How patient engagement pays for PCPs

“In the US, we spend $2.8 trillion on healthcare, which represents 17% of our GDP.”

We’ve all heard these statistics, but what do they actually mean? For example, what does it mean to spend $880 billion a year on hospital care? These numbers are so large it is difficult to make sense of them on a human scale.  In a recent JAMA article, former ONC chief Dr. Farzad Mostashari provides a refreshing bottom-up reframing of how an individual primary care physician (PCP) is able to move the needle on healthcare spending.

     

 

Here's the gist:

  • A PCP sees 2,000 patients in a year
  • An average patient represents $5,000 in annual healthcare costs

Now zoom out:

  • It follows that my PCP directs around $10 million in annual healthcare spending
  • All of the PCPs in my region (greater Raleigh, NC area) direct around $10 billion
  • All of the PCPs in my state (NC) direct around $100 billion

Now we are starting to see the path from an individual PCP to $2.8 trillion.

 

Healthcare Expense Drivers

I can hear the skeptics: It is one thing to direct healthcare spending in theory, but it is another to actually bend the cost curve. To see how that might work, first let’s zoom back in to our individual PCP that serves an adult population of 2,000 patients. Next, let's determine how many of these patients are likely to end up in the hospital or the ER within the next year:

  • 600 will be admitted to the hospital (source: HHS/CDC), which will cost an average of $10,000 per admission (source: AHRQ), resulting in $6M in hospitalization expenses.
  • 800 will visit the ER (source: Kaiser Family Foundation), which will cost an average of $1,000 per visit on average (source: PLOS ONE), resulting in $800K in expenses.
  • Together, hospital admissions and ER visits represent $6.8 million of the $10 million in annual healthcare expenditures for the population of 2,000 adults.

 

 

The Power of PCP-led patient engagement

10% to 17% of hospital admissions and almost 40% of ER visits are estimated to be preventable (source: JAMA). Using round numbers, this translates into $1.2 million of preventable hospital and ER expenses.  Research shows that a combination of outreach, information, and self-care tools can prevent hospitalizations and ER visits. These interventions are focused on a few common goals, including:

  • Improving medication adherence
  • Reducing excess body weight
  • Improving blood pressure control
  • Improving blood sugar values

 

     

 

Here are just a few examples:

 

Show me the money

PCPs are a largely altruistic group, but why should they invest in patient engagement? That is, what is the economic rationale for a physician practice to offer outreach, information, and self-care tools to their patients? The answer lies in payment reform. Let's assume that our PCP participates in an ACO with a shared savings plan. Now look at the revenue opportunity based on the percentage of patients that are enrolled in the ACO: 

 

ACO with 50 PCPs

Lives under ACO contract Revenue opportunity at 50% shared savings Revenue opportunity at full risk
20% $6,000,000 $12,000,000
50% $15,000,000 $30,000,000
100% $30,000,000 $60,000,000


 

What that looks like on an individual PCP level

Lives under ACO contract Revenue opportunity at 50% shared savings Revenue opportunity per PCP at full risk
20% $120,000 $240,000
50% $300,000 $600,000
100% $600,000 $1,200,000

 

These are top-line revenue numbers. An ACO has additional expenses that will subtract from these numbers before they hit a PCP's pocket. Even so, I think most PCPs would agree that these are meaningful numbers.

 

Bottom Line

PCPs are the strategic lever for change in our healthcare system. Forward-looking PCPs understand that they are in a position to both improve outcomes and generate incremental revenue via physician-led ACOs. Want to talk about what this means for your practice? Email me at mmattox@axialexchange.com