Large Employer's Responses to Rising Healthcare Costs includes Medical Travel-- but it's complicated

A recent survey published by the National Business Group on Health, indicates that to reduce demand, self-funded employers who offer health benefits to employees are shifting more costs to employees and seeking more opportunities to contract with health systems and other healthcare ancillary services providers through both value-based contracts and optimizing site of care delivery for specific services. But there's more to this whole construct than the juicy findings of the NBGH report...

Narrow networks are declining in popularity for several reasons

Most employers have essentially given up on the notion of narrow networks offered by their ASO suppliers and TPAs, citing a decline in popularity and rising complaints about timely access to care with the providers they trust or want to consult with from employees and dependents.

I know from working in this space for more than a decade that both employees and employees want fair prices (not "cheap care") and greater personal choice of who cares for them and their families.

While the narrow network concept may work for an HMO or PPO, the ERISA rules for fiduciaries and plan administrators requires them to, among other things, seek out the best possible care and conserve plan funds. Employers have shared with me time and time again that while the ASO may decline network participation to higher cost providers, often the rates that the employer pays (and cost shares paid by employees and dependents) doesn't change much -- doesn't change "enough" to warrant the disruption of provider-patient relationships that ensues on adoption of the model, or the time HR spends on complaints because of it.

So what's the point of narrowing choice if the utilization of a narrow network designed by the ASO or TPA doesn't move the cost needle for the employer and employee?

I'll tell you: Often this transition to narrow networks results in higher margins for the ASO or TPA. How? It lowers network management and contract negotiation and management costs and provider credentials verification costs - just for starters. The more reduction a network manager can realize, the fewer provider relations and provider contracting team members it requires to manage and maintain the network. All these margin increases are realized not through lower contract rates, but instead through lower overheads. That's why the employer and employee don't see much change in lower healthcare costs with this approach.

This two point test is not met in most ASO narrow network offers. As a result the popularity of use of the narrow network model has dropped from 26% to 19%. Contracting directly with providers enables the negotiation to meet both prongs of the test with the best providers, as deemed “best” by the employers operating self-funded health benefit programs. 

Where the medical travel option enters the scene: Centers of Excellence

The Center of Excellence ("COE") term was widely overused by every medical tourism provider back in about 2005-2008. It seemed that someone started using the term as a buzzword du jour, and every medical tourism hopeful plastered it across their website for awhile. From a storefront clinic in a rural Nigerian village to an Academic Medical Center in Cleveland or Baltimore. Why not? There was nothing stopping them from asserting that claim.

Many tied their use of the term to having passed Joint Commission International ("JCI") accreditation surveys - which is hardly the case. In actuality, the JCI accreditation externally validates that the provider meets the "average" healthcare delivery of the community in which the care is delivered - nothing more. But hey, if the public and most medical tourism lead sourcing referral agents and facilitators are ignorant of that fact, why not see if they can get away with claiming COE status for as long as the hot air fills the sails and pushes the boat across the lake on wind power?

How employers use and define Centers of Excellence in healthcare

What many providers touting COE as a brand message and buzzword learned in the years that followed was that the self-insured employers' across the USA understanding of the Center of Excellence designation included expectations about measured clinical and service outcomes over volumes of cases performed. So as they sent out introductory pitch letters for their "COE product" without the measured outcomes externally validated and accompanied by statistics that transparently shared volumes of cases in specific service lines, the responses anticipated never materialized. What they were led to believe by medical tourism trade association membership and conference propaganda wasn't "real". But for that sentiment to gain traction, it takes hindsight of repeated failures to win medical tourism contracts with self-funded employers and labor unions over time.

In reality, employers are more frequently steering their insureds and dependents to healthcare providers they have privately and individually deemed “Centers of Excellence” for specific needs, such as back surgery, hip replacements, fertility treatment or bariatric surgery.

CENTER of EXCELLENCE MEDICAL TRAVEL PROGRAMS

Fast forward from the buzz of the Center of Excellence terminology use from 2005-2008 to 2013, when Wal-Mart and several other employers offered hip and knee replacements to workers who agreed to go to Johns Hopkins Bayview Medical Center, Kaiser Permanente Orange County Irvine Medical Center, Mercy Hospital in Springfield, Mo. or Virginia Mason Medical Center in Seattle without out of pocket cost shares (waived deductibles, copayments and paid travel expenses for the patient and a companion traveler).

Other employers like Boeing and Lowe's Home Improvement Centers steered volumes to Cleveland Clinic. Serigraph in Wisconsin, steered to India for a short while and the program, despite investment of tens of thousands of dollars into designing the program infrastructure, use rules, payment arrangements and all the supporting case management and patient movement logistics required really didn't gain traction to sustain the initiative. B&H Photo in New York, on the other hand, has enjoyed success with a program that allows employees and dependents on their plan to travel to Israel for care. Some pro athletic franchises have steered injured players to treatment centers in Europe. A First Nation Casino in California steers shoulder surgeries to Europe, and workers' compensation insurer in the American Midwest, has started a pilot program steering hernia repairs under their workers' compensation program to a treatment destination in Miami, using a bundled case price model.

