“We’ve fully embraced value-based care,” we often hear from health system executives. “We don’t just measure inpatient admissions anymore—now we focus on ‘lives touched’.” Indeed, the proliferation of shared savings schemes, quality-based bonus payments, and the like has refocused traditional hospital leaders on a broader set of performance metrics.
But there’s some fuzzy math going on here. When we hear an executive boast that their system has “more than half our payments at risk”, our first question is, what kind of risk? A hypothetical, but very common, example, illustrates the point: if $100 of reimbursement has a $1 quality bonus attached to it, that’s often counted as $101 of “revenue at risk”. Nonsense!
As the lines blur between insurance companies and providers, and health systems aspire to move up the value chain, embracing risk for the health of the patients they serve, the real question shouldn’t be how many lives are under management, but rather how much management those lives are under.
Taking on greater responsibility for managing not just the total cost of care, but the total health of each individual patient, should be the strategic goal of systems looking to become fully “integrated”—depth matters more than breadth when it comes to managing care. That’s where the incentives really change, and decisions about what care should be delivered when, to whom, and how, become powerful drivers of a system’s economics.
We’d encourage health systems to fully embrace accountability for the health of their patients, and not to be satisfied with merely earning performance-based bonus payments.