Some See Large EHR Vendors as Playing Catch-up in Population Health

Lawmakers may end up repealing the Affordable Care Act, but it has been the law of the land for enough time that some of the changes it has brought will likely leave a lasting mark on the healthcare industry.

One of these changes is the shift away from fee-for-service payment models, where providers are paid for individual procedures and other units of care, rather than receiving outcome-based payments. Fee for service is giving way to what is known as value-based care, where providers are incentivized to keep costs as low as possible by keeping patients healthy.

For instance, the government now establishes target prices for particular procedures performed on Medicare beneficiaries, such as hip and knee replacements. This in theory creates an incentive for care providers to try to minimize costs, since they receive what amounts to a bonus if the procedure ends up costing less than the target price.

Another concept that has gained traction since the passage of the Affordable Care Act in 2010 is population health management. This practice is basically what it sounds like: defining a specific population, such as patients with Type 2 diabetes, and working to keep the entire population healthy. In certain cases, some of the people who make up a population that a healthcare organization seeks to manage do not receive care there, but live in the geographic area the organization serves.

Numerous companies sell software that they claim can help healthcare organizations with population health management, through features like performance dashboards and notifications that alert users when one or more patients may be at risk if a medical professional does not intervene. These software vendors include groups whose primary line of business is electronic health records (EHR) software, such as Kansas, City, MO-based Cerner (NASDAQ: CERN) and Verona, WI-based Epic Systems. Both companies have built digital tools that allow healthcare workers to do everything from schedule appointments, to document information on patients in clinical settings, to track charges that will later be sent to an insurer for reimbursement.

However, some groups and individuals in the industry say that when it comes to population health management tools, EHR vendors are not on the cutting edge at the moment and a healthcare organization that’s considering installing such tools today is better off getting them from a more specialized software company.

One of those voices belongs to Salt Lake City-based Health Catalyst, which develops software for healthcare organizations, including population health management tools. That makes Health Catalyst a competitor of Cerner, Epic, and other companies whose bread and butter is patient records software, though not a head-on competitor.

Health Catalyst says on its website that the health records software that’s currently on the market is “designed for a fee-for-service world … This makes it difficult to manage the health of populations—and difficult to understand the cost of care.”

Michael Greeley, general partner at the Boston-based healthtech investment firm Flare Capital Partners, echoes this opinion. Flare’s portfolio includes companies whose products fit into the category of population health management. One of them, Denver-based Welltok, works with insurers and other groups to create individualized programs that incentivize healthy behavior.

“The EHR systems for the most part were designed … to support a fee-for-service billing paradigm,” Greeley says.

The software made by EHR vendors works well for things like capturing data and ensuring that users document the information needed for billing purposes, Greeley says. But he says the tools these companies currently offer “do not neatly support the transition [to value-based care]; you need a more flexible infrastructure.”

With value-based care, the cost of care depends more on factors outside the four walls of a hospital or clinic (we’ll discuss some of those factors shortly). And since the software sold by some of the leading EHR vendors was built with the fee-for-service model in mind, Greeley says, those companies’ products may be less well suited for population health management and other areas of healthcare that have emerged as a result of shifting reimbursement models.

Leaders at Epic say its decades of experience with electronic health records makes the company an ideal provider of population health management tools.

Ryan Bohochik, director of revenue cycle applications at Epic, says that some of the company’s earliest customers were health maintenance organizations (HMOs), which are not fee-for-service healthcare providers.

The HMO model “really in essence is a population health model,” Bohochik says. “For the things that now people generally think of as population health—‘how do we have better outcomes and do it for cheaper?’—we’ve been working with groups that do that since the mid-1990s.”

Epic introduced a population health application, Healthy Planet, about five years ago, says Alan Hutchison, a vice president at the company. He says about 125 of Epic’s clients already have Healthy Planet up and running, while another 130 Epic customers are currently installing the application.

In late 2015, the company did what Hutchison calls “a major refocus” around population health, part of which involved making it easier to bring outside data into clients’ EHR systems.

Besides the information that lives in a hospital’s patient records, data that might be useful for managing patient populations include labs, claims sent to insurers, prescription data, GPS and environmental data, and patient-captured results. That last data source has caught the eye of more providers recently, as the wearable trackers made by FitBit (NYSE: FIT) and other Internet-connected devices have proliferated.

Hutchison says Epic’s software is able to exchange data with telehealth monitoring tools so that, for example, providers caring for congestive heart failure patients can monitor fluctuations in their weight and potentially intervene prior to a health crisis. One Epic customer that required its congestive heart failure patients to weigh themselves more frequently and enrolled them in a care management program saw their hospital readmissions decrease by 45 percent, he says.

