U.S. Health Care’s resistance to change may be moot. Employers who provide the majority of health benefits to Americans are taking matters into their own hands – and seeing astounding results.
Employers know something has to be done – so they are doing it. Employer spending on health care services increased by 44% per enrollee from 2007 to 2016, reaching an annual amount of nearly $700 billion in 2017 – roughly what the Pentagon spends on defense.
Innovative companies including Walmart, Lowe’s, McKesson, GE and Boeing are disrupting how they pay for care by taking insurers out of the equation and contracting directly with leading health systems. Remember what I keep saying: If health insurers took a vacation, U.S. Health Care would immediately get fixed because then providers would have to look those paying for their services right in the eye when they say how much!
That is exactly what is happening! Providers can no longer hide their prices behind insurers! These companies working closely with providers such as Geisinger, the Mayo Clinic, John Hopkins, and Virginia Mason, and with the help of specialized consultants, are crafting direct bundled payment arrangements that cover the cost of an employee’s care for certain medical events from start to finish – all the procedures, devices, tests, drugs, and services needed. In most instances, they are also picking up the tab for any necessary travel, lodging, and meals for the employee and a caregiver in order to save money (and practicing competitive shopping at the same time serving notice to local providers to get their prices in line), thereby democratizing destination care programs that historically were reserved as an executive perk.
Walmart has many successes to show for their six-year-old Centers of Excellence (COE) program. Walmart’s COE program has saved the company tens of millions of dollars and produced better outcomes than conventional, piecemeal care has. A 2012 survey, found that costs vary more than tenfold across the U.S., for example, hip replacements ranged from $11,100 to almost $126,000 nationwide. So a company like Walmart, the largest private employer in the world, providing coverage to more than 1/1 million U.S. associates and their families, had a huge challenge and had to figure out how to rein in and standardize costs. Their COE program has proven up to that challenge.
Check out this five-part series from Harvard Business Review to see, step-by-step, how you can do the same!
Another challenge Walmart faced was the fact that trying to get employees to shoulder more of the expense just turned into employees not getting appropriate care, meaning that employees wouldn’t seek care until it was an emergency, which defeats the purpose of having healthy, productive employees -- and emergency care is much, much more expensive than preventive and early care. Nationally, workers’ out-of-pocket expenses (beyond premiums) have increased in parallel with employers’ costs and, according to the Health Care Cost Institute, topped $5,600 per person, on average, in 2017. Walmart, and these other innovative companies, realized their employees just don’t have $5,600 extra lying around, which is why they weren’t seeking needed care. Walmart’s COE program solved this problem.
There was also the issue of quality. Given the wide variation in outcomes for common procedures among different providers, Walmart, like most other employers, had limited control over the quality of care their employees were receiving. Walmart’s COE program also solved this problem, choosing the providers they were willing to work directly with carefully based on quality of care. Walmart has developed not just bundled coverage but also Accountable Care Organization (ACO) arrangements with selected providers, with the driving principle being to secure the highest-quality care at the best price.
Given the fact that U.S. employers and their employees hold the purse strings on the largest collective spend in U.S. health care, Walmart and these other companies are demonstrating the power they have to finally achieve the transparent, accountable, affordable care we all need and deserve. Kudos! Keep it up! One more huge step toward Consumers Driving Health Care!
Check out this five-part series to see, step-by-step, how you can do the same!
Source: Lisa Woods, Jonathan R Slotkin, MD and M. Ruth Coleman, “How Employers are Fixing Health Care,” Harvard Business Review retrieved 4-3-19 at: https://hbr.org/cover-story/2019/03/how-employers-are-fixing-health-care
Rylan Klaseen & Associates
Rylan Klaseen & Associates
Serving Southern California: