More than a decade ago, the idea of population health management as an alternative way of structuring how we pay for healthcare became au courant. The topic became all the rage–conferences, articles, books, and lots of enthusiastic internal meetings followed. A new office within the Center for Medicare & Medicaid Services, the Center for Medicare & Medicaid Innovation, was born with a budget of $1 billion per year and charged with introducing new alternative payment system “pilots” as a way to encourage changes in the payment model within the industry.

The current system, called fee-for-service, pays hospitals and physicians for each service they provide to the patient. Since providers make more money when they do more tests, imaging and so on for the patient, it rewards aggressive treatment without regard for the cost or benefit. And providers get paid regardless of the outcome. So, the idea behind population health management was to link payment for care to outcomes that matter and to keep the cost within an agreed-upon budget. The underlying dynamic was to move the industry toward “pay for value.”

At present, payment to hospitals and physicians for care is unique. Usually, consumers don’t know how much their care will cost until after they receive the care, and there are no refunds, whether the care provided the intended improvement or not. The idea behind population health management isn’t really radical–in fact, it would make paying for healthcare much more like the way we pay for everything else in our lives. It is increasingly being recognized as key to delivering higher quality care at a lower cost. However, persistent fears and roadblocks stand in the way of this change, as highlighted in the just-released Numerof & Associates State of Population Health Survey Report.

The current report is the eighth administration of the population health survey. Respondents have been executives in hospitals and healthcare systems nationwide. The focus of the survey has been on the adoption of population health management by traditional healthcare providers and changes in their attitudes along the way.

Data from the most recent administration continues to show that executives across the country expect that population health will be the wave of the future, but change remains slow to come. For instance, the 2024 report found that most respondents (64%) said that population health would be ‘critically’ or ‘very’ important for future success, a finding consistent with years past. But they also made it clear that their organizations are still early in their journey toward a new model. Almost all respondents (99%) said their organizations have “some revenue at risk,” but the median amount of revenue at risk–as measured by the percentage of revenues in some type of risk-based agreement–was just 25%. While still a small portion of the overall revenue stream, this represents a significant change from the 10% where it had hovered in seven prior administrations.

Still, where respondents believe they need to be in the future is leagues beyond where they are today. As the report concludes, “given the very modest level of first-hand experience, it comes as no surprise that only about 1 in 3 respondents believe they are ‘very’ or ‘completely’ prepared for risk-based agreements.”

Some areas show promising progress, however. The fact that predictions respondents made two years ago about the amount of revenue that would currently flow through risk-based contracts was accurate (i.e.,25%) is significant. This marks the first time that the predictions respondents made about where they would be two years ahead actually matched where they were two years later. In previous surveys, respondents’ organizations did not live up to the expectations they had set. This progress may be an early indicator that delivery organizations are getting more realistic about the requirements for change, the inherent challenges of adopting a complex new model, and what population health principles entail.

While these results indicate a step in the right direction, there is still a long road ahead. When respondents were asked how ready do you feel your organization is to manage variation in cost and quality outcomes, they reported less confidence in their ability to succeed in this critical dimension than they had previously. In the last survey, most respondents (69%) described their organizations as “at least moderately prepared for at-risk management; but in this administration only 56% felt that way. This shift may well be caused by a more realistic–and accurate–assessment of just how far they still have to go.

As I have explored in previous columns, one critical question is how industry can get beyond the impasse we’ve seen for years. From one perspective, CMS has an opportunity to shape how quickly the industry moves, given its immense market and regulatory power. As the single largest payer in the country responsible for about half of the insured lives in the U.S., CMS has a stake in seeing improved quality and lower total cost of care. But CMS has been on this journey of ‘bending the cost curve’ for about 40 years. The result has been less than impressive despite the effort expended. CMS has tried to coax the industry into trying new reimbursement approaches for more than a decade with very limited success. Until it takes a more nuanced, comprehensive approach to solving a problem that has been decades in the making, change will continue to move slowly. The role of payers and other critical stakeholders must be included in any efforts to shift to a fundamentally different model.

Any standalone, siloed efforts taken by CMS or other players will face considerable industry resistance, however. As I discussed in my recent column, the pushback against site-neutral payments is a prime example of just how misaligned the incentives have been under the FFS model. Unable to envision a realistic, more comprehensive alternative to a broken system, industry stalwarts cling to the old methods – and everyone suffers.

While the healthcare system continues to rely on outdated practices, outside players such as Amazon and CVS are responding to consumers’ calls for change. They are moving into the healthcare space without the baggage of old assumptions and models, instead applying their proven business practices and strategies to benefit them and their patients. While the healthcare industry continues to sit back and despair its many problems, retail disruptors are acting. As the 2024 State of Population Health Survey Report states: “Taken together, the strategic moves by not-in-kind competitors and others sends a clear message: Barriers to entry in healthcare are eroding and if traditional health systems won’t satisfy consumers’ unmet needs, somebody else will.”