Converting low-frequency patients to concierge model for 8X revenue

Hypothesis

Hearing more and more about Direct Primary Care (DPC) models, sometimes referred to as “concierge care”, I wanted to see if I could identify patients that would be ideally suited.

Over a three year span (2011-2013)…

178,058 patients were treated
98,772 (55.5%) of these patients had 4 or more encounters.
79,286 (45.5%) of these patients had 3 or fewer encounters.

The typical response in a “Fee For Service” (FFS) practice would be something similar to the inset below.

Because a physician organization has no means to actually generate sick patients, the typical response is to encourage well patients to come in for various reasons, annual checkups, screenings, etc.

These marketing/outreach efforts are all the more challenging as they run counter to theses patient’s desire to avoid/minimize time spent in physician offices. After all, one of the advantages healthy people enjoy is avoiding trips to the doctor.

Fortunately, marketing techniques to encourage healthy people to come in more often don’t work extraordinarily well. If they did, the organization might be crushed under the additional workload (see Figure 2).

Figure 2 shows that the 56% of patients (from Figure 1), the “high touch” ones, disproportionately generate 92% of all encounters.

Low touch patients, by definition really, require substantially less provider effort. If low touch patients were converted to high touch patients through marketing/outreach programs, provider organizations would be unable to meet demand.

Figure 3 provides encounter and lab charges (purple columns) and actual payments (blue columns) for low touch patients during the three year span. Actual encounter payments are about half (52%) of the amount charged and actual lab payments are less than half (43%).

A provider organization receives only a portion of lab charges/payments shown in Figure 3. For purposes of this example let’s assume that 20% of the lab fees charged generate revenue for the provider organization (with the remaining 80% going to an external lab).

Figure 4 provides charges (purple column) and the actual amount received (blue column) for low touch patients during the 3 year span. The green column shows the calculated revenues from 79,286 low touch patients with a $50/patient/month subscription.

For purpose of this analysis, the provider organization covers all of the patient lab expenses. The net revenues after removing the actual lab expenses of these patients during the 3 year span with the subscription model is $141,282,288.

Comparing the $17,479,654 (blue column) actually earned for these low touch patients (blue column) to the $141,282,288 (green column) suggests that a subscription model for low touch patients is substantially more profitable (8X) for the provider organization. Assuming that these low touch patients would rely on a high-deductible catastrophic insurance for hospital or accident admissions, the subscription model would also benefit patients.

It bears repeating that a provider organization could generate more than 8 times the revenues from a subscription model while covering all the patient’s lab expenses for these low touch patients and reducing the patient’s out-of-pocket costs.

There are more low touch patients in the 40-49 and 50-59 age groups than any other. Note that the purple bar displays a 20 year span (0-19) while the other age groups are 10 year spans. Data suggests the 40-59 age group to be either healthier or more stubborn than other age groups.

Conclusion

Healthcare organizations must transition from FFS to FFV models. Low touch patients could be a vital element of a FFV model, benefiting both patients (through lower out-of-pocket expenses) and provider organization (through increased revenues).

Piloting a small number of these patients in such a model could be a very strategic step. Patient participation could be reviewed annually to tune profitability.

A final important consideration is the inherent stability of a model that relies upon patient’s natural behaviors. A low touch patient, seeks minimal care and is likely to remain low touch. Low touch patients may develop chronic conditions requiring additional care but profits from the pool should easily cover these expenses.