Self-funded Employers Replace Cost-sharing with Direct Deals with Providers

Originally published in SurgeryShopper.com

Thirty percent of self-funded employers (10-499 EEs) have already transitioned to managing health care cost increases through direct deals with providers and domestic medical travel options

In the face of low unemployment numbers, companies are turning to a variety of strategies to attract and retain talent. This has affected how they manage health care cost increases.

Reference-based pricing is a short-term, short-lived solution. It isn’t sustainable and it isn’t popular with providers. It’s no surprise that employers are turning away from PPOs, HMOs and off-the-shelf networks and prices. They are replacing these high-price, low value options (and the brokers and TPAs who sell them) that were once the darlings of group health, with more effort invested in shopping direct. What they are buying is transparently-priced, direct deals for predictable, bundled surgery case rates in friendlier, fairer, contracts with providers.

Domestic medical travel + telehealth + shared savings

By tackling this aspect of narrow or “special-purpose” network carve out themselves, they are changing the way they approach the problem of higher prices for employees. They’re also looking for solutions that can help patients find cost-effective local care that’s of high quality. If it doesn’t exist, they are no longer as reticent to consider domestic medical travel combined with digital health and telehealth solutions that can meet employee needs. Thirty percent of employers already do this and another 51% are considering them, according to reports from various HR consultancies in the USA. Not all are interested in big ticket, high profile Center of Excellence facilities, either. Many are examining the value, quality and cost of outpatient surgeries at ASCs and hospitals and integrated health systems.

What’s interesting is that in 2018, employees paid, on average, 25 percent of the total cost of coverage through paycheck deductions — nearly $3,200 per employee on average not including out-of-pocket costs. Now, the trend with bundled case prices and domestic medical travel means that for certain surgery procedures, if the employee agrees to travel to a vetted, high-quality provider offering $15,000 to $25,000 savings on a surgery, the employer pays for 100% of the surgery cost and all the travel expense and accommodation expense for the patient and one companion, and a per diem allowance for meals and incidentals while at the destination. Some utilize special HRAs while others also contribute a modest sum of the shared savings as a HSA contribution for choosing the lower priced option.

By moving to a managed program of transparent, bundled case pricing, negotiated in advance and a program of pre-authorization to manage utilization, another side benefit is that fraud, abuse and waste are essentially eliminated. Providers set the price up front for a bundled surgery procedure and that’s the price. If they want to add services, its on the provider’s side of the ledger, rather than the self-funded employer. Many are also seeking out providers of surgery who offer no-opioid and low-opioid options to manage post-surgical pain.

Pharmacy tourism is gaining in popularity for high -cost drugs

The State of Utah has implemented a plan to send employees to Mexico to visit with a local Mexican physician who will ratify the prescription medications and then visit a local pharmacy to purchase the medications on a Mexican prescription order for the same identical medications at a fraction of the price. Similar pharmacy purchasing trips are occurring in Europe and in India. Employees can bring 3 months of personal supply back into the USA if their name is on the prescription package and the prescription copy is carried along with the medication.  In some cases, the airfare, hotel, doctor visit and medication costs, passport and visa fees amount to far less than paying locally for the same drug. They aren’t the only employer doing this, either. 

Our go-to expert on all things medical travel, Maria Todd, of AskMariaTodd? says that “fears about counterfeit drugs are just that: fear. The real risks, however small, are mitigated through vetting and due diligence and selecting providers carefully.”

Uptick in primary care onsite clinics

Another benefit gained by this cost containment approach is earlier intervention. High-cost, out-of-pocket expense that employees and dependents fear is eliminated. Timely care often results in lower acuity which costs less to treat. That’s the care management aspect. Medical travel within the USA coupled with telemedicine services can drive up care continuity. Some are also adding primary care on-site clinics. That means that if a local doctor won’t accept the medical travel patient back out of hurt feelings or greed, the primary care clinic can remove sutures and monitor healing and outcomes after the patients return home. 

An on-site clinic can be operated in a space no larger than 500 sq ft., and can be operated at a level comparable to most concierge medicine clinics in town, and operated at all hours of the day and night meaning diversion from costly emergency department visits because the primary care physician office in town is closed. With the average ED visit costing upwards of $1800 for pediatrics and $1400 for adults, the entire on-site clinic can produce positive ROI in short order if the head count on the plan is 700 or more participants. At these clinics, it is easier to add targeted disease management programs that provide support for those with chronic conditions (e.g., diabetes, hypertension, high-cholesterol, osteoarthritis and back pain). These clinics can be managed day to day by a medical director augmented by nurse practitioners. Plug-and-play companies supply the outsourced clinical workforce as a subcontracted service while the employer supplies the facility and facilities management.

Episode of Care programs

Episode of Care programs, featuring facilities and physicians who bundle care for a specific episode of care are offered by 36 percent of employers. The most popular programs address transplants, cancer care, joint replacements, cardiac surgery, and spine surgery. Employers and plan participants report cost savings, improved outcomes and greater benefits satisfaction.

We’re here to help

Our team of experts who work with employers seeking cost containment solutions and direct-with-providers are eager to help you. Call them today for a no-cost, no-obligation discussion to learn how we can help drive down the cost of high-quality healthcare and rapid access to earlier intervention. They also know of consultants with experience in every option we listed above, including, but not limited to on-site clinic development and staffing, concierge medicine, telehealth and remote patient monitoring, pharmacy travel and medical travel within the USA and abroad for companies with employees and dependents posted outside the U.S.

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