To maintain choice, in accordance with an AMA treatise published about the same time about the scary potential perils of medical tourism risks, ethics and utilization for cost savings, employees could choose to utilize local providers, but then the surgeries and other care would still require the payment of deductibles, copayments and any related travel costs.

In each of these scenarios, it was the employers who decided which providers were deemed Centers of Excellence, not the providers themselves, by declaration.

According to the NBGH report, Centers of Excellence were used 47% this year for orthopedic surgeries compared to 40% last year. Of these procedures, 43% were paid through a bundled payment or other alternative payment model. Bundled pricing is a business model that I have been working with successfully since 1996, and have published extensively on the model, how it works, and how to avoid pricing risks and oversights when structuring fully-inclusive case rates for care, both local and out of area.

The majority of centers that are used for cancer treatment, fertility, bariatric surgery or cardiac care, however, still charge fee-for-service. That is because many healthcare centers are afraid of the untoward risk. They aren't sure how to structure the bundled case rate or how to negotiate it and commit the understanding between the parties to written form as a letter of agreement or contract. They also don't know whom to contact at the employer headquarters to reach decision makers and plan fiduciaries.

That's the primary reason why my Master Classes on the topic of direct-with-employer contracting always sells out about two weeks after the class opens for registration. Direct-with-employer contracting is also the topic that drives the highest volume of my on-site consultations with hospitals, PHOs, IPAs, and ACOs across the USA, and at ambulatory ("same-day") surgery centers throughout North America. They need the skills training, contract templates and list of plan administrators and their contact information that I offer as a part of the course materials. They also learn the talking points, and how to articulate their brand value and support their claims that they are indeed a Center of Excellence that should be considered a candidate for such case steerage. If you would like to see a schedule of my Master Class offerings, click here. I no longer offer this course through American health industry trade associations now that we have the Healthcare Business Institute to host our workshops and Master Classes.

That's also how our Mercury Health Travel subsidiary ends up with a number of our contracts to handle the case management and patient movement for the employers when they decide to work with the health facilities that are successful in winning contracts. Neither the hospital nor the employer really can prove out the feasibility to do the patient movement internally. It is simpler and more economical to hire an experienced logistics and case management firm that knows medical travel to the extent we do and has all the systems and infrastructure in place to move forward immediately with an emergency case if necessary, and understands ERISA and Taft Hartley to the extent we do.

These four distinguishing characteristics of Mercury Health Travel brand in one firm along with more than 35 years of experience is not available (or easily replicated) elsewhere from another vendor in the USA. What's more, our pricing model for our services is transparent and purchased on an as needed basis. No big retainers are required, no monthly access fees. Our pricing model is not tied to any sort of kickback or commission paid by providers. And we've arranged discounts on air travel through one of the world's largest internet travel procurement systems that smaller employers would not otherwise have access to. Sometimes, our travel discounts beat the discounts that the larger employers enjoy through their corporate travel programs.

In the Mercury Health Travel subsidiary, our client to whom we owe fiduciary duty is the employer. Mercury Health Travel is not a marketer of hospitals and healthcare providers. We don't source patient leads. From time to time, when requested to do so, we facilitate introductions to a short list of healthcare providers we know are ready for such a relationship. How do we know they are ready to be short listed? We've performed site and operations inspections and the Mercury Advisory Group experts trained them how to bundled their package offerings.

What else are large employers doing to move the cost needle?

In addition to Center of Excellence, and in alignment with moving the patient to different sites of care, employer are also beginning to change the way they do business with the pharmaceutical industry, and also how they procure services for chemotherapy infusion, wound care, and other services that were formerly rendered in the hospital inpatient or outpatient setting. They don't like paying for revenue code "510" which is an upcharge applied because the outpatient service was rendered at the health facility or outpatient extension of a hospital.

Both employers who are self insured using ASOs and TPAs as well as the managed care insurance plans frequently process claims with revenue code 0510 incorrectly, or balk at the upcharge. Revenue code 0361 or 0761 are also similarly problematic.

Many hospitals still charge these revenue codes in their fee-for-service billing systems. But those who bill bundled case rates and package prices are able to compete aggressively by either embedding the charge that they would have been paid for under revenue code 510 and the other codes into their case rates, or eliminate it and realize the revenue in other ways, such as reduced bill submissions, risk-shared price buffers, up front payments and the time value of money, reduced cost to chase and collect payments, reduced costs of direct-to-patient billing, and more.

