Population Health Paradox around Cost Savings


The principle of population health is to drive down cost in healthcare by preventing disease states before they occur. The assumption is of course that we are delivering more care closer to the consumers. However the marketplace is seeing a decrease in hospitals nationwide and a void of primary care physicians. How do we drive long short term savings results within the constructs of population health when the forces of supply and demand are set to drive cost higher for the foreseeable future?

Population Health
Cost Control
Sean Kayea, MBA
6 months ago

7 answers


This is fundamentally untrue. The cost control elements of population health involve avoiding inappropriate utilization. There are VERY few example of preventative medicine or chronic disease management decreasing overall costs. Further, the majority of large-dollar avoidable costs are driven more by social determinants than anything else.

The single largest opportunity for cost savings is usually avoiding readmission after acute discharge. The folks most likely to be readmitted are those with weak social network support (like no local family). The second largest opportunity for cost savings is (usually) steering patents from ED to primary care, particularly in Medicaid populations who tend to have a difficult time getting to primary care.

Effective disease management is not primarily to decrease costs: It is to improve outcomes. Disease management and preventative medicine usually raise costs.

Tim Breaux
6 months ago
Disease management and prevention decreases costs of ensuring a healthy nation in countries that practice Primary Health Care, PHC, resulting in longer life expectancy. Since this is a social program of smarter governments, it is inclusive of all sectors of society without discrimination of socioeconomic standing. The mantra of the World Health Organization, “A healthy nation is a productive nati. - Apollone 6 months ago
I am reminded of the general economic theory called: "THE PARADOX OF THRIFT? - Dr. David E. 5 months ago

Agree totally with previous responses indicating that social circumstances can prevent early interventions and drive inappropriate utilization especially in economically disadvantaged and/or elderly populations. Another current and often unaddressed driver of inappropriate utilization is the opioid epidemic.

Agree with the original question about availability of doctors and hospitals as homes for DM programs as economic pressures will continue to drive hospital consolidation and capitated and/or risk arrangements will continue to force PCPs to shorten visits and see ever more patients per day.

Patients will continue to see ever higher deductibles and copays in their insurance coverages and these OOP costs can perversely encourage patients from seeking care until a condition is at a crisis.

Another challenge for the health care industry as a whole is data mining to produce valid actionable data and interoperable medical records that provide this data anywhere at any time.

I don't think the issue is all about availability of hospitals and/or primary care providers as much of the monitoring of high risk and/or chronic conditions can be done by nurse practitioners and can be accomplished in the home environment via remote monitoring and telemedicine. I expect that the technologies in this area will only improve and that the next generation will be more tech savvy and comfortable with these programs.

Jeffrey Baumeister, CHC
6 months ago
Well said. Reducing moral hazards, addressing the top 5 chronic diseases, and the last two years of life cost/benefit analysis will go al long way to addressing the current domestic healthcare dilemma. - Dr. David E. 6 months ago

We as a country currently enjoy the highest number per capita of physicians, but as a country we need to address the growth in several conditions that ultimately require seeking medical care. Early monitoring will help somewhat, better treatments will help, but as the population continues to grow, so grows the need.

Primary care is shifting to use of physicians assistants and nurse practitioners, and reliance upon them to fill the gap. It is unlikely the current structure of physician training will increase it's capacity and output to meet the demand, hence the continued reliance upon PAs and NPs for the foreseeable future. The distribution of physicians tends to favor metro centers which is not going to change.

Sandy Waters
6 months ago
Physicians who pledged to do what is best for patients and their families are the antithesis of EBITDA for the Hospital, Health Insurance, Pharmaceutical, PBM, Med Mal and the EHR industries. - Dr. David E. 6 months ago
Davidi agree with your statement but am hopeful in the future the choices for doing the right thing will be significantly more cost effective and eliminate much of the associated overhead. Eg one CRISPR treatment to eliminate diabetes, or one to avoid Alzheimer onset, reduces chronic life long treatments. - Sandy 6 months ago
CRISPR etc, MAY decrease individual incident costs in the future but WILL increase total costs in the aggregate as more incidents are covered. - Dr. David E. 6 months ago

Using a “Scorecard” to Assess Population Health Readiness 

So, how do hospital leaders break through the confusion and uncertainty to put their institutions on a clear path toward a successful population health-based future? 

An effective way for hospitals to manage this process is by using a “scorecard” based on industry benchmarks to assess their relative readiness for – or current performance in – adopting a value-based reimbursement model. 

The scorecard contains metrics that quantify the financial and volume impact on a hospital when it transitions to a population health-based reimbursement model. These metrics can be grouped into a range of key categories – i.e., top 5% high-cost patients, non- urgent emergency department visits, avoidable admissions, readmissions, physician overuse, outpatient procedures performed in lower cost settings, and proportion of one-day inpatient procedures done as outpatient. Hospital managements can address each of these categories in order to reduce per-member, per-month costs of care. 

For example, new risk-sharing models have created more impetus for physicians and health systems to work together to prevent avoidable admissions. In 2011 alone, potentially avoidable admissions accounted for 10-14 percent of total inpatient admissions for most hospitals. With the growing push to reduce avoidable admissions, an average 300-bed hospital could potentially lose $9.5 million in annual contribution, as they would no longer obtain volume/revenue from these avoidable hospitalizations. On the flip side, if a hospital doesn’t prevent avoidable hospitalizations, they would be penalized for these unnecessary visits. 

