The dominating healthcare payment model has been fee-for-service (FSS). FFS describes the arrangement where healthcare providers deliver a treatment or test to a patient in return for payment. The FFS model rewards volume and intensity of service so essentially the more admissions, testing’s, procedures and treatments a provider delivers, the more they stand to earn. The FFS model for health insurance does not give providers a reason to control health costs because the more services they provide, the more they get paid. The FFS model is widely accepted as an underlying reason for the catapulted costs of the healthcare system in the past 30 years.
For this reason, in recent years, major payers in U.S. healthcare systems have been exploring new payment models that create incentives to control the unnecessary healthcare spending taking place. The government and private payers are moving rapidly to value-based risk payments. Payments include rewards and penalties for system wide performance on population-based metrics. These metrics include inpatient readmission rates and preventative care for chronic conditions. Managing population health requires systems to reorganize care while integrating inpatient, outpatient, rehab centers and preventive care to achieve specific performance benchmarks. Systems must develop specific capabilities to manage on a population basis, including care coordination, integrating IT with analytics and integrating clinical networks.
The transition into a risk-based payment system will require new technical capabilities. Effective population health management will require that providers keep tabs on the health status and utilization of thousands of patients, and respond immediately when they need to request a service. It requires the ability to predict risk within a patient population so it can be managed with the necessary preventive and