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How Oak Street Health Retains 97% of Its Patients

Analysis  |  By Philip Betbeze  
   October 19, 2017

Oak Street's network of primary care centers for Medicare eligibles in medically underserved communities offers a blueprint for success in value-based care—and a warning for acute-care focused organizations.

Rapidly growing Oak Street Health, a healthcare organization that delivers a unique primary healthcare experience, offers both a blueprint and a warning for organizations that depend largely on complex acute care services.

The warning: Innovators are looking to cut expensive hospital care for their patients.

The blueprint: Oak Street's methods could serve as a model for health systems to move into population health and blunt the impact of a reduction in acute care demand.

Oak Street’s network of 24 primary care centers caters exclusively to adults on Medicare, and primarily to those on Medicare Advantage health plans.

After launching in Chicago in 2013, the company has expanded to smaller cities in Illinois, Michigan, and Indiana, and recently announced its expansion to Philadelphia.

Each center has between 2,000 and 4,000 patients, and it has reduced hospital inpatient visits by 40% for its more than 30,000 patients.

One of Oak Street's founders, Mike Pykosz, a Boston Consulting Group alumnus, has bet large on the company’s ability to attract physicians and patients while driving better outcomes at lower cost and with better patient experience. Following is a lightly edited transcript of that interview.

HealthLeaders Media: How did you get involved with this company?

Pykosz: In consulting, one of my clients was a big Medicare management plan. We thought it would make a good business to find a way to take better care of at-risk older adults.

We spend twice as much on healthcare per capita as most other industrialized countries, but we’re not getting quality for it. This population is the one driving the highest costs and the poorest results. In late 2011 one of my cofounders and I, Chief Operating Officer Geoff Price, decided to do it.

HLM: What’s the business case?

Pykosz: If you have the right components, payment model, and interventions, you can create differentially good outcomes at a lower cost and with better patient experience. Healthcare’s so local and based on payer and provider mix.

The issue is how to create a replicable platform to do it in markets where it didn’t evolve organically. In late 2012, we were able to talk our third cofounder, Griffin Myers, MD, our chief medical officer, into joining us. We raised private capital from a lot of individuals.

HLM: How do you choose your markets?

Pykosz: The first thing we look at is where there are a lot of older adults, and where there are not so many doctors. Our ideal locations are more blue collar and low income. Our first centers were built on the South and West sides of Chicago in neighborhoods that have a lot of challenges, and from demographic and cost data, where there is a lot of chronic disease burden.

We want to go to places where we can provide services that don’t exist and where we can make the most impact. The patient is ours. We’re accountable for their entire care and we’re very data-oriented.

In our financial model, we take full risk and global capitation for Part A and Part B. That’s risky, but for us, our whole model is driven to provide higher-quality care. In 2016, every plan ran a surplus.

HLM: Describe your patient population and what’s different about the locations.

Pykosz: The majority of our patients are Medicare Advantage, and we work with eight MA plans. We start all centers from the ground up—we don’t try to take existing assets and change the way they practice.

We are never in medical office complexes. We’re in retail locations of about 15,000 square feet. We want to provide more access and lower barriers.

We start with zero patients and hire providers and the team, and we go into the community and talk about why it’s important to have a medical home and a doctor. This is basic stuff, but a lot of these patients have never had a primary care or insurance.

We encourage them to go to the doctor regularly, not just when they’re sick. We have transportation, we average 30-minute visits, and we have 24/7 phone coverage. Ninety-seven percent of those who try a visit remain with us long term.

HLM: How do you recruit clinicians?

Pykosz: We have to find physicians who are aligned with the mission. It’s a challenging patient population and the model is different.

Our panel size is about 500 patients versus a national average of about 2,300. It’s a different way to practice medicine, and bonuses are based on quality, not RVUs.

This is better alignment and it’s not a model for everyone, but we have plenty of providers. We have a waiting list of docs who want to do this in Chicago.

HLM: How do you ensure that you’re not keeping patients out of the hospital who need to be there?

Pykosz: We send patients to specialists or the hospital if they need it. If we don’t, it’s just going to get worse and cost a lot more money. If we send patients to hospitals early enough when they really need it, they’ll need a shorter stay.

Think of it from quality perspective first: Outcomes and quality of care is 99.9% of the time what ends up making the company money in the long term.

HLM: What’s your vision of full deployment?

Pykosz: We had to have conviction that the model was sustainable and replicable. We knew what we wanted to build.

We learned a lot on the way because with a small number of patients you couldn’t take full risk. So we pretended we were in a value-based world when we were in fee-for-service.

We lost a lot of money on the way, but it got us to a place where we had a lot of conviction we would be successful in a risk model. When we did, we got paid differently and the financials looked a lot better but the care model didn’t change.

We could put up hundreds of these but we struggle with what’s the proper pace, because the need is so high. We won’t have imaging or surgery centers. There are plenty of those around. Going to Philly is a big step from the Midwest. It puts us in the national conversation. The model works.

Philip Betbeze is the senior leadership editor at HealthLeaders.

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