Employers, you have the power to shape healthcare (Part II)

This blog is a follow-up to my first blog on the power of employers to shape healthcare. The first blog covered:

• Examples of payers transitioning from passive to active purchasers of healthcare services
• Employer initiatives that facilitate the transition of their employees to prudent purchasers of healthcare services

In this blog, I will cover the following:

• Provider and benefit models that incent value-based care
• Identifying value-based vendors to better address employer healthcare costs
• Employer involvement in health policy issues that directly and indirectly impact their ability to receive value from the healthcare dollar

Provider and benefit models that incentivize value-based care:

Direct Primary Care (DPC)

• The DPC practice model is an approach to delivering and financing primary care that is new and still evolving.
• DPC practices typically only contract directly with patients or with self-insured employers. Health insurance is not involved.
• The majority of DPC practice revenues typically come from monthly or annual DPC per person membership fees paid by the employer.
• The DPC model provides expanded patient access and longer patient visits.
• Most DPC practices do not charge any cost sharing for services covered under the DPC membership fee.
• Employers usually find that by investing in the DPC model they have a positive impact on their healthcare costs as well as better health and increased productivity for their employees.
• This model can generate systemwide reductions in health care utilization throughout the community including hospitalization rates, emergency department usage, unnecessary radiology and diagnostic tests, and specialist care, leading to broad-based health care cost savings.
• The key to the overall success of the DPC model from an employer’s perspective is that high-value care becomes the first point of contact, but also the DPC physician can assist the employee in finding value-based specialists and services within the community. Obviously, the more provider choices in the community the greater the likelihood of identifying value-based specialists. ?

On-site or Near-site health centers

• Onsite clinics can be either self-administered or in partnership with a clinic group or onsite healthcare vendor. Employer-sponsored health centers may be onsite (on the employer's premises), near-site (near employer's work site), or shared-site (serving multiple employer locations in a near-site setting).
• These centers usually include primary care, physical therapy, chiropractic services and acupuncture, behavioral health, health coaching and vision services, as well as transportation to and from the center.
• On-site or Near-site health centers can also work in collaboration with the DPC model.

Centers of Excellence

• A key driver of escalating employer healthcare costs are high-end procedures. Centers of Excellence are an effective way to both address the excessive costs of these procedures but, more importantly, provide a quality outcome.
• Bundles are the payment methodology of choice for Center of Excellence (COE) services. Bundled payments?is an example of a payment methodology that has both a?risk?and?reward?component that would incent providers to be more cost-efficient. Ideally, bundled payment should be tied to some form of value-based outcomes.
• Employers can collaborate with third parties in the identification of appropriate Centers of Excellence for their employee population and these collaborators can assist in negotiating the appropriate payment methodology and level of payment.?

Direct contracting with providers

Employers can also directly contract with providers (cutting out the middleman) in their community for all services or specific services relating to their employee population. If an employer decided to direct contract with providers it is important that you do your homework both from a cost and quality outcome perspective. Having a good reputation in the community does not necessarily make that provider a good match for the employer. Information is power, so make sure decisions are data driven. Finally, it is important that the employer utilize the appropriate payment methodology and rate of payment and, if possible, negotiate with multiple providers in order to create a competitive environment for your negotiations.

Identifying value-based vendors to better address employer healthcare costs:

As noted in my Part I Blog directed to employers, passivity also applies to employers when they hire third parties, i.e., health insurance companies, employee benefit consultants, brokers, etc., and they do not hold them accountable for their performance.

What are the key criteria in identifying a value-based consultant/broker and how do you ensure you are getting the most out of that relationship?

• The number one criterion is “TRUST.”?You need to believe that your advisor is an advocate for you and just you as the employer. You need to ensure that they are not receiving compensation from other sources that would compromise their commitment to you.
• How do you compensate them for services provided? Ideally, it should be a set fee with expectations clearly identified. If possible, stay clear of percentage of premium arrangements. It is easy for employers to lose sight of how much they are paying consultants/brokers in percentage of premium arrangements and, remember, if it is a set percentage, the vendor compensation increases as your premium increases (perverse incentives).
• Do they reprice historical claims when evaluating potential carriers and do they ensure you understand the methodology being utilized to prevent them from potentially steering business to a particular carrier?
• Do they provide you user-friendly reporting to identify employer specific healthcare cost drivers? Do they provide you recommendations to address cost-drivers?
• Do they provide you data, if needed, relating to provider profiling to assist in identifying value-based providers?
• Do they provide access to nurse navigators who assist employees in finding value-based providers of care? (Note: You may pay extra for this service, but it could be a worthwhile investment.)

