Cost-Benefit Analysis of Community Health Workers

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According to the 2013 Medical Expenditure Panel Survey, hospital inpatient expenses account for a large portion (nearly 30%) of total health care expenses and health care spending is highly concentrated among a relatively small proportion of individuals. The top 1% of spenders accounted for 21.5% of total expenditures while the lower 50% accounted for just 2.9%.

Emergency department visits and inpatient hospitalizations drive much of the costs generated by this small percentage of patients. Many of these high spenders are those with chronic medical conditions such as hypertension, heart disease, asthma, and arthritis, who are not adequately controlling their conditions through regular outpatient care. These individuals, for example, may be having difficulty navigating the complex health care system or not fully understand their prescribed medication regimen. Even for those of us without complex conditions, knowing which doctor to see, having to attend appointments for multiple specialists, and keeping track of medications and when to take them can be cumbersome, and this difficulty is only amplified for those who do. But when these tasks aspects of care management are neglected, visits to the emergency room are often inevitable.

Community health workers (CHWs) have become an important tool used by healthcare organizations, such as primary healthcare practices and insurers, to improve disease management for patients with chronic conditions and curb the high costs associated with these individuals by reducing ED visits and hospitalizations.  These programs place a focus on prevention and are used to address social determinants of health, provide health education, and facilitate changes in health behavior while connecting with the patient at their home or other sites within the community. Despite evidence showing both improved medical outcomes and cost savings from such programs, there is uncertainty among health care organizations about the financial costs and benefits of CHW programs. A new Medical Care paper responds to this uncertainty by determining how much CHWs would need to reduce ED visits and associated hospitalizations among their caseload to be cost neutral from the perspective of a payer that funds both CHW costs and ED and hospitalization expenses. Cost-neutrality occurs when the money saved from less ED visits and hospitalizations equals the expense of the CHW program.

This study simulates the characteristics and utilization patterns of a nationally-representative sample of individuals based on demographics, insurance status, and medical diagnoses. The analysis focused on individuals with one (or more) of the six conditions that commonly afflict individuals targeted for CHW engagement: asthma, congestive heart failure, type II diabetes, human immunodeficiency virus (HIV), hypertension, and substance abuse. Based on data from the Agency for Healthcare Research and Quality, the researchers simulated how often each individual would likely visit the ED and be hospitalized. Patients who visited the ED and a primary care provider at least once in the prior year were marked as eligible for CHW engagement. From this pool, CHW caseloads for each diagnosis (based on the patient’s principal reason for the ED visit) were filled based on data from the Massachusetts Department of Public Health.

Basu and colleagues then calculated the costs of each caseload prior to any impact of the program. These costs were based on data specific to each patient’s insurance status, condition(s), and demographics and varied widely depending on the principal condition associated with the caseload. This data was then used along with the estimated cost of $47,800 per year per CHW to obtain the benchmark number of ED visits among each caseload that must be prevented to pay for the program’s costs.

The results suggest that it is easier to achieve cost-neutrality for certain conditions, over others. As given in the paper, CHWs assigned to a panel of 70 patients with uncontrolled hypertension or congestive heart failure have the lowest cost-neutrality benchmarks at four to five ED visits averted per year (3% to 4% of typical ED visits among such patients). This finding is greatly influenced by the fact that the overwhelming majority of ED visits for these conditions result in a hospitalization.  In contrast, CHWs assisting patients with a primary substance abuse diagnosis, who typically have low costs for ED visits and a low probability of inpatient hospitalization, need to avert the greater number of visits to pay for the program at 23 visits per panel of 70 patients (or 37% of expected ED visits). CHWs working with most other diagnoses would need to avert between 7% and 21% of ED visits.

For payers concerned with getting the most bang for their buck (and who wouldn’t want this?!), this study not only demonstrates that CHW programs can be a cost-effective means to reduce the high number of ED visits and hospitalizations of patients with chronic medical conditions, but also suggests that individuals with common cardiovascular conditions should be the priority targets.

Damika Barr

Damika Barr

Manager, Public Policy at AmeriHealth Caritas
Damika W. Barr is always looking for the policy solution in healthcare challenges. Damika is a Public Policy Manager at AmeriHealth Caritas, where she evaluates legislative, regulatory and public policy activities related to Medicaid and Medicare. Before joining, AmeriHealth Caritas, Damika served as the Policy Surveillance Director at Public Health Law Research at Temple University. Ms. Barr has a Juris Doctor from Thomas Jefferson School of Law, a graduate certificate in Public Health from the University of North Carolina, Chapel Hill, and a Bachelor of Science from George Mason University. The views expressed are those of the author and do not necessarily reflect the views of AmeriHealth Caritas. The views expressed are those of the author and do not necessarily reflect the views of AmeriHealth Caritas.
Sophie Ranen

Sophie Ranen

Sophie Ranen is a senior at the University of Pennsylvania majoring in Health and Societies with a concentration in healthcare markets and finance. She is passionate about finding innovative approaches to the challenges facing the healthcare system. Most recently, she was a public policy intern at AmeriHealth Caritas where her work focused on the analysis of policies affecting Medicaid. In the fall of her junior year, Sophie traveled to India, South Africa, and Brazil where she studied local healthcare systems and public health initiatives, the impact of globalization on health, and medical anthropology. She also completed comparative research on the conceptualization, treatment, and stigma of mental illness. The views expressed are those of the author and do not necessarily reflect the views of AmeriHealth Caritas.
Sophie Ranen

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About Damika Barr and Sophie Ranen

Damika W. Barr is always looking for the policy solution in healthcare challenges. Damika is a Public Policy Manager at AmeriHealth Caritas, where she evaluates legislative, regulatory and public policy activities related to Medicaid and Medicare. Before joining, AmeriHealth Caritas, Damika served as the Policy Surveillance Director at Public Health Law Research at Temple University. Ms. Barr has a Juris Doctor from Thomas Jefferson School of Law, a graduate certificate in Public Health from the University of North Carolina, Chapel Hill, and a Bachelor of Science from George Mason University. The views expressed are those of the author and do not necessarily reflect the views of AmeriHealth Caritas.

The views expressed are those of the author and do not necessarily reflect the views of AmeriHealth Caritas.