The COVID-19 pandemic has been a financial disaster for primary-care practices, which rely on fee-for-service reimbursement. Innovators in the field are moving quickly to take advantage of the situation.
Chicago-based Oak Street Health recently announced plans to raise capital to expand its clinic-based primary-care system, which currently serves low-income patients on Medicare and Medicaid. Oak Street told potential investors the 85,000 patients who visited its 54 storefront clinics in eight states last year had 51% fewer hospital admissions, 42% fewer 30-day hospital readmissions, and a 51% reduction in emergency department visits when compared with Medicare beneficiaries with similar risk profiles.
Medicare Advantage insurers are clamoring to use the company’s services. Oak Street’s revenue grew 72% last year.
Oak Street’s model isn’t rocket science. But, as Dr. Griffin Myers, the company’s co-founder and chief medical officer, likes to say, it’s hard work.
The company uses a team-based approach to meet the special needs of its patients. Most suffer from the multiple chronic conditions that drive healthcare costs higher. Oak Street’s teams are led by a primary-care physician or nurse practitioner.
They include a registered nurse, a medical assistant, a social worker and a scribe.
The teams meet daily to discuss the progress of every patient they’re going to see that day. They develop comprehensive care plans to address their patients’ special needs like food and shelter or treatment for substance abuse and mental health disorders.
Oak Street makes extensive use of telehealth, remote patient monitoring and in-home care. They can offer those services without worrying about reimbursement because 97% of company revenue comes from per-member, per-month payments from private payers. Its three largest clients are the Advantage plans run by Humana, WellCare and Cigna-HealthSpring.
Yet Oak Street doesn’t use those technologies to replace in-office visits. Beneficiaries visit their primary-care physicians an average of eight times a year—nearly three times the national average. And during those visits, patients spend as much time as needed. Their doctors are salaried and not on the 15-minutes-per-visit treadmill.
It doesn’t work for every patient. But Oak Street’s business model doesn’t depend on individual success. It depends on improving the overall health of an entire patient panel and thereby reducing its total spend below the capped payments. It’s the exact opposite of fee-for-service medicine, which generates the most profit when people get sicker, not better.
VillageMD, also based in Chicago, uses a similar team-based approach. It now provides services for 600,000 people at over 1,000 clinics in nine states. Until recently, it largely partnered with local primary-care practices and health systems.
But last year, it established physician-led clinics at several Walgreens pharmacies in Houston. The idea was to take the team-based approach to Middle America through the portal of the local chain pharmacy.
What does Walgreens bring to the table? It adds a pharmacist to the team whose specific mission is improving medication adherence. That reduces the use of more expensive services like hospitalization. The success of the Houston pilot projects led the Walgreen Boots Alliance to announce this month it will invest $1 billion over the next five years to open 500 to 700 VillageMD clinics in 30 markets.
Until now, pharmacy-based clinics and urgent-care centers have not posed a major threat to primary-care practices across the country. The Walgreens-VillageMD venture still relies on fee-for-service payments, either from insurers or out of their customers’ pockets. CVS’ MinuteClinics operate the same way.
But if these clinics prove successful in the care-coordination role, their well-heeled partners will be well-positioned to take on financial risk if and when Medicare and employers follow through on their pledges to shift more care into value-based contracts.