quality Assurance attempted to make their mark. Their goal -- with sponsorship from large employer groups -- is attempting to assure quality of clinical care in the managed care arena.

However, these kinds of efforts are often marginal to the business, are not integrated into the overall financial strategy and fail to adequately demonstrate improved clinical outcomes. As a result, they are treated as a necessary evil.

Common health indicators, such as the NCQA's HEDIS metrics, are certainly monitored, however, the results are not typically used to assess financial impact of certain clinical or financial strategies.

* Have short-term health management strategies resulted in longterm deterioration of health and increased costs?

* Has anything proactively been done on a large scale to effectively maximize and maintain patients' health?

* If anything was done in an attempt to maximize and maintain the health status, were the results ever measured and monitored for both clinical and financial outcomes?

Unfortunately, the answers to these questions generally appear to be "no."

In addition, results are unclear because, in most cases, there is never consensus on how to define "results." Were they clinical results or financial/utilization results?

Bottom line, there doesn't appear to be much in the way of hard, codified results -- only opinions that vary widely.

'Perverse Incentives'

An example of this friction can be found in the recent Institute of Medicine report on quality in a section that explored how excellent care improved HbAlc screenings in diabetics and higher immunization levels among those at risk for community acquired pneumonia.

The title--"Perverse Incentives"--illustrates the wide gap between clinicians and financial managers.

Great clinical successes led to measurable improvements of population health and a reduction of health care expenses. But profits of the success went to the managed care organization, not the providers. (1)

If the story was published in a book for managed care financial managers, it would be viewed as a great success in reducing expenses and increasing profits.

Shouldn't profits of an ethical strategy (clinical or otherwise) to reduce utilization be allocated more fairly?

Finding common ground

Here is a conceptual model of how things could work if the financial and clinical sides could find common ground.

The figure suggests that both the clinician and the financial manager are after the same thing, a reduction in utilization and resource consumption.

In the example, "admissions" is the metric. 'There are strategies for reducing admissions (called "inputs") and consequences of such a reduction (called "outputs"). Unfortunately, these are often at odds.

The figure shows input lines of financial and clinical strategies leading to a utilization metric. It also shows output lines leading from the utilization metric. This conceptually represents the consequences or rewards of the input strategies.

Starting at the base of the figure, the input line represents financial strategies to reduce costs related to a utilization metric.

The kinds of strategies employed in the financial world are rate-based contracts, medical necessity-based denials and indirect financial strategies like case management. (2)

At the top left of the figure is the input line representing clinical/health strategies. The direct goal of any clinical strategy is to optimize health through proper diagnosis and intervention.

Interventions can be direct (surgical, medical, compliance with drugs) or indirect related to prevention (immunizations, screenings). In the aggregate, these strategies should, broadly, lead to a reduction in admissions or a decrease in health services provided with an admission.

Clinical or financial strategies can both reduce costs. But there is no common language between financial and clinical managers.

It is up to the clinicians to help develop the common language. The dotted line in the figure represents that language; it comes from the discipline of epidemiology, a science dedicated to understanding factors that influence the health of populations. (4)

Population Health Value Model

The Population Health Value Model (PHVM) developed by the authors is based on epidemiological and clinical health management principles.

This follows the legacy of the 19th Century pioneers, John Snow, a physician, and William Farr, a statistician, as its goal is to understand health issues and suggest methods to improve those conditions. (3)

A key principle of the model is that clinicians care for individuals, but the evaluation of clinical effectiveness is based, in part, on improved health for populations. (4)

This is similar to how clinicians use results of randomized clinical trials (RCTs) to practice medicine. For example, we know RCTs provide strong evidence that a pill works on 40 percent of the patients. When it fails on one of our patients, we do not dismiss the drug as ineffective because it didn't work. We try something else.

Likewise, clinicians believe the results of population-based evidence are more powerful than the results of any given individual experience.

Financial leaders measure success on aggregate metrics.

Epidemiology can provide aggregate metrics -- metrics that start with the health status of an individual and are aggregated.

So we have an existing, but often unrecognized, common ground of aggregate metrics and can begin to discuss the mutual interdependence of the clinical and financial worlds.

The PHVM will align both groups to control health care costs while maximizing and maintaining patient health and customer satisfaction.

Health Status Index

The methodology depends on a health measurement tool known as a Health Status Index (HSI).

A HSI can be customized to measure health status for any selected population. It is created from information such as a patient response health status survey. This information can also be aggregated across any population to determine a population-level HSI.

It is not necessarily a single metric. More often, a HSI is any set of clinical metrics used to define the health status of a designated population. There is no need for a "one size fits all" HSI as, ideally, it should be customized to the population to which it is applied.

A HSI for the general population would look far different from a HSI for a population at risk for chronic diseases. Focus for clinical decision makers is on intervention strategies to improve the clinical indicators defined by a HSI.

Determinations regarding effectiveness of intervention strategies can be evaluated and a value proposition determined at the population level.

