Documents

Background

There is growing interest among insurers and policy makers in the United States in primary care playing an expanded role to improve quality and lower cost. These activities often are not costless for primary care practices or clinics (PCCs) to implement, and the costs are not always reimbursed. Thus, a PCC facing expectations to provide additional, unreimbursed services is likely to consider their return on investment (ROI). Additionally, when private businesses are used to implement government policy, the objectives, resources, and constraints of the businesses need to be carefully considered.

Methods

We develop a general model for the PCC’s ROI in a tiered cost-sharing health insurance benefit design in which PCCs with lower total risk-adjusted annual per capita cost of care (TCOC) are assigned to a tier with lower consumer cost-sharing, leading to an increase in patient volume. We focus on price discounts as one way to lower the PCC’s TCOC, but the same analysis would apply to any unreimbursed effort to make the PCC more attractive to prospective patients, e.g., in a capitation system with regulated fees. We use data from a large state employee insurance program that uses such a TCOC design.

Results

The study finds that discounts of 10–20 percent can have a positive ROI for the PCC, meaning a PCC may generate more income through a gain of patient volume than is lost through lowering their unit prices. These results are sensitive to the model’s parameters.

Conclusions

The study finds that primary care clinics offering 10–20 percent price discounts within a tiered cost-sharing insurance model can achieve a positive return on investment. Increased patient volume from lower cost-sharing tiers can offset the revenue loss from discounts. However, the profitability of these strategies depends strongly on specific model parameters and assumptions.