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Maximizing the Value of Benefits Plans through Employee Engagement 1/25/2018


By Colin McNeese, Senior Advisor, Employee Benefits

As our elected officials in Washington, DC debate who should have access to healthcare and who should pay for it, business leaders continue looking for ways to curb their benefit plan expenditures in the face of rising medical costs. Traditional strategies have focused on negotiating preferred vendor contracts, improving plan administration, and promoting cost-efficient plan designs through various contribution models. Although these practices alleviate the impact of ongoing inflationary cost increases, such strategies have only a limited effect in delivering true year-over-year reductions in healthcare expenditures. Plan sponsors have increased employee cost-shares (deductibles, copays, etc.) to the practical or even statutory limit, and have applied a wide variety of cost efficiencies and cost savings measures, and yet it is not enough. As hospital systems and pharmaceutical companies continue to increase the cost for healthcare, businesses will need to take a different approach to see any significant reduction in healthcare expenditures.

There are two different strategies that have the promise to improve both the quality of care and financial performance of a health plan. The first strategy focuses on empowering the Doctor & Patient relationship through enhanced Primary Care.This approach will improve the overall health of the employee population while facilitating access to more fair and transparent pricing for all medical services. The second strategy focuses on integrating readily available alternative provider reimbursement strategies that provide significant discounting opportunities when accessed outside the traditional PPO Network contract.The success of these strategies hinges entirely on the employer’s ability to actively engage employees through technology, transparency and appropriate plan incentives to facilitate the most cost efficient and clinically effective care. Plan Design is still important, but more in motivating plan participants to take advantage of the new clinical resources designed to improve the population’s health while generating significant cost savings opportunities for both patient and plan.

The savings opportunities are real, and easily can approach 20% (or more) in some scenarios.If your organization can empower the plan administrator to challenge current benefits solutions and adopt these new strategies through successful employee engagement, then you can see significant reduction in healthcare costs year-over-year.

Better Clinical Outcomes, Better Pricing
The advent of managed care in the 1990s created new barriers of communication between doctors and patients, and lessened the quality of care. Limitations on the choice of specialists, location of diagnostic testing, and the length of hospital stays left doctors feeling constrained, while new financial pressures curbed the time they spent in consultation with patients. Reinvigorating the Doctor & Patient connection can empower both parties while driving down healthcare outlays for benefit plan providers. The strategy creates a virtuous cycle that:

  • keeps healthy people healthy through ongoing access to Primary Care
  • identifies clinical issues early, while it is more cost effective to manage
  • ensures patients adhere to prescribed treatments to manage ongoing conditions
  • reduces utilization of Urgent Care and Emergency Room care
  • facilitates referrals to most cost efficient and clinically effective care as conditions arise

Taking charge of the “referral chain” is a powerful tool that simply wasn’t available a few years ago.When a plan coordinates Primary Care, provider cost & quality information, along with appropriate incentives, then employers can effectively steer participants to most cost efficient and clinically effective care which creates tremendous cost savings opportunities while promoting the interests of all three parties- Employer, Patient and Physician. This approach will improve the health of the plan’s population while greatly increasing the long term financial sustainability for the plan.

Concurrent with the strategy of promoting a stronger Doctor & Patient relationship is the focus on fair and transparent pricing through direct contracting. If an individual needs more substantial medical treatment, the patient can leverage the relationship with their Primary Care doctor to take control of the network referral chain and seek out top-quality care that is more affordable. The considerable differentiation in cost for discretionary orthopedic surgeries, such as a knee or hip replacement, often stems from variation in facility fees. Although most surgeons have access to multiple locations to perform their services, they may be unaware that the total expense for the same procedure may vary significantly depending on the selected location (facility). For example, a knee replacement may cost $100,000 in some in-patient settings, whereas it is only $30,000 in an outpatient surgical center. An effective employee engagement strategy will compel the patient to discuss treatment locations (and not just procedural options) to facilitate use of locations exhibiting greater cost efficiency.Similarly, diagnostic services, like MRIs, CT scans and blood work, represent tremendous profit centers for the large health systems and tend to be the highest cost in a given market. The same quality of care can be obtained through direct contracting with an independent diagnostic center or laboratory at a significant discount.Our experience is that plan participants will make the most cost efficient and clinically effective choice if given the right information and the right incentive.

