October 1, 2022

Today there is greater awareness of the social determinants of health in healthcare circles than ever before. But how can we translate this heightened awareness into action? The still-prevalent fee-for-service payment model doesn’t support SDOH initiatives. And good intentions only go so far.

The social determinants encompass conditions in the environments where people are born, live, learn, play, worship and age. Examples include racism, discrimination and violence; education, job opportunities and income; access to nutritious foods and opportunities for physical activity. These and other SDOH account for 60% of an individual’s health status, while healthcare and genetics each contribute 20%.

SDOH have traditionally been outside the domain of hospitals and health systems. A lot of the work falls to an array of community service agencies, charitable organizations and governmental entities. While health systems interact with these entities to some extent, multiple barriers get in the way of true collaboration, including the lack of shared funding mechanisms.

How can we, as a nation, accept the continued separation of SDOH and healthcare, given that the connections between SDOH and health—in particular, connections with costly chronic conditions—are well understood? To improve population health, reduce the growth of national healthcare expenditures and achieve cost-effectiveness of health (not just healthcare), we must, as a nation, address upstream factors like SDOH much more effectively. Otherwise, we will just keep bailing out the boat instead of fixing the leak.

And while we’re busy bailing, healthcare spending, which is hovering just under 20% of GDP, will resume its steady climb. That is simply unsustainable in the long term, mathematically speaking, unless healthcare spending continues to squeeze out other societal priorities. Ironically, growth in healthcare spending could threaten SDOH spending. What a vicious cycle that would be.

If this sounds like a policy prescription, it may be. But it’s also a call to action for healthcare leaders: It’s time to make a choice. When it comes to expanding our approach to cost-effectiveness to encompass health, not just healthcare, we are at a crossroads. As I see it, we have three options:

The default is to maintain the status quo. Continue with fee-for-service payment. This may seem like a reasonable choice for some. After all, fee-for-service isn’t going away anytime soon. Only about 11% of healthcare payments made through private health plans flowed through an alternative payment model with two-sided risk in 2020. The rest are built on a fee-for-service chassis.

But how much longer can the status quo adherents ignore the winds of change? Policymakers, thought leaders and forward-looking healthcare executives are unwavering in their belief that value-based payment is the future. The Center for Medicare & Medicaid Innovation has set a goal of getting all Medicare beneficiaries into an accountable care relationship by 2030. Major health insurers such as Humana, UnitedHealthcare and Blue Cross Blue Shield routinely publicize their progress in advancing value-based care and payment models.

As “Reframing Healthcare” author Dr. Zeev Neuwirth puts it, “The longer you wait (to move toward cost-effectiveness of health), the longer it’s going to take. If you delay, where will that put you in the market at that time?”

Decline to be a part of the solution. Unlike the default choice, decliners accept the premise that the current state of affairs is unsustainable, and they understand the implications. But they feel powerless to do anything about the problem. As time goes on, this becomes an increasingly uncomfortable choice to make. It means acquiescing to a future that you had no role in shaping for your organization.

Take action. Accept the challenge of managing your organization’s margin now while simultaneously preparing to thrive in the risk-bearing environment that’s slowly emerging. Investing in SDOH—often in partnership with community agencies and health plans—and accepting risk are essential elements of success for provider organizations. Taking these steps will reveal that there’s margin opportunity in operating with a cost-effectiveness-of-health mindset. In other words, it’s the right strategic direction to adopt.

If you’re willing to take the challenge, how do you move forward? On a practical level, it means developing the willingness to accept risk, investing in analytics to make data-driven decisions and seeking out prospective partner organizations, including health plans.

Short-term risks may be necessary and appropriate to carve out a long-term role in a healthcare ecosystem built around cost-effective health. Keep in mind that it’s not change itself that most people struggle with; it’s change that happens to us. This is your opportunity to translate knowledge into action and to help shape the change. Don’t let it pass you by.

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