Actuarial Study Estimates that Online Care May Reduce Healthcare Costs

Thursday, September 25, 2008 General News
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Milliman study shows that the use of online care for certain prescribed circumstances may cut first dollar employer sponsored health plan expenses by $3.36 per-member-per-month for commercial population and $6.95 PMPM for a Medicare population

Boston, Sept. 24 /PRNewswire/ -- Results of a study released today found that the use of Online Care for certain prescribed circumstances may result in first dollar financial savings for employer sponsored health plans. The Milliman study was authored by Arthur L. Wilmes, FSA, MAAA, principal & actuary at Milliman, a widely respected actuarial firm with a leading presence in the healthcare market. The analysis demonstrated potential medical savings of $3.36 and $6.95 per-member-per-month (PMPM) for commercial and Medicare plans, respectively. The study investigated the use of Online Care services similar to those in American Well's Online Healthcare Marketplace(TM) System, which became commercially available earlier this year.

"Harnessing technology to shift select care to the home setting will have broad financial impact on the healthcare market, one that cements the justification for Online Care," said Roy Schoenberg, MD, MPH, CEO of American Well Systems. "This complements what is already known about Online Care's transformational effect on consumers' access to healthcare services and providers' choice of practicing lifestyle."

The majority of savings estimated in Milliman's analysis came from the potential for substitution of non-emergent ER visits and in-person visits (both acute and follow-up) with lower-cost live interactions using an Online Care platform. The savings for the commercial population amounted to 9.2 percent for the services analyzed, representing an estimated 1.2 percent reduction in overall medical costs. For Medicare, the savings amounted to 12.1 percent for the services analyzed, equivalent to an estimated 1.2 percent of overall medical costs. Milliman also identified other potential clinical applications of Online Care with cost savings potential, including chronic patient management, early disease detection and care management. These are still under study.

"To estimate the impact of Online Care, we developed individual actuarial cost models for a commercial and Medicare population from internal Milliman data sources," said Art Wilmes, who led the study at Milliman. "After creating these claim-based models, our medical and actuarial team reviewed the underlying conditions and their episodic context to identify the subset of encounters for which Online Care may be medically appropriate. We assumed an opportunity model approach where the cost of identified encounters was replaced by the cost of an online encounter. We found that replacement with an alternative mode of care can impact medical expenditure. Specific areas of focus in this phase of the study included: Facility & Physician ER Services; Office/Home Visits; Outpatient Psychiatric Visits; and Urgent Care Visits. The cost of care with the alternative use of online services was then estimated and compared to our current actuarial benchmarks. Readers of our report and the associated model will be able to assess the sensitivity of the economic results and how the results may change based upon different perspectives as to the use and efficacy of the Online Care alternative."

"We look forward to expanding our model to examine additional areas of Online Care financial impact, such as chronic patient management. We will also further review these estimates using prospective data as Online Care becomes more widely deployed in 2009," said Mr. Wilmes.

About Online Care

The Online Healthcare Marketplace allows credentialed physicians to make themselves available to patients for online and phone consultations at their discretion. Using a browser or a phone, patients can gain im

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