Under the new model, patients and doctors choose a facility that provides transparent pricing through a direct contract with the plan provider, or a fee-for-service arrangement that bundles together the costs of surgery, anesthesia, and facilities. Not only does this format let employees and physicians know in advance what the cost of a given procedure will be, but direct contract or package pricing also tends to be cheaper than the services provided by major hospital systems, which tend to add charges that reduce the value of any PPO Network discounting.

The same strategy can be deployed to manage Pharmaceutical costs. For example, a dozen different medications may be available for a given diagnostic category, but the patient or prescribing physician is only familiar with a newer drug or one with a fancy advertising campaign. They don’t know that the medication is ten times more expensive than a drug that is equally effective and fail to take the price into consideration when making decisions about the course of treatment. By providing access to this information and encouraging them to discuss the financial impact of their decision with their doctor or pharmacist, plan participants will create a downward trend in healthcare outlays.

More Engagement, More Savings
Traditional cost-savings measures are passive and simply focus on adjusting plan designs, introducing exclusions, or limiting networks, which ultimately hurt plan participants. In contrast, we want to actively engage employees through effective strategy and technology to develop the empowered clinical relationships necessary to generate the improved outcomes and cost savings opportunities we are seeking.Here are the key steps to achieving this goal:

  • Involve the executive team. Company leadership should aggressively communicate the vision of their benefits strategy and actively promote the program through their benefits administration team and through direct employee communications.
  • Connect with healthcare providers. Expanding relationships with doctors and physician facilities that offer direct contract arrangements can curb healthcare costs and ensure that employees have access to affordable, high quality healthcare.
  • Incentivize employees. Employees are more apt to engage in a benefits program when there is a financial win. Subsidizing deductibles for workers who take advantage of the program, or offering a cash bonus if they use a direct contract provider for surgeries and other expensive medical services, will drive participation.
  • Leverage technology. Mobile apps can push information about healthcare provider cost and quality directly to employees’ smartphones and tablets, which promote informed conversations with their doctor or pharmacist at the time of service.
  • Provide advocacy support. Offering a call center is a cost efficient strategy to actively facilitate and promote utilization of those physicians and facilities that support your strategy.Plan participants greatly appreciate this advocacy as a true concierge service offering and therefore, consider it an actual enhancement to the benefit package.

Making the Move
Business leaders are fed up with rising healthcare costs, outrageously expensive specialty medications, and the failure of ACOs and similar networks to deliver promised savings, as they see medical expenditures rising 10 percent or more each year. Many are looking for ways to do things differently by seeking out value driven healthcare providers to support their benefits programs. At the same time, more and more doctors and physician facilities are frustrated with the red tape and slow pay practices of traditional managed care, and are shifting to cash discount and fee for service pricing. At Marsh & McLennan Agency, our team connects forward-thinking plan sponsors with healthcare providers who favor fair and transparent pricing to create a growing free market movement that can transform your employee benefits program.

The core of the strategy is to attack the wide cost variations for the same quality of care by expanding the Doctor & Patient relationship and implementing transparent pricing strategies such as direct contracting. Through effective communications that drive employee engagement, your business can see medical costs drop 20 percent in the first year, with continued savings going forward. Depending on the readiness of your organization and its existing contracts, implementing these strategies may require a phased, multiyear plan. We partner with your business to identify the opportunities that already are available and create a blueprint for implementing additional cost-saving measures, such as reference-based pricing and cost transparency tools for plan participants, in the years ahead. If you’re ready to take the next step, we invite you to give us a call.