Population Health Service Organizations: Managed Care Gets a New 4-Wheel Drive Vehicle To Navigate the Value-based Terrain

Richard G. Stefanacci, DO, MBA
Terri Schieder

The shift of risk to providers continues to grow as a means for managed care organizations to improve clinical and financial outcomes. This shift of risk to providers, along with a migration of more providers into hospital-based health systems, means health systems are fast becoming the provider entities that most often shoulder managed care risk. As a result, an increasing number of health systems have created teams within their organizations called population health service organizations (PHSOs). They are supplanting the management service organization (MSO) that gained popularity in the ’90s to assist practices with back-office functions so providers could concentrate on seeing more patients.

Richard G. Stefanacci, DO, MBA

Richard G. Stefanacci, DO, MBA

Terri Schieder

Terri Schieder

Value-based health care and payment is another reason for the emergence of the PHSO. Many health systems are using PHSOs as the vehicle to manage care through this new terrain. Value-based care imposes new requirements and obligations on health systems, making them responsible for the health and successful outcomes for populations, not just individuals. This new focus means that what we call health care has grown beyond what occurs in the confines of the traditional health care environment. Rather than taking place only inside the hospital or doctor’s office, health care has extended its reach—into the community, the neighborhood, and people’s homes. The MSO, which was designed and organized to improve provider efficiency by increasing volume-based revenue and limiting facility-based expenses, is no longer adequate. Value-based care is reshaping the health care landscape, especially for health systems. Many are using PHSOs as the vehicle to manage care through this new terrain.

We were involved in the early MSOs and now a PHSO. Although we are just now getting comfortable with the PHSO term, we are experiencing firsthand how today’s PHSOs are performing many of the same functions as traditional MSOs. But they have a different orientation, providing overall strategic vision and direction to internal and external stakeholders involved in delivering on the outcomes for which health care systems are now being held accountable. This accountability stems from both payers and patients holding health care systems responsible for improved clinical and financial outcomes. In some cases, health care systems have set up ACOs to take measure of, and manage, clinical and financial outcomes. But other organizational structures and methods are used, including clinically integrated networks, bundled payments, and percentage of premium-based reimbursement.

PHSOs should be the leaders in pulling stakeholders together to assess their community’s health needs and then, once identified, drive the process to fill those gaps. A community health needs assessment (CHNA) can help a PHSO take on that role and serve as an important jumping-off point for subsequent efforts. The ACA requires tax-exempt hospitals to create a hospital CHNA every three years, so the PHSO can serve as a lead organization for a health system’s CHNA.

With the CHNA as its guide, the PHSO can go about filling identified gaps in the health of the population the health system serves. Filling these gaps commonly involves addressing social determinants of health (SDOH), post-acute and home health services, and the use of care coordinators and teleservices. A coordinated effort led by a dedicated team under the PHSO stands a greater chance of succeeding than the often fragmented efforts made by most health systems.

The importance of addressing SDOH is highlighted by Healthy People 2020, which included the creation of social and physical environments that promote good health as one of its four goals. The World Health Organization is also emphasizing SDOH; a decade ago, it pushed Closing the Gap in a Generation: Health Equity Through Action on the Social Determinants of Health. There are also U.S. health initiatives, such as the National Partnership for Action to End Health Disparities and the National Prevention and Health Promotion Strategy.

Hospitals break out into the community

The Healthy People 2020 website includes a SDOH topic area that contains information on ways to create social and physical environments that promote good health. The website highlights an organizing framework reflecting five key areas of SDOH: economic stability, education, social and community context, health and health care, and neighborhood and the built environment. Research has shown that addressing SDOH can strongly influence clinical (and financial) outcomes for vulnerable populations. Despite this knowledge, sustainable financing for interventions that improve SDOH factors is not yet available. A recent article in Health Affairs argues that there is under investment in SDOH because such investments are, in effect, public goods, and the benefits cannot be efficiently limited to those who pay for them. As a result, capturing a financial return from these investments for health systems can be difficult. The article, drawing on lesser-known economic models and available data, showed how a properly governed, collaborative approach to financing could enable self-interested health stakeholders to earn a financial return and sustain their SDOH investments.

This is another opportunity for PHSOs, because these investments can be orchestrated through a PHSO. Some PHSOs are beginning to work directly with Medicare Advantage plans as a result of CMS expanding the kind of services that plans can offer. This expansion harkens back to a long-forgotten model for funding SDOH. Almost 40 years ago, the predecessor to CMS, the Health Care Financing Administration, developed the social health maintenance organization concept. Although it failed to gain approval for national expansion because it didn’t reduce costs, these social HMOs bear a strong resemblance to what some of the Medicare Advantage plans may look like once they start offering services that are not traditionally seen as medical. Some of the services that the Medicare Advantage plan will be able to offer include adult daycare, home-based palliative care, help with transportation, and home safety equipment, such as grab bars in the bathroom. Given that these tend to represent new offerings for health systems, the PHSO can be positioned to manage these services with an aim at improving population health.

Benefit for navigation

Beyond the identification of care needs through the CHNA and filling of gaps with regard to SDOH, PHSOs are also assisting patients in navigating the system and caring for their needs. The roots of the patient navigation movement that PHSOs are leading can be traced back to the 2001 President’s Cancer Panel report titled “Voices of a Broken System: Real People, Real Problems” to President George W. Bush. The report said that despite “profound advances” in cancer research, the health care delivery system is “the root of vast and unnecessary suffering, personal financial ruin, and loss of dignity for millions of people with cancer, who must fight their way into and through a dysfunctional system even as they struggle to save their very lives.”

PHSO-managed patient navigation services can assist patients with decisions related to something as complex as cancer care or simpler choices, such as whether to go to the emergency department or an urgent care center. Here again, these new services, managed through the PHSO, can drive health systems to improve outcomes for the population they serve.

Although health systems have historically focused on facility-based services, better clinical and financial outcomes are often possible through home-based services. The hospital-at-home models are on the far end of the spectrum; telemonitoring and visiting primary care services are in the middle ground. Still, these nontraditional types of new services need champions within a health system to thrive. The PHSO can play that role. Nontraditional services also need to be integrated into an overall population health strategy. Otherwise, they may be viewed as extraneous add-ons and suffer from lack of leadership, funding, or both.

In summary, in today’s value-based care environment the PHSO is emerging as the organization within health systems that can improve the clinical and financial outcomes of the populations the health systems serve. PHSOs can begin with identifying a population’s needs through a health system’s CHNA process and then go about filling gaps in health care. Often, innovative approaches are needed, including services outside those traditionally provided by hospitals, doctors, and other providers.

Richard Stefanacci is the medical director for population health for AtlantiCare/Geisinger, a health system in New Jersey and Pennsylvania. Terri Schieder is vice president of population health and business development for the health system.


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