11.1 Program Sponsors and Program Focus
Another way to consider program focus is from the perspective of the program sponsor. Programs sponsored by employers, as an example, target their employee population with a primary goal of keeping these employees healthy and productive. A disability
management program may serve these goals, but, depending on the identified needs of the employee population and the sponsoring employer, a catastrophic care management program may be of primary importance. If reducing risk and liability from workplace accidents and injuries is an employer’s priority, including a dedicated catastrophic care management strategy will be critical, whether or not a disability management program is also developed.
11.2 Vendor and Contracting Concerns
Population health management program development offers many opportunities to use outside vendors for services. Information systems companies may help to integrate existing information technologies or develop new linkage appropriate for population health management program use. Pharmaceutical firms or pharmacy benefits managers may offer turnkey health management programs that can be integrated into existing healthcare
organizations with a focus on implementation and incentive alignment. And, most obviously, businesses dedicated to population health management strategies such as disease
management companies, demand management companies, or companies offering carve-outs for different service lines can all be appropriate partners for an organization developing a new program.
Given the multitude of vendors with whom an institution may collaborate, it is
important to do appropriate background research to investigate target partners. Expertise may be available in areas such as information management, risk analysis, and guideline
implementation, and these possibilities may be worth investigating (Southwick 1996). Past experience should be reviewed, as should any available clinical or financial outcome data. When possible, discussing potential vendors with current and former clients of those vendors can be very informative and give the interested organization more information about the potential challenges and opportunities that may exist when working with that business partner.
Opportunities to develop partnerships and collaborations with outside firms typically involve the development of a formal contract by which all parties can define and manage their expectations. The contracting process should encourage each organization to clarify expectations about details such as the level of service expected, outcomes expected or guaranteed, and savings expected or guaranteed. Contracts themselves should be as explicit as possible, outlining relevant expectations and target outcomes whenever possible. It is important to establish baseline measurements from which program results can be evaluated, and to use timely and accurate data in any and all analyses. Ideally, organizations should try to develop long-term contracts that encourage properly aligned incentives and work towards defined health improvement and savings goals over an extended time period. Contract elements such as needed equipment and supplies for patients, capital investments, and
appropriate benefit coverage to effectively provide health management should all be included (MacStravic 1998).
Another opportunity that has emerged in recent contracts is the option to share risk or accept a savings guarantee from a health management company. These options may
encourage organizations to sign contracts with the outsourced vendor because risk to the contracting organization is minimized or eliminated. Competent vendors are likely to be able to guarantee net savings, and these claims should be investigated (Leider 1999; Lewis 1998). In practice, these types of contracting arrangements may offer less potential for sharing in program gains, but they also limit the hazard of program losses when implementation or operational challenges are not effectively managed. Considering such contracting strategies is an important component of managing the financial side of any health management approach.
A final consideration when contemplating outsourcing is the stability and
accessibility of the vendor as a business entity. Taking into account who owns the program, how stable is the company, and who are included in the company’s staff are all important concerns. In addition, the issues of whether or not the company has a local staff to support the contracted organization and how the outsourced company will match activities and skills with the contracting organization should be reviewed (Schmidt 2000). Considering these organizational and financial issues early in the vendor search process can facilitate better decision making and a higher likelihood of achieving program success.
Leider, H. L. 1999. “Selecting a Vendor for Disease Management Programs.” Disease Management and Health Outcomes 6 (3): 131-39.
Lewis, A.1999. “‘Build versus Buy’ in Disease Management: Separating Fact from Myth.”
Disease Management and Health Outcomes 6 (6): 315-18.
MacStravic, S. 1998. “Should Providers Pursue Disease Management?” Health Care Strategic Management 16 (4): 1, 19-23.
Schmidt, J. 2000. “Key Issues to Ponder When Designing Your DM Program/2000.” The Managed Care Information Center. [On-line article; retrieved 5/15/01.]
https://www.monmouth.com/themcic/ac-adm.htm.
Southwick, K. 1996. “To Partner or Not to Partner?” Healthcare Forum Journal
(January/February): 32-36. 11.3 Carve-outs
Carve-outs have arisen out of the need to keep objectives and incentives aligned between the sponsoring organization and the health management program and may offer flexibility to institutions interested in offering health management approaches in the absence of dedicated in-house expertise. The concept of a carve-out for services has gained popularity in recent years as a means of trying to manage the entire spectrum of needs for a particular class of patients. A carve-out is typically described as a health management approach in which practitioners select one disease or treatment and manage both the clinical and business aspects of that carved out niche. Arguments favoring carve-outs emphasize the importance of giving patient care responsibility to those clinicians most highly trained to provide the
By concentrating on one area of care, carved-out programs are designed to leverage the benefits of both specialization and patient volume. Programs dedicated to one clinical area, such as cancer or behavioral health, can become expert at providing the types of care needed by patients in that area. Companies that have emerged to address the health
management needs of a particular population segment offer benefits to clients, including: the ability to negotiate better discounted rates with providers based on their patient volume; the potential to produce better clinical outcomes due to more experience with similar patients; and the ability to better predict the course of patient care treatment and outcomes based on more experience with such patients.
Economically, carve-outs appear to be logical arrangements to create good incentives for high productivity. Rather than relying on traditional approaches to caring for patients on a case by case basis, carve-outs provide an environment for specialization and concentration. Carve-outs are frequently seen in the behavioral health area, as well as in other specialties, including cardiology, gastroenterology, oncology, obstetrics, and orthopedics. Cancer treatment, for example, is a good candidate for carve-outs for a number of reasons. First, the cost of cancer treatments is high ($50 billion in 1995, or 5 percent of total U.S. healthcare expenditures). Also, because care provision is typically erratic and subject to variation among providers and geographic locations, treatment offered is often not the most appropriate nor the most reasonably priced. By applying guidelines about care processes and using care plans to reduce variation in care, patients and payers can benefit from application of available medical evidence supporting appropriate and efficient treatment.