Key criteria in identifying value-based carriers and, if applicable, third-party administrators (TPAs):

• While most major insurance carriers do not allow this, if possible, determine their willingness to carveout service lines such as pharmacy, stop-loss, etc.
• Pharmacy Benefit Managers (PBMs) are a very lucrative business and insurance carriers that own their own PBMs are very protective of the profits they receive from them.
• Ideally, utilize transparent pharmacy benefit managers which provide the self-insured employer access to all related savings.
• If pharmacy cannot be carved out, and you are self-insured, demand access to all rebates, etc. If a carrier offers you a discount on your Administrative Fees as compensation for not receiving rebates, push towards identification of rebates to determine if their offer of discounts on Administrative Fees is pennies on the dollars.
• What is their process in managing high-risk individuals and associated claims? Does the carrier assist you in identifying Centers of Excellence within the community or region?
• What is the payment methodology utilized to reimburse providers for services rendered to your employees and their dependents? Be concerned about percentage of charge relationships that result in increased payments as providers increase their charges. If they utilize some form of value-based payments, require them to explain to you as well as to any third-party consultants the specifics of the payment methodology. While it may initially sound confusing, these payment methodologies can be explained to you in an understandable fashion.
• Do they provide members access to user-friendly transparency tools? As noted in my Employer Blog (Part I), Per an April 26, 2022 report from Milliman, “Payers that have contracts with providers on a “percentage of billed charges” basis or payers that have other “alternative reimbursement arrangements” are now allowed to circumvent the transparency requirement with work-arounds which per Milliman will make the data much more difficult for consumers and other stakeholders to use for decision-making and analysis.”?
• You should demand of any carrier that they provide your employees access to user-friendly transparency information to enable prudent purchasing of healthcare services. If you are self-insured, attempt to match key services utilized by your employee base to user-friendly pricing information available through your carrier or TPA.
• The cost-effectiveness and quality of providers in a network will vary. If you contract with a carrier with a set network ideally attempt to purchase services from a third-party that will allow you to identify the value-based providers within that network.
• As noted in Blog 1 on Employer Empowerment ideally employers should pursue self-funding. If employers decide to stick with the fully insured model, they need to go out for competitive bids a minimum of every three years to ensure the best premiums.

Additional initiatives and collaborations that can address employer’s escalating healthcare costs:

• Check out this article from the Society for Human Resources Managers (SHRM)
• Additional information from SHRM

1. As pharmacy benefit costs continue to climb, employers are finding ways to decrease drug expenses, such as more closely evaluating their spending on expensive specialty drugs, such as?biologics that are injected or infused. Employers are encouraging?the use of biosimilars?as lower-cost, clinically effective options. To curb the cost of specialty drugs, 37 percent of best performers are changing their coverage to steer care away from hospitals and toward a doctor's office (or, if practical, self-administered at home), whereas only 19 percent of companies with above-average health care spending take this approach.
2. Best performers identify what the workforce needs and understand that each employee has a unique health care journey. By?offering meaningful choice with a variety of benefit options, employees can personalize their benefit selection. To meet the varied needs of employees, best performers offer tools that support personalized enrollment decisions (59 percent). Of high-cost companies, less than half (45 percent) provide these tools.
3. Best performers know how to evaluate their programs to improve future benefits: 53 percent of best-performing companies—and just 34 percent of others—are using data to analyze benefit results. For instance, they may conduct multiyear evaluations of claims data and employee feedback to see if their initiatives improved employees' health and well-being.
4. Employers that self-fund health care costs typically buy stop-loss coverage to insure against extremely large claims. Instead of traditional stop-loss coverage, employers can join in a group medical stop-loss captive, which allows each participating employer to maintain its own self-funded health benefits plan separate from that of the other member employers. More employers with 50 to 300 employees are looking for risk-sharing arrangements such as stop-loss captives.

Employer involvement in health policy issues that directly and indirectly impact their healthcare costs:

Most employers do not have the political clout to effectively lobby at the federal or state level. They would need to rely on employer coalitions or Chambers of Commerce to advance their agendas. Sadly, in most cases, the employer lobby efforts are far outweighed by the political lobbying at the state and federal level by incumbent stakeholders and their associations (American Hospital Association, Pharma, etc.).

The following are some recommendations to enhance the employer’s voice as it relates to health policy issues:

Employer coalitions

As noted by Elizabeth Mitchell?CEO of Purchaser Business Group on Health, a member coalition of some of the largest employers in the U.S. in a recent opinion piece in MedpageToday.

?“With support from skilled coalitions, large, self-insured employers are more vigilant in looking for policy solutions where the market has failed. This has been the route to success in advocating for an end to surprise billing, demand for hospital price transparency, and provisions in the Balanced Budget Act to extend negotiated pharmacy discounts to commercial payors.

