By SACH JAIN
Last year I was heading to a meeting on a Fortune 500 business campus and stumbled upon a bake sale. It was odd to see someone selling cupcakes and breads on the grounds of a major corporation, so I inquired. As it turns out, Judy, an employee, was selling baked goods to finance her insurance deductible for spinal fusion surgery.
“Is this what our system has come to?” I asked myself, “Fundraisers for fusions?” If so, our health system is broken.
No matter how you slice it, Americans spend more on healthcare than any other advanced economy, with households responsible for 28% of that spend according to CMS. The Affordable Care Act (ACA) attempted to address long-standing deficiencies inherent in our fractured healthcare system. However, creating an insurance marketplace hasn’t solved the problem of affordability or the reality of limited access to quality providers. The concept is great, but without private sector buy-in it will never succeed.
President Biden is taking long-overdue steps to address some of the ACA’s shortcomings with Executive Orders. During his campaign, he suggested other actions, like capping marketplace premiums at 8.5% for all income levels with the goal of spurring enrollment and strengthening the ACA with an affordable public option. The recently passed $ 1.9 trillion stimulus package also incorporates an increase in government subsidies to health insurers for covering workers laid off due to COVID-19 and those purchasing their own coverage.
This is a start. But it’s not enough. We can’t afford to waste time waiting for policymakers to negotiate rules that may be overturned when a party majority flips.
If we are going to repair our splintered health system and make value-based care a reality for Americans, we need to look beyond drafting laws. This effort must move out of the halls of Congress and into those of the innovators: the businesses and employers that make our free-market economy run like clockwork and the technology pioneers who realize there is an unending opportunity to gain territory as a healthcare leader with a little grit and a lot of fortitude.
We need tools that make it possible for employees to actually find higher quality providers they can access and afford. We need tools to help employees easily use their benefits, which may seem complicated to even a savvy consumer. We need to incentivize doctors and hospital systems to deliver high-quality care at affordable, predictable prices, while keeping employer premiums in check and reducing patients’ out-of-pocket costs. We need to make sure that employees, like Judy, don’t have to host bake sales to pay for surgeries.
Centers of Excellence (COE) programs have made great headway in using bundled payment arrangements to directly contract with premier providers for common, high-cost procedures, like orthopedic surgery or breast cancer treatment. Employers can purchase healthcare directly from these providers for a single, transparent price and eliminate employee co-pays and coinsurance.
Last month RAND Corp. published a peer-reviewed study in Health Affairs showing that when employers leveraged a bundled-payment based COE program, they saved over 45% on each procedure, while employees avoided between $ 1,000 and $ 2,500 in out-of-pocket costs. Overall savings for the entire spend category came down by 11%, even when just one fifth of employees took advantage of the program. COEs also reduced unnecessary surgery by redirecting 30% of patients to less invasive treatments, and lessened readmissions by as much as 86% relative to the national average. (Disclosure: The RAND study mentioned in this op-ed analyzed data provided by my company, Carrum Health. The study was paid for by a grant from the National Institute of Aging.)
It is the alignment of incentives all around – or market dynamic principles – that make this type of program work. With a bundled payment based COE program, employers know their healthcare costs upfront, doctors are rewarded for delivering high-quality outcomes and hospitals receive payment faster. Most important, patients also buy in, turning to high-quality providers for care that promises a better outcome with controlled costs – no fear of surprise out-of-network fees.
Legacy COE programs have struggled with scalability, long-distance travel for patients, resulting in low utilization. New generation solutions are driven by an end-to-end technology platform that makes these programs plug-and-play, with regional access to top providers and artificial intelligence and machine learning tools to drive member engagement. With the advantage of bundled payments, which replace the fee-for-service style contracting, these programs lead to dramatic unit cost reduction and superior quality outcomes.
The pandemic has accelerated the adoption of value-based care and COE models as employers consider strategies to address high-cost claimants. A recent survey of large employers conducted by the Business Group on Health found that over 80% will offer a COE Program this year.
There is a reason employers are taking health coverage into their own hands, sponsoring their own health plans, and educating their employees about how to use their benefits. These employers are the change catalysts, and they are driving true innovation – led by today’s health industry pioneers – to create more efficient solutions.
Employers have no choice. Healthcare is one of their largest corporate expenses, and it has reached a breaking point. According to the Kaiser Family Foundation, the average family premium for a company is $ 21,342. Since 2009, premiums rose 54% while workers’ contribution increased 71% – several times more than wages (26%) and inflation (20%). Even worse, there is no correlation between higher costs and better care.
I applaud the President for every attempt to legislate a better healthcare system. However, it’s time the private sector steps up its game and breaks the mold. Until then, we’ll continue to lag behind other first world countries in healthcare and it’ll be even more common to see employees carrying signs: Will Bake for Surgery.
Sach Jain is the CEO and Founder of Carrum Health.
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