It’s no secret that the healthcare industry is under growing pressure to reduce the cost of care while improving quality. Linkage of payment for healthcare to the cost and quality delivered is the idea behind value-based payment frameworks, and is the driving force behind today’s rapidly changing healthcare landscape.

Such linkage will likely be achieved using a population health model. This implies that a provider contracts to deliver designated services at an agreed-upon “all-in” price and to meet specific quality targets. The arrangement makes the contracting provider financially accountable for cost over-runs and quality shortfalls. The services may be an acute care episode like a knee replacement, or can be management of a chronic condition like diabetes on a monthly or annual basis. Either way, the provider is responsible for delivering the services at a per-patient or per-episode price, and treating defined adverse events (like surgical site infections, falls, or hypoglycemic episodes) without additional reimbursement.

This new level of accountability puts a premium on the efficient use of healthcare delivery resources. It encourages providers to intervene with patients at the earliest point in time and least costly site – so wellness is better than outpatient treatment, which is better than emergency or acute care. It also puts providers in the risk management business, knowing that they will bear the direct costs of mistakes and unanticipated adverse events. The growth of population health programs is dramatically changing the business environment for manufacturers who sell into the industry in several important ways.

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