The emerging population health landscape has also resulted in hospitals experiencing growing competition from lower cost settings such as ASCs. Over the past decade, the number of ASC operating rooms has doubled. Historically, ASCs and hospitals shared in the growth of common procedures such as shoulder arthroscopy. But, with 60 percent of hospitals now within a 5 minutes drive from an ASC, and given the industry’s accelerating shift to population health models, ASC’s price advantage puts hospitals at a competitive disadvantage. 

The scorecard gives hospital executives the ability to accurately assess the financial and volume impacts of population health-based reimbursement models to their institution. This is critical in identifying opportunities for improvement, setting priorities, and making key strategic and operational decisions that will help guide a hospital through periods of great change and uncertainty.

Implementing the fundamental changes necessary to meet the historic challenges now confronting healthcare providers has been compared to swapping out the engines in a jet plane – while it is still airborne! As daunting as that metaphor sounds, hospitals can successfully evolve to the population health-based future if they take the right steps to plan for the changes and implement them in a methodical, data-driven fashion. 

Careful planning and practical assessment tools like the scorecard help hospital leaders make smarter strategic decisions around value-based healthcare.

What do you think?


Dr. David E. M
6 months ago
What happens to the reimbursement model when there is no need for surgeries and rehabilitation due to a non surgical treatment breakthrough? The reimbursements will drop as will the curative costs to treat one and done for chronic diseases like diabetes, heart disease, breast and other cancers as examples. - Sandy 6 months ago
Theoretically, you have a point. But, as a surgeon, dont worry - not in our lifetimes. - Dr. David E. 6 months ago

We need to look at both short term and long term cost savings. Decreasing readmissions and decreasing ED utilization are definitely good short term cost saving measures, but they are not a long term solution. In the long term, disease management and preventive medicine are going to be the tortises that win the race. Both of these strategies increase costs in the short term because we have not invested in the resources to do this work and the benefits are 5+ years down the road when the cancer, obesity, emphysema, complications of diabetes etc. are prevented. In our current payment and attribution models, it is risky to invest preventive medicine resources in a patient today, when the benefit is likely to be realized by someone else years down the road. An employer could definately benefit if they have a good employee retention strategy. A single payer model would definately benefit, which is why we see much higher investment in these types of strategies in countries with a single payer. But a provider in todays US market is gambling on retaining a patient for the long term.

If we do it right, and invest in preventive medicine and disease management, the two problems at the start of this post will solve themselves. We will need fewer hospitals and hospital beds and the "value" of primary care will increase and providers will gravitate to promary care.

Brian Patty
6 months ago
Unfortunately, MEDPAC is dominated by specialists. - Dr. David E. 6 months ago

I recognize that I am a bit of a skunk at the picnic, but the cost performance of disease management and preventative medicine has been studied quite a bit. With the exception of preventative measures in the first trimester (which can mitigate the risk of a very expensive delivery in the very near future) almost none of the interventions pay themselves back. It is worth noting that effective management of chronic disease usually delays the eventual adverse outcome, versus avoiding it (with rare counterexamples; juvenile asthma comes to mind). Further, assuming we delay mortality with effective disease management, it means there are a greater number of sicker people living longer. There is no health system cost benefit, either in the short term or the long term. There may be societal benefit (e.g., productive people working longer) but health system costs only go up. They go up two ways: There are more sick people at any point in time, and each individual has a longer sick path before death.

Again, we do disease management and preventative medicine to improve outcomes, not to decrease costs. Remember that the most effective cost management strategy is not to treat anything. That is highly cost effective.


Tim Breaux
6 months ago
AGREED: Well said. Reducing moral hazards, addressing the top 5 chronic diseases, and the last two years of life cost/benefit analysis will go al long way to addressing the current domestic healthcare dilemma - Dr. David E. 6 months ago

Once again, there is a fallacy of looking at this issue too narrowly and from a microeconomic lens. Let's look from a macroeconomic lens. Compare the US healthcare system with Sweden or any other single-payor macroeconomy where there is a stronger focus on and higher spend on disease management and preventive health. In Sweden, there is a strong focus on obesity preventive health, and the obesity rates are 10% vs. the 30% obesity rate in the US. Sweden also has a higher spend on disease management, and the cancer death rates are 115/100K vs. 133/100K in the US. There are also 3.3 primary care physicians per 1000 people vs. 2.3/1000 in the US. And people live an average of 4 years longer in Sweden. So by the argument above, the cost of healthcare should be more. Yet the per capita spend on healthcare in Sweden is almost 1/2 that of the US, $5500 vs. $10,000. You can see the same trend in any country where the spend on preventive medicine and disease management is far higher than the US, their healthcare expenditures are proportionally less.

Brian Patty
6 months ago
Hmmm. I don't think it is reasonable to use separate countries as cost frameworks for the economic value of disease management. We would need to compare US services with disease management/preventative care versus US services without. No one has demonstrated that disease management saves money (either at the individual level or at the population level). It improves outcomes. - Tim 6 months ago
Agree; thank you - Dr. David E. 5 months ago

Have some input?