Department of Defense

Improving Quality and Reducing Costs in Military Health System

In the US, 10% of patients account for 70% of health expenditures. Patients with chronic medical conditions account for >80% of all health care spending. In the Military Health System (MHS), 25% have a chronic medical condition and account for nearly 50% of the health care costs. Care management (CM) has emerged as a successful intervention that improves quality and reduces cost among the highest health care utilizers (HU).


Studies of CM have shown significant improvements in quality and reductions in utilization/cost. In one study patients had 24% fewer hospital days, 37% fewer skilled nursing facility days, and 15% fewer ED visits. Based on Medicare rates and costs of CM, the annual savings were $75,000 per care manager who is responsible for 50 HU patients. In a second study, patients had fewer hospital admissions, hospital days and ED visits translating into a $1,304 per patient 6-month cost reduction; $4,340 per patient 6-month reduction after excluding highest risk patients. The estimated savings after controlling for CM costs ranged from $8,000 to $190,400 per care manager.


The DOD Military Health System (MHS) has not previously utilized CM. We’ve identified >1800 HU patients eligible for CM, representing <2% of patients in our catchment. A cost analysis found that 2% HU patients represented 12% of all clinical service costs in FY2010, over $6 million. Only 19% of our HU were >65, but they comprised >60% of clinic visits and 70% of all ER visits and hospital admissions among HU for a cost of $4 million. A conservative estimate of the impact of CM in the MHS yields a cost savings of approximately $2.7 million per US Navy military treatment facility (MTF); times three MTFs in CONUS equals $8.1 million in yearly savings. Taking into consideration all USAF, Army, Navy and Marine Corps MTFs and clinics, the total cost savings for the DOD health care budget with deployment of CM for HU patients would be expected to reach significantly higher levels.



Idea No. 16848