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Health Serv Res. 1998 June; 33(2 Pt 1): 223–242.
PMCID: PMC1070262

Purchasing population health: aligning financial incentives to improve health outcomes.


OBJECTIVE: To review the concept of population health, including its definition, measurement, and determinants, and to suggest an approach for aligning financial incentives toward this goal. DATA SOURCE, STUDY DESIGN, DATA EXTRACTION. Literature review, policy analysis PRINCIPAL FINDINGS: The article presents the argument that a major reason for our slow progress toward health outcome improvement is that there is no operational definition of population health and that financial incentives are not aligned to this goal. Current attempts at process measures as indicators of quality or outcome are not adequate for the task. It is suggested that some measure of health-adjusted life expectancy be adopted for this purpose, and that integrated delivery systems and other agents responsible for nonmedical determinants be rewarded for improvement in this measure. This will require the development of an investment portfolio across the determinants of health based on relative marginal return to health, with horizontal integration strategies across sectoral boundaries. A 20-year three-phase development strategy is proposed, including components of research and acceptance, integrated health system implementation, and cross-sectoral integration. CONCLUSIONS: The U.S. healthcare system is a $1 trillion industry without a definition of its product. Until population outcome measures are developed and rewarded for, we will not solve the twenty-first century challenge of maximizing health outcome improvement for the resources available.

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