The Virtual Care Insider

The Flip Side of ROI: Virtual Care and Cost Containment

in Benefits

Catherine Murphy

Catherine Murphy
COO
July 26, 2018

Multicare Webinar CTA.The other day, I saw the Advisory Board released new research indicating that healthcare executives’ primary priority is cost containment, even over revenue growth. This focus shouldn’t surprise anyone remotely familiar with U.S. healthcare. Increasingly, health systems are being asked to do more with less – more patients, less staff; more innovation, less budget.

Working closely with our customers, I see first-hand the budgetary constraints and financial scrutiny that are an everyday part of operations. That’s why our team has worked hard to provide health systems with a clear understanding of the financial implications of an on-demand virtual care service, starting with revenue.

Why Revenue Still Matters

The Advisory Board’s study didn’t say healthcare executives were uninterested in revenue, just that often takes a back seat to cost containment. When it comes to effectively managing the bottom line, a two-pronged approach addressing both revenue and cost containment is vital.

As mission-driven organizations, non-profit health systems need to think about revenue. Grants and donations can only cover so much of a health system’s operating budget. In order to effectively provide services for their communities, health systems need to have additional sources of revenue.

A quick Google search yields numerous articles, seminars, webinars and other resources for health systems looking to maximize payer contracts. With the growing trend toward value-based care, effective contracting is critical to healthcare organizations bringing in revenue. Many of our customers use their virtual care services to support and enhance local payer contracts.

Virtual Care’s Revenue Impact

Traditionally, virtual care has been viewed as a patient satisfier (and sometimes market requirement) first and revenue generator second. The trouble is that revenue is seen primarily as visit fees, which often can’t cover the cost of care delivery much less software licensing. In reality, virtual care’s ability to generate revenue and return on investment for health systems lies in its utility as a patient acquisition channel. I won’t go into the nuts and bolts today, because it’s been done extensively in previous blog posts (here and here), as well as in case studies (here and here).

Cost Containment with Virtual Care

Cost containment is the flip side of the ROI coin.

While revenue is important, health system executives are right to make cost containment a priority. Last year, expense growth outpaced revenue growth by 1.2%. And, just as health systems can’t achieve their missions without revenue, they can’t effectively operate in a deficit.

I really view cost containment and revenue growth as two sides of the same coin. And, while Zipnosis has been vocally focused on revenue, we have also been focused on the flip side. So, how does virtual care support health systems’ cost control initiatives? Two ways:

Expense Reduction for Risk-Based Populations

Health systems are also big employers, and employee compensation is one of the biggest expenses they face. To help control compensation costs, health systems are often self-insured. This creates a somewhat ironic situation where healthcare costs are actually a major health system expense.

Virtual care offers health systems a low-cost access point for convenient care delivery. When focused on risk-based populations like self-insured employees, this can translate to a major cost savings. A recent study by Humana found video visit costs paid out at approximately ⅓ the cost of in-person care while producing comparable follow-up rates and lower incidence of antibiotic prescriptions.

Looking at data from across the country, we calculate the mean cost of in-person care at $320 per visit (note: we’ve seen this as high as $500-$600). Conversely, our customers see the cost of delivering care via the virtual care platform at approximately $5. That’s an average per-visit savings of $315. On an individual visit level that may not look like much, but imagine the savings possible across an entire self-insured population. Even with activation between 5% and 10%, significant cost savings is possiTake the 2018 On-Demand Virtual Care Benchmark Survey.ble – enough to cover software costs and free up budget to support important programs.

Enhancing Clinical Efficiency

I alluded to this somewhat in the previous section. Virtual care, in particular asynchronous modalities, can produce significant clinical efficiencies. On average, providers spend 15 minutes per in-person visit and are saddled with the administrative overhead of documentation later in their day, often after hours. With Zipnosis’s asynchronous modality, the visit time is a fraction of an in-person visit and there is no documentation.   

That efficiency is part of why virtual care can be an effective low-cost access point, but it also can help drive significant cost savings, since health system providers are able to grow their patient panels while avoiding the costs of adding staff, outsourcing, or the health system adding brick-and-mortar locations.

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