oak-street-chicagoDuring a recent talk in Chicago given by Harvard Business School’s Michael Porter, in which he offered his take on the direction health care should be headed, the business guru took the time to call out the work of the locally based primary care provider Oak Street Health.

Porter’s talk about why he favors bundled payment as the model that will truly transform health care was wide-ranging and interesting, and whetted my appetite for more on what makes Oak Street Health worth mentioning.

After hearing Oak Street’s story, which has been described previously in H&HN magazine, it’s readily apparent that its model, already in implementation, relies on the kind of altered incentives Porter seems to favor.

The investor-owned operation is built on the belief that Oak Street can provide primary care to a sicker-than-most population far better than what the patients are currently receiving.

“No one seems to do it very well. So we like to fill the need, just from a mission perspective,” says Griffin Myers, M.D., founder and CMO of Oak Street.

Here’s how it works: Oak Street receives a risk-adjusted global capitation payment from CMS-hired insurers for seniors with low income, basically the senior dual-eligible population.

That payment is designed to cover everything. “We are at risk for all of the care,” says Griffin Myers, founder and CMO of Oak Street. “That’s not just primary care. If somebody ends up in the hospital, we pay the hospital bill; if they end up in a specialist’s office we pay the specialist; if they end up in a rehab, we pay the rehab;” Myers says.

But Oak Street Health provides a cranked-up version of primary care at a cost that is roughly triple the annual amount spent on primary care with the average Medicare patient, but far cheaper than inpatient care, Myers says.

The economics are compelling: If Oak Street’s primary care efforts are good enough to reduce inpatient admissions sufficiently, the patients are healthier and Oak Street harnesses the savings. Myers estimates that the average cost of a hospitalization for seniors of about $13,000 equals the cost of about 100 clinic visits. Under that scenario, if they can prevent a single hospitalization as the result of 90 primary care visits, they’ve saved money, he says.

Myers described generally how well the model is working. He says the admission rate of Oak Street’s patients runs a little more than 200 per 1,000 patients, compared with a rate of 770 per 1,000 for Chicago males that are dually eligible and 315 per 1,000 for Medicare-age admissions nationwide.

Because Oak Street Health is still in growth mode, adding clinics — it currently has 15 serving 16,000 patients — Myers declined to discuss whether it’s financially in the black yet. But he did say that it is making money at the patient level and it has clinics that are making money.

And patient satisfaction ratings are through the roof, he adds.

I hope to keep you updated regularly on Oak Street’s progress.