Catastrophic care management programs are another avenue for carve-outs because patients with catastrophic illnesses or injuries can be carved out of the general population for dedicated care management services. By providing specialized care in one field, patients and payers benefit from a concentration of leading edge medical treatments and technologies along with economies of scale. Treatment of catastrophic cases can be streamlined based on available evidence and expertise, so patients can potentially receive better and more
economical care.
Cross, M. A. 1999. “Slicing It Thin: Carve-outs Seek Cost Savings, but Challenges Remain.”
Modern Physician (November): 56.
11.4 Organizational Change Theories
Organizational change theories become important when organizations must adapt their standard operating practices to accommodate a population health management approach. Payer organizations who adopt a population health management model may be faced with the challenge of organizing themselves to achieve new goals, including improved health, lower medical care costs, and better quality of care for the populations they serve. Provider organizations may already have similar health-related goals, but they may face challenges to orient themselves towards providing better coordinated, appropriate care to target populations of individuals.
A first step in moving organizations towards this population health management model involves classifying the types of change needed for those organizations. Kaluzny and Vency developed a classification scheme for three different types of organizational change
based upon the different means and ends associated with organizational change: technical change, transitional change, and transformational change (Kaluzny & Vency, 1977). Using this model, technical change is described as emphasizing change of the means, or the typical activities of an organization, without changing the ends such as the mission or goals of an organization. In this sense, technical change involves changing the workings of structure or process of an organization in order to improve operations or enhance performance.
Transitional change concentrates on changes to the ends of an organization rather than changing the means. By changing an organization’s goals or products and keeping the structure and process of the organization relatively constant, an organization may attempt to respond to changes in the environment such as consumer expectations or increased
competition. Last, transformational change involves changing both the means and ends within and organization. This dramatic type of change affects the entire organization as structure and process are modified in addition to changes in goals and organizational products (Hernandez, Kaluzny, and Haddock 2000).
Organizational adoption of population health management methods may involve all three of these types of change. When organizations attempt to improve operations in ways that include the use of interdisciplinary teams or integration of management information systems to support health management approaches, these changes are mainly technical. However, adoption of a population health management model for a health care organization interested in developing or emphasizing population health management functions may instead involve a transitional change with a redefined mission and goals for the organization. Similarly, a payer entity interested in promoting the value of health and care management for its defined population may require transitional change to reflect new organizational values. Finally, transformational change is also possibly necessary for both payer and provider entities. If hospitals or other health care organizations redesign themselves to operate as health care systems (Shortell, Gillies, and Devers 1995) and adopt a patient-centered
population health management model, this reorientation will likely involve transformational change. Similarly, for employers who sincerely adopt a disability management approach, this process will likely involve transformational change.
After classifying the type of organizational change required to accommodate a population health management approach, the process of change for that organization is typically complex. Smith and Kaluzny have described a model of change or innovation that involves four distinct stages (Smith and Kaluzny 1986): awareness; identification;
implementation; and institutionalization. Ideally, this change model is applied sequentially with a change or innovation proceeding from one stage to the next in the process. Bypassing steps such as moving immediately to implementation of an organizational change without first developing awareness of an opportunity or need for change and then identifying the solutions this change represents can lead to problems with institutionalization and integration of the change into the organization (Smith and Kaluzny 1986). Figure 11.4-1 shows how a population management approach can be institutionalized in a health care organization to attain the goals of coordinated, individualized, and appropriate care for defined populations.
In practice, implementation of an organizational change such as adoption of a population health management approach can be very difficult. Kanter and colleagues describe six factors that can enable change in their discussion of the change implementation process: pace; scope; depth; publicity; supporting structures; and who will be driving the change process (Kanter, Stein, and Jick 1992). Table11.4-1 highlights some of the crucial
questions to consider in this implementation process. Effective implementation of organizational change will be reflected in institutionalization of a population health management model that supports the goals of individualized, appropriate, and coordinated care for the defined populations served by that organization.
Reprinted with permission from: McAlearney, A. S. 2002. “Population Health Management in Theory and Practice.” In Advances in Health Care Management (Volume 3), edited by G. T. Savage, J. Blair, and M. Fottler. New York: JAI Press/Elsevier Science Ltd.
Hernandez, S. R., A. D. Kaluzny, and C. C. Haddock. 2000. “Organizational Innovation, Change, and Learning.” In Health Care Management: Organization Design and Behavior, 4th ed., edited by S. M. Shortell and A. D. Kaluzny. Albany, NY: Delmar Thompson Learning Publishers.
Kaluzny, A., and J. Veney. 1977. "Types of Change and Hospital Planning Strategies."
American Journal of Health Planning 1 (3): 13-19.
Kanter, R. M., B. A. Stein, and T. D. Jick. 1992. The Challenge of Organizational Change: How Companies Experience It and Leaders Guide It. New York: Free Press.
McAlearney, A. S. 2002. “Population Health Management in Theory and Practice.” In
Advances in Health Care Management (Volume 3), edited by G. T. Savage, M. Fottler, and J. Blair. New York: JAI Press.
Shortell, S. M., R. Gillies, and K. Devers. 1995. “Reinventing the American Hospital.” The Milbank Quarterly 73 (2): 131-60.
Smith, D., and A. Kaluzny. 1986. The White Labyrinth. Chicago: Health Administration Press.
