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Employers, providers team up for health care savings with employer-purchased care agreements
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University Hospitals announced that University Hospitals Cleveland Medical Center was recently selected as a national Center for Excellence to provide joint replacement surgery and orthopedic care for Walmart employees and their families. With this newest addition, Walmart employees can now receive joint replacement surgery at 11 Centers of Excellence across the country.
Since January 2014, Walmart, along with Lowe’s and McKesson Corporation, has established employer-purchased care agreements with providers through the Employers Centers of Excellence Network. Created by the Pacific Business Group on Health, a 501(c)(3) nonprofit employer organization, and Health Design Plus, a third-party administrator, the Employers Centers of Excellence Network provides employees with enhanced benefits for joint replacement surgery services at participating hospitals. Benefits include 100% coverage of all procedure costs, travel, lodging and an expense allowance for the patient and a caregiver.
“The Employers Centers of Excellence Network, although it has grown over time, it is, at its core, a travel surgery program designed by employers to meet their needs,” Olivia Ross, MPH, MBA, associate director of the Employers Centers of Excellence Network at the Pacific Business Group on Health, told Healio.com/Orthopedics.
Through a five-step process that includes reviewing publicly available data, an invited request, team assessment, request for proposal and in-person site visit, Pacific Business Group on Health and Health Design Plus select Centers of Excellence and negotiate bundled pricings for the employers participating in the program.
“In the world of orthopedics, we see too many centers that are doing procedures without providing that level of quality and value and the employers are now aware of that,” Ross said. “This is a chance for them to say we are not going to send our patients to a hospital that is not making that kind of commitment.”
Dissatisfaction with insurance industry
Along with the need for the best quality of care, “dissatisfaction with the insurance industry in negotiating and managing the cost of the employer” is another reason employers may participate in employer-purchased care, according to Michael J. McCaslin, CPA, principal at Somerset CPAs and an editorial board member of Orthopedics Today.
“I think the employers are dissatisfied with cost of care, ultimately, and feeling like there is not a good enough relationship on how that care is being managed,” McCaslin told Healio.com/Orthopedics. “Care crosses many provider elements — hospital, physician, ancillary services, skilled nursing, home health, etc. There is frustration this cost is not necessarily coordinated and managed collectively across all of these providers. There could be some additional issues with respect to access and service, but I think more than likely it comes down to a dissatisfaction over the cost of care, and, therefore, feeling like they can cut the insurance company out of the equation and end up with a better result. The insurance company really becomes a third-party administrator in this instance.”
Although employer-purchased care has numerous benefits for employers, employees and providers, defined cost may be one of the biggest benefits as it will eliminate variations and surprises associated with total joint replacement surgery.
“In theory at least, for the care that is contracted, I should have a fixed definable cost,” McCaslin said. “That is one goal ... eliminating the variation, surprises, the things that cost money if in fact I have negotiated a reasonably good fixed rate contract for the services defined.”
The cost savings debate
But McCaslin noted there is some debate whether the cost savings to the employer will be beneficial at the end of the patient’s care, specifically for patients with postoperative complications.
“The question is follow-up and additional travel cost that are typically required for the care,” he said. “That gets back to did I, the employer, save any money and what I thought was a benefit to my employee, is it by the time they have to travel a couple of times?”
However, an article published in Harvard Business Review by Jonathan R. Slotkin, MD, and colleagues showed participation in the Employers Centers of Excellence Network led to lower employer costs, lower patient out-of-pocket costs and excellent patient satisfaction scores among Lowe’s employee associates. These drivers in cost savings include reduction of inappropriate utilization, complications and unit cost, according to Slotkin.
“The employees do not pay any co-insurance, co-payment or deductible and ... that could mean over $3,000 in savings just for the individual patient per surgery,” Slotkin, director of spinal surgery for the Neuroscience Institute and physician leader of Employer Purchase Care efforts at Geisinger, told Healio.com/Orthopedics.
Provider concerns
McCaslin noted employer-purchased care may create problems with whether providers receive a high enough volume of patients from the employer, and cause conflicts between orthopedic surgeons if postoperative complications arise.
“In the current structure with a limited number of providers typically included in the employer contract, we are going to pit surgeon against surgeon in this care process because [surgeons may think], ‘well I did not do [the original procedure], so now why are you coming to my office for after care? I think you should go back to Johns Hopkins or wherever it is that you originally had your care rendered,’ and that, I think, creates problems of efficient, effective care,” McCaslin said.
No doubt, many orthopedic groups are happy to engage in employer-contracted care to begin understanding this as a different delivery model with a small enough patient population to allow learning with a manageable risk, he noted.
Know your cost of care
Despite these concerns, employer-purchased care has spread from a large employer market to now include medium and small businesses, according to Slotkin.
For hospitals that want to enter into employer-purchased care agreements with employers, Joseph Bosco, MD, professor and vice chair of orthopedic surgery at NYU Langone Health, said it is important to know the “cost of care you provide and be able to provide the highest value of care possible.”
“If you do not know how much it costs to provide your care, then it is difficult to negotiate a contract that is favorable for you,” Bosco said.
Slotkin, who partner with Michael H. Haak, MD, of Geisinger’s Orthopedic Institute in this initiative, noted having the right systems in place allows providers to take better care of all patients, even if providers are not yet ready to enter into an employer-purchased care agreement.
“[For] those systems or providers that feel that they are not ready yet for this type of care, we would suggest that they get the care systems in place ... to be ready for this type of care delivery,” Slotkin said. “Even if you do not end up in these sorts of contracts, the improvements you need to make in your care processes to win these types of arrangements have a halo effect that bleeds over to all of your book of business and causes you to take better care of all of your patients.” – by Casey Tingle
References:
Slotkin JR, et al. Why GE, Boeing, Lowe’s, and Walmart are directly buying health care for employees. Available at: hbr.org/2017/06/why-ge-boeing-lowes-and-walmart-are-directly-buying-health-care-for-employees. Accessed June 25, 2018.
www.newswise.com/articles/view/696066/?sc=dwhr&xy=10007438
For more information:
Joseph Bosco, MD, can be reached at 333 East 38th St., 4th Floor, New York, NY 10016; email: ryan.jaslow@nyumc.org.
Michael J. McCaslin, CPA, can be reached at 3925 River Crossing Parkway, Third Floor, Indianapolis, IN 46240; email: mmccaslin@somersetCPAs.com.
Olivia Ross, MPH, MBA, can be reached at 575 Market St., Suite 600, San Francisco, CA 94105; email: oross@pbgh.org.
Jonathan R. Slotkin, MD, can be reached at 100 North Academy Ave., Danville, PA 17822; email: maburke1@geisinger.edu.
Disclosures: Bosco, McCaslin, Ross and Slotkin report no relevant financial disclosures.
Perspective
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Scott D. Boden, MD
At Emory, we have a strategic initiative to explore direct contracting with select employers when the structure allows enhanced quality of care and service for the patient and their family, rather than discounted pricing as the primary motivation. The most effective direct contracts with employers involve employee benefits to steer patients to the contracted centers or system. A close partnership in design of the benefit with the employer focusing on what is best and practical in the long term for patients rather than overly focusing on short term “unit cost” price savings is also a unique opportunity of contracting directly with large self-insured employers that have a more longitudinal view of health, wellness and cost, assuming they have a reasonably stable employee base.
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