Measuring Population Health ROI Is Still Tricky

Over the past few years, health systems have made massive investments in population health management technology. Given the forces driving the investments are still present – or even closer at hand – there’s every reason to believe that they will continue.

That being said, health leaders are beginning to ask more questions about what they’re getting in return.  While systems may have subjected the initial investments to less scrutiny than usual, having accepted that they were critically necessary, many of these organizations are now trying to figure out what kind of return on investment they can expect to realize. In the process, some are finding out that even deciding what to measure is still somewhat tricky.

Many healthcare organizations started out with a sense that while investment returns on pop health management tech would take a while, they were in the knowable future. For example, according to a KPMG survey conducted in early 2015, 20 percent of respondents believed that returns on their investment in population health IT would materialize in one to two years, 36 percent expected to see ROI in three to four years and 29 percent were looking at a five+ year horizon.

At the time, though, many of the execs answering the survey questions were just getting started with pop health. Thirty-eight percent said their population health management capabilities were elementary-stage, 23 percent said they were in their infancy and 15 percent said such capabilities were non-existent, KPMG reported.

Since then, health systems and hospitals have found that measuring – much less realizing – returns generated by these investments can be complicated and uncertain. According to Dennis Weaver, MD, a senior consultant with the Advisory Board, one mistake many organizations make is evaluating ROI based solely on whether they’re doing well in their managed care contracts.

“They are trying to pay for all of the investment – the technology, care managers, operational changes, medical homes—all with the accountable payment bucket,” said Weaver, who spoke with Healthcare Informatics.

Other factors to consider

Dr. Weaver argues that healthcare organizations should take at least two other factors into account when evaluating pop health ROI, specifically reduction of leakage and unwarranted care variation. For example, cutting down on leakage – having patients go out of network – offers a 7 to 10 times greater revenue opportunity than meeting accountable care goals. Meanwhile, by reducing unwarranted variations in care and improving outcomes, organizations can see a 5 percent to 10 percent margin improvement, Weaver told the publication.

Of course, no one approach will hold true for every organization.  Bobbie Brown, senior vice president with HealthCatalyst, suggests taking a big-picture approach and drilling down into how specific technologies net out financially.

She recommends that health organizations start the investment analysis with broad strategic questions like “Does this investment help us grow?” and “Are we balancing risk and reward?” She also proposes that health leaders create a matrix which compares the cost/benefit ratio for individual components of the planned pop health program, such as remote monitoring and care management. Sometimes, putting things into a matrix makes it clear which approaches are likely to pay off, she notes.

Over time, it seems likely that healthcare leaders will probably come to a consensus on what elements to measure when sizing up their pop health investments, as with virtually every other major HIT expense. But in the interim, it seems that figuring out where to look for ROI is going to take more work.

About the author

Anne Zieger

Anne Zieger

Anne Zieger is a healthcare journalist who has written about the industry for 30 years. Her work has appeared in all of the leading healthcare industry publications, and she's served as editor in chief of several healthcare B2B sites.