Breaking The Curve: The Economics and Benefits of the WeCare tlc Healthcare Model

Let me summarize what we believe to be our position and expectations for a clinic for your company.

First, we think you should structure it to maximize the opportunities for return.  This would include offering the clinic to other local employers to share the cost and expand the services.  The additional staff that would be required would be NP provider staff which is about ½ the cost of physicians thus lowering the cost for all employers.  We could also consider the addition of an x-ray, depending on what your data indicates the return to be.  This would also expand our ability to negotiate direct, lower costs for special services such as MRI, CT, Physical Therapy and other such treatment.

Second, although we understand your plan will be grandfathered for ACA changes for 2013, we can expect them to be required for 2014.  Regardless of what happens to ACA, our opinion is that these required benefits will survive any challenges.  We have seen estimates of the impact on claims to be between 5% and 15%.  Nearly all of the required benefits, most of which are for wellness initiatives can be performed in the clinic with minimal impact on clinic costs.  If the clinic is initiated in 2013, directing those costs to the clinic will be accepted more readily.  With clinic costs estimated at about 7% – 8% of plan costs, even if the actual cost is at the lower end of the estimate above, upwards of ½ to 2/3  of the clinic operational costs could be covered by this.

Third, we achieve significant savings related to laboratory and pharmacy as well as the other areas you noted in your email.  The prime example is laboratory where our average cost per test, based on actual invoices across all our clinics last month was less than $9.00 compared to your plan costs of about $73.00. This is an example of the waste and abuse that exists in healthcare and exposes the failure of traditional payor controls expected from provider negotiations.   We can do the labs from other providers so we can expect about 85% of all out-patient labs to be done through the clinic.

Our average cost for purchased pharmacy is less than $10.00 per script.  The real savings on pharmacy thought is getting patients off expensive brand drugs, reducing the number of scripts and improving their health to the point that continued scripts are reduced or eliminated.  We find that reducing the generic costs by 65% is normal, not to include the reduction in brand.

In a Fee for Service world, physicians do not make money on patients who are well!  We know we will save money on actual primary care visits but the real office visit savings occurs with avoided specialist visits.  In an earlier email Judy Garber highlighted a number of procedures which could either be performed in the clinic or which we questionable in nature.  Without significant oversight, which can be provided through the clinic staff, local providers are free to prescribe, provide and refer at will using Knapheide dollars to pay for it.  When you couple this with the understanding that healthcare costs in Quincy are much higher than other metropolitan cities nearby, the opportunity to exert pressure, control and management to accomplish changes is significant.

You mentioned having a local surgeon perform minor procedures in the clinic.  Although we have not done much of that, there is no reason it could not be done.  The process is that once we get the claim history detail from BXBS numerous opportunities will arise.  We will offer many suggestions for changes, some of which could be done within your collective bargaining, some of which may require negotiations in your next session.  Some recommendations you will accept, some you will reject.  We understand that.

The most common attempt used to estimate a clinic ROI is by re-pricing procedures and services from the prior year.  This does not account for the changes in utilization patterns that will occur as a result of the clinic and it is these changes in utilization that account for the significant expected ROI.  The most credible resource for ROI determination is experience of other similar clients and our experience with that has been exceptional.  Your actual claims cost per employee per year (over $10,000)  is high enough for us to know that savings will exist.  Occasionally we see a prospect who have costs below $5,000 and expecting a significant ROI on these clients is much more difficult.

The more information we see on your actual costs the more confident we become that your savings will be significant.  I don’t have enough data to put numbers to all of these but the areas are:

• Reduced Workers’ Compensation costs for physician visits and minor procedures
• Reduced occupational costs for DOT, drug testing and other similar tests.
• Reduced costs for primary care visits
• Reduced costs for avoided specialty office visits
• Additional savings for services that can be added to the clinic for x-ray, PT, minor surgery, etc.
• Reduced costs for direct contracts for MRI, CT etc.
• Reduced costs for ACA mandated benefits
• Reduced laboratory costs
• Reduced pharmacy costs
• Eliminated costs for external wellness services

And the list goes on.  We should not fail to note that all services provided in the clinic or which are negotiated directly will save your employees and their families significant dollars in eliminated co-pays and reduced deductibles and co-insurance.  It is very common for patients to comment after the clinic is opened that the clinic resulted in a raise to the employee!  None of our savings projections include patient savings, nor do they include “soft” savings due to productivity, loss of time or other impacts.

At the end of the day, a clinic represents a change in course.  Continuing down the same path as used for the previous years can and will produce results in the future that mirror previous results. If you want to break the curve, we need to change the process and that is where the clinic begins the process.  The clinic, in itself, is not the complete answer, but it represents the platform from which substantial changes can occur.  Future changes can include expanded wellness services, narrow provider networks, directed management of high-cost patients, specialty pharmacy directed through the clinic and the list goes on.

We appreciate the opportunity to work with you and your company and commit to giving our best service possible should you decide to implement a clinic with our company.