For many employers, the ever-rising cost of healthcare demands they seek out new and innovative solutions. An on-site clinic is often the right solution.
Because a clinic requires a substantial investment, we sat down with Vera CFO Sarah Cole to discuss how to make the financials work. From uncovering hidden costs to avoiding outdated fee-for-service pricing models, here’s what she had to say.
Q: Primary care is often viewed as a loss leader, what are the key things you do to make the financials behind primary care work for Vera’s clients?
Sarah: The historical treatment of primary care as a loss leader certainly works in a production-oriented, fee-for-service system to generate revenue for the systems involved, but it does very little to reduce overall healthcare costs and improve health.
Vera's approach to care is to have more time with the patient and employ medical home and population health tactics. This allows us to reduce health care costs incurred outside of the clinic through things like reductions in emergency room visits due to our proactive approach to health and convenient clinic access.
Q: What are the top three factors that an employer should be thinking about when they start evaluating whether an on-site primary clinic is right for them?
Sarah: First, employers are often at a whole variety of different stages of change when it comes to contemplating doing something like this. An ideal employer for us would be one that already includes the health and wellness of their employees and their families as a high strategic priority. That’s really important to us and the right fit for a successful primary care model.
Second, employers should have an appreciation for how increasing their investment in prevention, along with a whole health approach, can drive a return on investment. Finally, they should also have an appreciation for the endeavor as being a long-term commitment.
Q: What are the typical challenges that you face when you’re structuring the financial side of a deal with a client?
Sarah: It depends on where they are in terms of their education around this stuff. But the first factor is often just this concept of paying more for primary care than you historically have. Primary care has been treated as a loss leader in our traditional system, so it is a bit of a paradigm shift for folks who are thinking about spending more on primary care than they have in the past. But, that’s incredibly important. As I said before, the equation needs to flip and we need to spend more on primary care in a capitated form so that all the incentives around improving health and reducing costs are aligned for all parties involved. That’s a key factor when negotiating.
Q: How does Vera structure its costs? Why?
Sarah: The way we operate is very simple. It’s primarily staffing because our provider-patient relationship is important, as is our integrated health coach. We have specific panel sizes that determine the maximum number of patients in a group that one provider or health coach can support. We start with the number of people that could potentially come to our clinics, and then we staff accordingly to be sure we have the adequate providers and coaches and support staff in the clinic. That’s a huge chunk of what our costs are. There are some variable costs driven off the number of members, but they’re simple things like supplies. In the end, it’s not complicated. It all comes back to the people.
Q: How does transparency play a role in Vera’s cost structure?
Sarah: Transparency and trust are fundamental values in our relationships. We support pricing transparency in each of our pricing models. The first model is a per participant per month fee. It’s a fixed fee that an employer would pay us based on each eligible member of their health plan. That model creates very predictable and clear information in terms of the financial impact an employer can expect from us. We also always provide transparency to a range of cost elements including visit types and volume, and patient satisfaction.
The second model passes major operating costs on directly to the employer. The employers handles things like staffing and other major operating expenses, and we charge a management fee that’s similar to a per participant per month fee. This model provides more transparency, which some organizations prefer because they want to manage operating costs more directly.
I prefer the first model because it allows us to run the clinic for the employer with a more turnkey approach, saving our business partners from having to approve operational decisions too frequently. It has a cost risk that we take on because whenever there’s a need to, say, hire more people, that’s on us. With the second model, those costs and risks pass through directly to the employer.
Q: What hidden costs do you typically see in how competitors price their services?
Sarah: We have this value-based model that requires a series of services, not just staffing, and generates a reduction in costs overall and also improves health. Our competitors will pull out similar services as being optional and they’ll assume low levels of engagement, so their staffing costs are lower. This makes them look far less expensive, but all the client is getting is a bare-bones model. It might be less expensive, but it’s not going to have the health and cost management impact of the Vera model.
Q: What pricing techniques do you see in the industry that you oppose?
Sarah: Some have decided to continue the problem with fee-for-service. They may charge a fixed management fee, but then they also charge a per visit fee. That does nothing to fix the real problem with misaligned incentives. It just brings primary care closer to home and a little easier to access.
Q: How do Vera’s outcomes influence the cost and pricing conversation with clients? What type of outcomes should an employer look for from a primary care vendor?
Sarah: Our key outcomes are improved health and a reduction in overall healthcare spend. The savings generally drive most employers to make this sort of purchase because they’re feeling some pain in terms of how much they’ve been spending on healthcare. They’re looking to start doing something to control that because they haven’t had a lot of tools to control it in the past. We are a mechanism to do that.
We generate enough savings to more than cover what they’re paying us and then some, so ultimately, they should end up with more money to invest in other parts of their business than they would have without Vera.
Q: Why is Vera confident enough to offer a performance guarantee to clients?
Sarah: Because our results prove it out. We’ve had some really wonderful experiences with employers who are willing to get in there and partner with us and follow our best practices. When we are able to have best practices by the employer, and when we can do our work and provide all the services we offer, that results in really healthy savings. To be honest, we don’t see it as being risky.
Q: What’s something you think every CFO should be thinking about when it comes to healthcare spending?
Sarah: I would want them to be thinking that their healthcare investment is as much their responsibility in their oversight as all the other investment that occurs within their organization. I think it’s pretty common for most CFOs to think that it is something they don’t have a lot of control over, but in my opinion it is the job of the CFO to balance all of the costs of the organization and to be creative about what they can do to control them. Vera is a solution that makes the healthcare investment work so much harder for an organization.