Savannah's Memorial Health offers small businesses a direct care model to help employers afford healthcare for their workers. It benefits the health system by smoothing revenue—but don't call it a health plan.
Savannah's Memorial Health, like many hospitals and health systems trying to figure out the implications of healthcare reform, has seen an increasing level of bad debt and struggles with primary care affordability among its patients.
Memorial Health, which covers 35 counties in southern South Carolina and northeast Georgia, exists in a service area where many small to mid-size employers are trying to continue providing healthcare benefits for their employees, but are being squeezed under traditional health plans because of their small size.
Call it an unintended consequence for which there are many contributing factors.
As a result, the service area has seen a dramatic rise in the underinsured, says William (Bill) Lee III, the chief strategy officer for the system anchored by 635-bed Memorial University Medical Center.
Given a pace of premium inflation that few of them can afford, many such employers have tried to limit their exposure by offering employees stipends to purchase health insurance on their own. But a rapidly increasing number of individuals just aren't doing so, says Lee.
For the health system, that means an increase in self-pay patients over the past year. And collecting relatively low-dollar, but still important, revenue from patients directly is a big problem.
"When you are serving an ED with over 100,000 annual visits, and a lot of the patients have high-deductible health plans, which often don't pay until a $1,500 or even $5,000 deductible is met—and it's easy to spend that in one setting—we've got to be able to collect those dollars," says Lee.
Self-Pay Problem
"Within our physician practice—we employ about 125 physicians—for people with high deductibles, an office visit bill is $280. It's a challenge in how we deal with that in a population where our self-pay was above 10% in 2013."
To help reduce the impact of this problem, the leadership team is not afraid to try interesting partnership ideas. In one successful instance, it's worked directly with employers in the Savannah area on a so-called provider-sponsored network. It is not an insurance plan, but partners with third party administrators and companies such as Gulfstream, a business jet manufacturer with a large local employee base.
The partnership means employees have a direct primary care link where out-of-pocket costs are minimal as long as they utilize physicians within the Memorial Partners model, the health system's physician organization.
"Employers want affordability, primary care access, and ease of process," Lee says. "The question was could we create a product that enables the majority of those employers to have that, and when there's a need for a higher level acute care, have a wrap network component so you do have some level of coverage. But the primary focus on plan design is around primary care."
Lee says one important reason the system has tried to innovate in this area is because of a strong relationship with local employers.
"They have leaned on us to educate them and their employees on finding plans that make sense for coverage for their team members and that's affordable, but ensures they are not exposed without coverage," he says.
Don't Call It a Health Pan
Part of the reason the system has been able to leverage these relationships is through a relationship with Physician Care Direct, which handles payment and payment methodology for the primary care experience.
William, (BJ) Lawson, MD, CEO of Physician Care Direct, says his company is focused on "reforming delivery at its most basic level, primary care," saying that there's no need for a true "insurance" product at that level.
"We've identified we have a problem with chronic disease and a baseline level of health and well-being. Those things have to start in primary care," Lawson says. "We've got definite ROI associated with targeted primary care investments, and we're rewarding physicians based on value. Why are we pretending we need to insure for everything?"
The idea behind so-called "direct care," generally, is that primary care is more akin to getting an oil change as opposed to fixing your car after an accident. That part of healthcare, which Lawson says makes up 80–90% of most patients' annual healthcare needs, can be made affordable and does not belong in the same category or risk spectrum as, for example, a heart attack, a knee replacement, or a car accident.
"This care, directly purchased from the provider, makes them more viable as well, and allows them to start being proactive," says Lawson. "As we studied the economics, this replicates the environment of an onsite clinic that an employer might actually fund, but does so using existing practices. They just have to start changing how they pay primary care providers and it's a great win for all sides."
Lawson calls this an employer health ownership plan, as opposed to a health plan, and it's the foundation. Though higher-acuity reinsurance can be layered over the top, for basic, primary care services, there's no cost share to the patient. It's only when the patient goes outside the medical home, to see a specialist, for example, that the cost share, deductible, and insurance start to kick in.
A 'Game-changer' for Small Employers
Lawson says this plan can allow local brokers to offer coverage that is 20% less expensive for employers with fewer than 50 employees than competitive insured options.
That 50-employee threshold is especially important for employers who would like to provide health coverage for employees, but who can't deal with the huge annual increases in premiums for full coverage.
"Locally, we had a coalition of small business owners who have between two and 50 employees who were caught in the gap between buying a full benefit plan versus giving employees a stipend and telling them to go out on the exchange on their own," says Memorial Health's Lee. "We wanted to see how this type of pricing transparency and access would work for that group."
Such plans now encompass more than 1,000 lives this year, and are poised for growth as the option gets more attention locally through Memorial Health's efforts and those of brokers.
"It's essentially a game-changer for small employers here," says Lee. "It gives them a way to fund healthcare differently and provide access to employees."
But it's also a game changer for the physicians and for Memorial Health, who actually get paid for the visit within one week of delivering the care. With traditional insurance, payment could be 75 days later, or potentially, never, if the patient is on a high-deductible health plan and cannot pay the bill out of pocket.
Lee says it's not immediately obvious how much of a better idea this type of plan is for both sides. But over time, he expects it not only to help reduce the effects of bad debt and collections efforts, but also to improve patient care and satisfaction for physicians
"As a large organization, you have to remind yourself to be nimble," Lee says.
Philip Betbeze is the senior leadership editor at HealthLeaders.