In the end, failing to take bold action to fix healthcare and change the "Game" employers fund while others profit is now a greater threat to their business and their employees than continuing along the current path. But even the largest employers know they cannot change the system alone. The way to get it done is to increase their firepower by joining together with other private and public purchasers to put pressure on the healthcare system to improve its performance. The "Game" must change, and many of this country's largest employers are taking bold steps to do just that.”

Local community initiatives

Employers as a group have the potential to positively impact healthcare in their communities. Employers need to recognize the power of collaboration with other community employers to have one voice. Employers are also on boards of hospitals, and in that role, are in position to be advocates for their fellow employers related to more affordable healthcare in their communities.

Key health policy issues that directly and indirectly impact employers:

• Site neutral payments for Hospital Based Outpatient services and independent providers. As noted in the following article, hospitals are reimbursed almost twice as much as independent providers for outpatient services. This over-payment has been a key catalyst for independent providers selling their practices to a health system which results in a less competitive provider market in the community and higher healthcare costs for employers.
• Transparency – You cannot have competitive healthcare markets without user-friendly price transparency. Employers at the national and community levels need to play a proactive role in pushing enforcement of transparency laws.
• A recent example of policies and regulations at the national level that adversely impacts employers is CMS Proposal to suppress public reporting of key measures of preventable hospital-caused harms. ?

As noted in the article, large employer coalitions and consumer advocates are angrily pushing back against a?Centers for Medicare & Medicaid Services (CMS) proposed rule. If the rule is finalized, CMS would not calculate scores under the?Hospital-Acquired Condition Reduction Program?(HACRP). Hospitals would still report on some safety measures, but certain scores -- in particular those for the 10-measure?Patient Safety and Adverse Events Composite?(PSI 90), a key component of the HACRP -- would be hidden from public data files and would not appear on the CMS?Hospital Compare?website.

The CMS proposal "is outrageous," Bill Kramer, executive director for health policy at the?Purchaser Business Group on Health, told?MedPage Today.

"Patients will be unable to know whether the provider they want to go to has more patient safety problems, more risky providers, so clinicians as well as purchasers and policymakers will be unable to identify and help patients choose those hospitals with the best patient safety record," he said. Without that information, patients are more likely to suffer from avoidable accidents, "and some of them will die as a result."

Leah Binder, president and CEO of the Leapfrog Group, which uses the CMS data to score hospitals with?safety grades?from A to F, told?MedPage Today?that she worries that not only will this proposed rule be finalized, but that CMS will extend the suppressed public reporting indefinitely, because they don't want "to make hospitals unhappy with them."

"The American public trusts hospitals to deliver care, and not to cause them to suffer unnecessarily," she said. "As a hospital or as a hospital worker, you have a job that's difficult, that requires you to keep your patients safe."

"It scares me," she continued. "I know enough to be frightened ... if hospitals are not able to manage their operations in order to protect their patients."

Closing Comments:

While employers, rightly so, focus on their own employees’ healthcare costs and quality outcomes, they also have a vested interest in a healthy community.

?Both on a national and regional basis, employers need to play a more proactive role in creating a healthy and more affordable healthcare environment. This can be accomplished through increases in proactive initiatives at all levels of societies.

?Employers should be?sitting at the table?with providers of care in creating a sense of urgency when it comes to transforming our healthcare system to one that is more value-based.

Finally, as I noted in my Part I blog, I try to utilize my publications as a forum for discussions on important topics in healthcare. I am the first to recognize that I do not have all the answers and people may have different perspectives on the issues I cover. I welcome feedback from the readers of this blog. Feel free to provide further insight into the topics I discussed in this blog as well as provide ideas and recommendations for employers and employees to facilitate their transition to active purchasers of healthcare services.

Tom Campanella is the Healthcare Executive in Residence at Baldwin Wallace University. Backed by more than 35 years of experience in the industry—particularly the health insurance, physician and hospital sectors—he’s focused on strategic advising and community outreach. Follow Tom’s articles on LinkedIn for his latest weekly coverage of the healthcare industry.

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Baldwin Wallace University would love to partner with healthcare-related employers and their employees to explore ways to ensure both organizational and individual success during this time of disruption and beyond.

Baldwin Wallace University Can Assist Employers and Their Employees in the Following Areas:

• Organizational in-house leadership programs
• Organizational collaborations relating to continuing education for employees
• Organizational, specific programs relating to current and future trends impacting industry sectors and organizations
• Professional development programs such as: process improvement, connecting with your customer, and differentiating your product or service in a competitive market.
• Healthcare-related degrees and programs:
• Undergraduate degree completion
• MBA, Healthcare Management
• Graduate Certificate in Healthcare Management
• MMS, Physician Assistant
• MS, Speech-Language Pathology
• MPH, Master in Public Health
• Music Therapy
• Accelerated BSN, Nursing

For more information about what BW has to offer, please visit?bw.edu/cpd.