Expanding Direct-to-Provider Purchasing Models
Thursday, July 18, 2019 | Joseph Sasson
One topic that seems to ebb and flow in the healthcare arena is employers purchasing healthcare directly from providers. When we hear about these arrangements, they typically fall into the categories of 1) Jumbo employers (think Walmart, IBM, and Home Depot) and 2) high cost surgeries (such as joint replacement and spine surgeries). These contracts have been known to manifest themselves as Center of Excellence (COE) relationships, in which an employer will offer the employee an opportunity to go to a proven high-quality center for their surgery, and typically cover the costs for an employee and a companion to travel to the Center of Excellence for the surgery.
In Walmart’s program for spine surgery, for instance, there is no deductible and no co-pay if an employee goes to a Center of Excellence for that surgery, but the procedure will typically be covered at only 50 percent if the employee chooses a location other than an approved Center of Excellence. While the cost of the surgery may be comparable or sometimes slightly above a national average, the COEs are typically known for preventing unnecessary surgeries and for having lower than average complications (such as readmissions) which lower the overall cost of care per employee.
While the benefits of these COE relationships seem apparent and worthwhile from a quality and health economics perspective, the patient does not necessarily embrace them wholeheartedly. There are a percentage of patients who simply do not appreciate the opportunities provided by this model. They may not want to travel or have a caregiver that can travel with them; feel more comfortable with their local physicians; want to recuperate in their own space; fear complications of air travel soon after surgery; or any other number of psychosocial factors that may be cited. In the end this potentially valuable strategy of healthcare purchasing and delivery still leaves some room for refinement.
Let’s zero in on the components of what make the Centers of Excellence strategy work, namely: 1) high quality care, 2) lower cost for the patient, and 3) lower total cost for the employer. If we could refine the model to remove some of the psychosocial challenges faced by patients it would result in a more optimal care delivery process that was inclusive of a greater population and create a higher overall patient experience. I envision a system that continues to leverage the COE model yet builds on it by creating approved local options. This in turn will create benefits that extend beyond patient preference concerns.
A more localized provider network would have to accommodate the needs of patients, providers, and payers. It would create a marketplace in which cost and quality become more transparent; where employers can assess quality and cost and adjust patient benefit accordingly if they so choose; and that creates new opportunities for providers who provide high quality outcomes at a low cost but don’t happen to practice at a Center of Excellence. There are great physicians in nearly every community who want to participate in unique payment arrangements with employers, but aren’t at an institution that easily accommodates that process due to size or geographic location. The market is in need of these innovative solutions.
I envision a solution that provides a streamlined and easy way to link providers with payers, is inclusive of high-cost surgeries as well as diagnostics and rehabilitative services, increases local options for access, lowers the cost curve for the employer, and provides a free - or greatly reduced cost - healthcare option for the employee. To top it off, this solution should create a way to increase participation in either bundled episodes or fee for service episodes between providers and payers. It should accelerate the transformation of cardiovascular care and create an increased level of equity for all stakeholders. It should expand options for all stakeholders and lower costs for payers and patients while not adversely affecting the prices that providers charge for their expertise. An examination of the underlying systems will reveal that these goals are perfectly reconcilable with each other and one party does not have to lose for another party to win – they just need to play the game differently.
I will acknowledge that the vision is lofty, but I will not concede that it is overly optimistic. I believe that the elements can be procured, built, partnered for, and organized to create a seamless national purchasing network, and that doing so will be valuable. As a provider organization, would you like more access to direct-to-employer contracts? As a patient, would you want more local options with no deductibles or co-pays based on the quality of the physician? As a payer, would you want to better meet the needs of your covered lives, keep costs low, and reduce travel costs associated with surgeries?
The market doesn’t need a complete overhaul, it needs an expansion and increased inclusiveness for those employers who don’t have the bandwidth to contract with Centers of Excellence. There is a lot more to this vision than the blog you are reading, but today I wanted to present the burning platform. This simply identifies the opportunity that exists and the need for a new solution. Together we can build that solution.
If this is the type of network you’d like to be a part of please reach out to me and tell me why – I’m interested in the exchange. I firmly believe we have a responsibility to bring quality, cost, and equity to healthcare, and a refinement of direct-to-employer contracting is a path to doing exactly that. Who’s in?
Illustration: Lee Sauer
About the Author
Joseph Sasson, Ph.D. is Executive Vice President of MedAxiom Ventures. Joe's work includes helping MedAxiom members to access the technologies and solutions they need most to effectively run their organizations and prepare themselves for the future of value-based care. Simultaneously, Joe works with dozens of companies in med-tech, device, pharma, imaging, cath labs/ASCs, and health IT to deliver economic value propositions and strategies to help companies accelerate commercial growth.
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