By measuring and trending the HSI, the longitudinal impact of intervention strategies can be determined. And by correlating the HSI with related costs, an effective mix of intervention strategies with the best HSI per unit cost -- or "health value" -- can be found.

The ability to correlate intervention strategies with HSI and financial outcomes is the missing link to align clinical and health care finance decision making.

There are no longer disparate goals but, rather, each side can more clearly understand the relationship of their respective areas of interest using HSI as a standard metric.

Patients are far less likely to feel caught in the middle because their health status is now front and center, with both clinical and financial health care decision makers attempting to maximize or maintain this metric.

Case study: Accordant Health Services

Accordant Health Services (AHS), headquartered in Greensboro, N. C., is a disease management organization that oversees the health of patients with one or more of 15 complex, chronic diseases.

The programs are based on a population health management model using regularly administered, disease-specific health status assessments. Individual results are aggregated to determine a HSI for a defined population of patients enrolled in the program. It's an example of PHVM principles in action.

The first step in the AHS system is defining the populations to be enrolled in the program. AHS does this population stratification at a disease-specific level and an aggregate population level.

Earlier data are used to outline the disease-specific resource consumption patterns and opportunities for clinical interventions for the populations. Intervention strategies are developed after determining which avoidable complications were most often related to resource consumption.

The strategies are managed to improve a selected set of clinical outcomes. Historically, this was done using a Delphi technique based upon expert opinions of medical advisors. The model was refined to utilize an epidemiological approach to assess population-level outcomes.

Patients are routinely assessed using a disease-specific health assessment tool and a personalized intervention strategy based on the menu of intervention strategies.

The goal is to manage current acute episodes and the disease-specific HSI that is defined for each disease.

Correlating this disease-specific HSI with patient resource consumption and health care costs helped define the health value of various intervention strategies.

In the AHS multiple sclerosis (MS) program, for example, intervention strategies are selected based on the ability to proactively intervene clinically and their relationship to a specified set of clinical outcomes (HSI).

Some outcomes selected to define the MS HSI include levels of functionality and depression/mood disturbance.

The outcomes program attempts to show relationships between:

* Intervention strategies

* Clinical outcomes

* Resource consumption

* Cost management

These are presented in an epidemiological and statistically based fashion at a population level.

Outcomes are measured longitudinally in a cohort study design. The metric is termed "length of time in program" or LOTIP Quarters. (5)

The longer a patient is in the program the greater the value gained. From the perspective of the patients, value is clearly better health.

The value from the clinical perspective is similar, better health that results from appropriate clinical management.

And from the financial manager perspective, the primary value is lower utilization, lower costs and justification for an outsourced disease management program. These graphics show the relationships between, clinical outcomes (Figures 2 & 3 and utilization metrics (Figures 4 & 5).

Clearly, the groups with less experience in the program show a higher admit rate--a symptom of poor health and high cost. It's in the best interest of all parties to focus on this group.

Interventions appear successful on all counts, and the overall admit rate dropped. The admit rate among those with depression-like ("mood disorders") symptoms dropped as well.

Through epidemiology, we see strong relationship between clinical issues and lower utilization, a marker for both clinical and financial success.

Without performing this longitudinal observational relationship review, it would be difficult to determine the health or financial value of the program.


The Population Health Value Model focuses on maximizing the health status of the patient.

It provides a Rosetta Stone for financial and health care decision makers to understand that their goals are common and can be accomplished by using this model.

Data capture, management and distribution are central to the ability of the model to function and the ability to manage data may be a significant value that managed care organizations can offer to the clinician in this model.

The clinician is able to manage patients more effectively with a better understanding and definition of the most clinically successful intervention strategies for patients.

The PHVM can be scaled to any size population and customized for any designated population. It is not presented as the panacea for solving the complexities of modern health care management, but rather as a model that offers advantages over existing models.

Acknowledgement: Accordant Health Services, Greensboro, North Carolina


(1.) Committee on the Quality of Health Care in America, Institute of Medicine. Crossing the Quality Chasm: A New Health System for the 21st Century. National Academy Press, Washington, D.C., 2001.

(2.) Kongstvedt, P.R. The Managed Care Handbook, 3rd edition. Aspen Publishers, Gaithersburg, Md., 1996.

(3.) Rosen G. A. History of Public Health, expanded edition. Johns Hopkins Press, Baltimore, 1954, 1993.

(4.) Wilson, T.W. 'Your Money or your Life" Jack Benny and Population Health Value Model. Wilson Research, LLC, Loveland, Ohio, 1999.

(5.) Wilson, T.W. "Length of Time in Program (LOTIP) Per Patient as Key Operating Principle in Determining Disease Management Program Value." Presented at AAHP Building Bridges Conference VII, Seattle, April 26, 2001.

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No portion of this article can be reproduced without the express written permission from the copyright holder.
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Article Details
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Author:Wilson, Thomas
Publication:Physician Executive
Date:Nov 1, 2001
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