Providers of value-based care are interested in anything that can affect a patient’s health: where they live, what they eat, how they get from place to place. These factors have become a bigger consideration for providers with the move to value-based care, one of the key objectives of which is to make sure healthy patients stay that way.

“Eighty percent of the population is effectively fine—how do you take everybody else with kind of low-level, non-acute chronic conditions and manage them better in a more cost-efficient way?” asks Greeley, the venture capitalist in Boston. “What’s so exciting as a startup investor is that means there’s a lot of new products and services that have to be created.’’

Cerner, the company many consider Epic’s chief competitor, expects that the ability of providers to manage patient populations effectively will help shape the future of the healthcare business.

“In our view, population health management is going to have to be the answer to the question of how to curb the drivers of healthcare spending,” Neal Patterson, co-founder, CEO and chairman of Cerner, wrote in the company’s 2016 annual report.

According to the report, Cerner’s population health management product became available in 2013. By the end of last year, the 100-plus Cerner clients using the software had pooled together data on a combined 88 million patients.

Still, there’s no guarantee that large EHR vendors like Cerner and Epic will increase—or, for that matter, maintain—their current market share in population health management software.

For instance, the University of Iowa Health Alliance, which includes multiple hospitals that use or are installing Epic’s software, recently picked a separate vendor to provide tools the alliance will use to manage its accountable care organization (ACO). That’s according to Greg Smith, a consultant for health systems that use Epic’s software, who discussed his experience serving on the alliance’s search committee in a recent call with industry analysts.

(An ACO is a healthcare payment model for Medicare beneficiaries that, like many of the others that have become more popular amid the shift to value-based care, puts more risk on providers and less risk on payers than with fee-for-service models. Similar tools can be used to manage patient populations and ACOs.)

The Iowa organization ended up picking Optum, part of Minnesota-based UnitedHealth Group (NYSE: UNH), to provide software for its ACO. Smith said one reason that the committee chose Optum over competing vendors, such as Arlington, VA-based Evolent Health (NYSE: EVH), was Optum’s good reputation among large payers. Smith said he has been on two other search committees for ACOs, and both also ended up selecting Optum.

“[Healthcare organizations] would like to turn to their software vendors, whether it’s Cerner or Epic,” Smith said. “But neither Cerner or Epic really have their game together in population health yet, so [these organizations] are turning to third parties.”

However, that could change, potentially in just a few years’ time, he said.

While the alliance awarded the contract to Optum, it was “also interested in continuing to work with Epic to make sure that within a period of three to five years that Epic would be in a position to replace Optum,” Smith said. “The reason why the desire [of hospitals] is there to work directly with EHR vendors is really quite simple: all of the clinical data that they’re looking to manage, and all the case management, and all the engagement of the patient population is going to be much easier if it’s in one integrated solution set.”

But in the short term, Smith said providers seeking help managing their ACOs or patients with certain chronic conditions are likely to continue looking to Optum and other companies that are more narrowly focused on population health software.

Last year, the Orem, UT-based market research firm Klas assembled dozens of healthcare leaders for a one-day summit. Part of their mission was to define the “required core competencies” for a population health tool set.

The list of six competencies, which Klas calls “verticals,” are listed in a white paper that’s available on the organization’s website. Each vertical is split into bulleted lists of basic and advanced functionalities.

Not long after the summit, Taylor Davis, vice president of analysis and strategy at Klas, told the trade publication Health Data Management that “no vendor has products that have mature functionality in all six of the verticals.”

Hutchison, of Epic, says that the company’s Healthy Planet application covers the basic functionalities across all verticals, but not all the advanced features.

“There are certainly pieces within some of the advanced categories where we’re in active development,” he says, before adding that “I’m sure there are some things that we may choose not to do.”

Michael Barbouche, founder and CEO of Madison, WI-based population health software developer Forward Health Group, says that the goal isn’t really for one company to develop its tools to the point that they have all of the advanced functionalities listed in the Klas white paper. After all, no two hospital IT departments’ needs are identical. There will therefore almost always be a need for a patchwork of software systems, says Barbouche, who participated in the summit.

“No matter the implementation, no matter the setting, there will likely never be a situation where a single vendor platform will meet the needs for a client,” he says in an e-mail. “Instead, the mesh of multiple tools and multiple approaches will be required to meet the diverse needs of population health improvement.”

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