Care Coordination

Care Coordination Could Save $8.5 Billion Annually

Issam Zeinoun, September 2018 [Download PDF]

A study published in the American Journal of Managed Care (AJMC) [1] found that fragmentation in PCP care increases the number of preventable hospitalizations by 28%, and that PCPs with higher care coordination eliminate this cost. We combined this finding with corresponding data reported by two government agencies (CDC [1] and AHRQ [2]), and by Forbes [3] to estimate the financial impact. The result shows that nearly $8.5 Billion of annual healthcare spend can be eliminated with appropriate care coordination, using PCPs and their staff.

Various studies show that 75%, or more, of the total cost of care in the U.S. is driven by the sickest 5% of the population. Our reference, Forbes [3], uses a more conservative number of 50%, which we will use here. The Forbes article also states that ⅓ of this cost is incurred in the last few weeks of life, and is therefore unaffected by care coordination, leaving ⅔ of this cost as a primary candidate for reduction. Therefore, the portion of cost that can be reduced with care coordination is around ⅔ of 50%, which comes to 33%.

Shifting back to the findings of the AJMC article [1], the data is related to preventable hospitalizations. The CDC report [2] shows that hospitalizations cost around $1 Trillion (in 2015). Recall that we estimated 33% of that cost can be reduced with proper care coordination, i.e., $330 Billion. Next, we reference the AHRQ report [4] to estimate a 10% portion of this cost is under preventable hospitalizations, i.e. $33 Billion. Finally, we use the AJMC’s article measured 28% reduction in preventable hospitalizations, i.e., 28% of $33 Billion, which is roughly $10 Billion.

However, additional care coordination would incur new costs. Using the CDC report, page 316 shows “Other Professional Services” costing $87.7B, part of which goes toward coordination of care. Since we are slightly increasing support for 5% of the population, we estimate a 1% to 2% increase in the total cost of this component, i.e. roughly $1.5 Billion in additional professional costs. Even with that increase, the net annual savings achieved would be around $8.5 Billion.

In conclusion, based on the studies cited below, the U.S. can save an estimated $8.5 Billion in annual healthcare spend, if PCPs and their staff are enabled and incentivized to provide appropriate care coordination for the chronically ill.

References

[1] American Journal of Managed Care: http://www.ajmc.com/journals/issue/2015/2015-vol21-n5/care-fragmentation-quality-costs-among-chronically-ill-patients

[2] CDC Report, Page 316: https://www.cdc.gov/nchs/data/hus/hus16.pdf

[3] Forbes’ Michael Bell: https://www.forbes.com/sites/michaelbell/2013/01/10/why-5-of-patients-create-50-of-health-care-costs/#543c5a9028d7

[4] Trends in Potentially Preventable Inpatient Hospital Admissions and Emergency Department Visits - Table 1: https://hcup-us.ahrq.gov/reports/statbriefs/sb195-Potentially-Preventable-Hospitalizations.jsp