Contrary to popular belief and health plan propaganda, large employers generally do not see providers’ pricing power as a primary driver of escalating health costs.

Instead, 80% said specialty pharmaceuticals caused the problems. Similarly, only 3% of employers said that provider consolidation is a top cost driver. These impressions were formed in the NGBH report that took information from 418 employers covering 15 million employees and dependents and their spend data; not some assumptions from Maria Todd's anecdotal files.

It is estimated that two-thirds of large employers now offer second surgical opinion ("SSO") decision support or assistance via telehealth or remote records review and consultation. Some use navigators that coach plan participants how to stay in network. Some use tools that are bolted onto a self-service benefits portal. Some use the services of Mercury Health Travel to coordinate the SSO or external review.

It is estimated that 64% of large employers now also offer claims dispute assistance. That's because unlike commercially insured plan participants, those enrolled in an employer or union self funded health benefit program can seek ultimate decision on coverage disputes from the plan fiduciary, not from the insurance company that leases its network to the employer or labor union for the purpose of receiving discounts from pre-vetted, contracted healthcare providers.

So it isn't that they "now offer" this service. It's been a part of the self-insured complex scheme since 1974. They do it for a different reason than you might assume. They do it because appeals in the self insured ERISA and Taft Hartley space are ultimately forwarded to the Internal Revenue Service and puts the employer on the IRS' radar if the plan fiduciary won't respond or responds in a way that the claimant deems "Unfair".

Talk with me about this topic

As one of the rare consultants with high acumen in this area of medical tourism in the employee benefits space, I work closely with employers, labor unions and association health plans of all sizes who are self funded under ERISA or Taft Hartley and other similar arrangements. Workplace Benefits experts who currently work with these groups are often uncomfortable discussing more than the most superficial aspects of this with their clients because they lack the experience. That's why they bring me in to work with their clients on a conference call as a subject matter expert. I make them look like a superstar because I carry the ball during this discussion and they learn along with the client. In this way, I've worked with many of the largest workplace benefits firms in the country and many smaller, independent benefits consultants all around the country.

If you see a need to bring in the expert for this sort of discussion, contact me at 800.727.4160 or via email. If your client decides they'd like my help beyond the initial discussion, I will travel to them (you're welcome to join) and sit face to face in a conference room to answer their questions and present many options from which to choose, both domestic and international depending on what they want. I bring my expertise at a pre-agreed fee for the consultation is all they are asked to invest. My fiduciary duty is to them, not the hospitals or other suppliers. If they decide to retain my services for this new direction, my fees are hourly and transparent to the workplace benefits consultant and the client. I don't pay lead fees which keeps the client happy and confident that we are there to serve them and not run up a bill padded with hidden extras.

Then, if they want to build their own narrow network of Centers of Excellence they have chosen, they are given the option to use Mercury Health Travel for patient movement and other services (site inspections, network development, credentialing and privileging, provider contracting on their behalf, etc.) we can provide. Those services are billed hourly at a very reasonable fee - in line with other case management services around the nation.

We accept no double dipping commissions or referral payments from providers for our care coordination and patient movement services. We serve one master - the client who places their trust in us - and it you for referring us. This approach is vital to building long lasting client relationships that are critical to workplace benefits consultants over the long haul.

About Maria Todd

Chief Executive Officer at Mercury Healthcare International, Inc.

Clients dramatically improve their healthcare operations, business growth, and profitability after working with Maria Todd. They realize benefit to reimbursements, volumes of new patients, and health plan brand value resulting in higher reimbursements and patient steerage.

Her unique skill set comes from over 35 years of experience at all six seats at the table, clinical, administrative, insurance contracting, healthcare marketing and branding, and health law paralegal work. She intertwines these skills in a way that no other consultant can offer because most usually only offer one of these expertise and have to call upon others - each with their own fees and expenses to comprise the other five. She solves problems for clients and shortens time and reduces expenses associated with hiring a consultant. This is an additional value added benefit of working with her.

Maria adds value to every project she accepts. If she doesn't believe she can add value, she turns the project down. She loves watching her clients' successes and watching them grow and thrive. She is also brutally honest with clients which they tend to appreciate when working with her. She is direct. She pulls no punches and doesn't sugar coat bad news or constructive criticisms.

Reach out to her to at +1 (303) 823.4662 (office international land line) or by email. Maria accepts most invitations to connect with her on LinkedIn. You can also follow her professional Facebook page. Initially, Maria prefers direct email to her @mercuryadvisorygroup.com address or through LinkedIn for all contacts via email.

Visit her websites and blogs on medical tourism at:

• globalhealthsources.com
• mercuryhealthcareintl.com
• medicaltourismstrategy.com

to find additional valuable information and timely articles about medical tourism programming and business development.