Everybody's Getting Smarter About Healthcare Value

A raft of new tools that rely on massive amounts of data are helping employers and their employees demystify the healthcare value equation. Even small employers and their employees are benefiting.

Employers are getting a lot smarter about healthcare. If you run a hospital, health system or physician group, chance are you already know this, especially if you have dealt directly with a large employer lately.

On a high level, big multinational companies have been steering their employees to narrow networks or "centers of excellence" for a few years now. Such programs allow large companies to take advantage of their ability to drive volume in striking one-on-one deals with health systems. As part of these deals, such employers have invested in the resources to evaluate quality and processes of the best healthcare organizations.

But using data to make healthcare choices is no longer only for the biggest companies. Smaller companies are making greater inroads, too. They're getting help turning that data into strategy through vendors that have sprung up to address a glaring need among all employers to reduce healthcare spending.

Cost of Value-Based Plans? Less Transparency

The increasingly common alternative, say many, especially for small companies, is jettisoning employee health insurance entirely. By necessity, they're getting ever more sophisticated about helping their employees choose wisely, saving money for both the employer and the employee. They're also using these vendors to make wise decisions at the employer level.

Crescent Parts and Equipment, a 115-employee heating and air conditioning wholesale company based in St. Louis, with 15 locations in Missouri and Illinois, is one small company that is using online tools tailored to patient data and shopping incentives, among other strategies, to help employees to be better healthcare shoppers.

Mark Lammert, Crescent's chief financial officer, says those tools are insufficient, though. Education, engagement, and personal advisors help complete the circle. "Whether they realize it or not, healthcare really has an unfair advantage over the employee and employer because we haven't had data or the tools to figure out what it means," he says.

Increasingly, they do now. Here's how the little guys are doing it:

1.Self Insurance
Self-insuring used to be for only the largest companies, but several factors are making it more possible for smaller companies to go this route. In the past decade, Crescent moved from a fully insured, $500 individual deductible plan to a self-insured $10,000 deductible plan with an accompanying health reimbursement arrangement and third party administrator.

Within the past 19 months, the company began incorporating a captive health insurance company used by several small employers called Wellth to cover claims higher than $40,000. Though United Healthcare acts as TPA for Crescent, the company self-insures the first $40,000 of a claim, with reinsurance from Wellth covering any claims beyond that level.

Accompanying that move was a move toward using a company called HooPayz to help employees with healthcare decision-making and billing issues.

"We've asked [employees] to take on more risk than previous years with higher deductibles," says Lammert. "We, as a company are also taking more risk, so it makes sense to give them the best tools to manage their own healthcare costs through a third party who can give them unbiased advice. Employees are flying blind otherwise."

Thanks to these transitions, Crescent has been able to hold premiums stable for the past five years, he says. And this year, the company will be able to offer 30% off regular employee premiums in return for getting an annual physical, a biometric screening, and participation in the company's wellness program.

2.Decision Support and Patient Advocacy
As employers and the tools their employees use to make healthcare decisions get more sophisticated, so must healthcare organizations get more sophisticated in attracting new business through better quality and lower costs versus their competitors.

And the scope of those competitors is widening. No longer do you compete just in your city or town. You may be competing statewide or even nationally, and you might not even know it. Even on Crescent's small scale, procedures have moved from where they would have been performed to less expensive sites of care.

Yet it's highly doubtful that any of the hospitals and health systems affected by its strategy knows why one lost volume and one gained. It's a fair assumption you're already losing, or gaining, critical business from such strategies.

HooPayz, the company that works with Crescent employees on decision-making through online tools and personal advisors, debuted only the first of this year, with one client. Now it has 25, with members in 36 states, so such services are clearly filling a critical need for small employers. It's far from the only company offering these services, which also include access to billing experts who can help patients navigate erroneous billing, which Lammert says account for a third to half of all bills his employees receive from healthcare providers.

"Employers are looking for a new lever that doesn't include continued cutting of benefits," says Susan Lang, the founder and CEO of HooPayz. "If you've narrowed the network, the formulary, set up your HSA, and you're self-funded, you're running out of levers. We're creating additional levers that are beneficial to employees and that are not another negative."

Crescent has paid about $5,800 for Hoopayz's online tools and advisers to be available to its employees for the full 2015 calendar year, and saved a little more than $64,000 since the beginning of this year, when counting both employer and employee savings, says Lammert. That's quite an ROI for a program in its infancy.

3.Location, Location, Location
Sometimes, big savings can be realized by something as simple as traveling to St. Louis for a procedure rather than having it done in the employee's hometown. One employee saved $7,000 by travelling less than 60 miles to St. Louis for his procedure.

"That saved him money and saved the company money," says Lammert.

Lang, who has done previous stints as a senior executive with both BJC Healthcare in St. Louis and Express Scripts, says hospitals should understand that companies like hers are having a big impact on influencing where care takes place.

"As long as there's a huge discrepancy [between] what we pay BJC in St. Louis versus a smaller hospital like St. Luke's [a 493-bed standalone nonprofit in the St. Louis suburb of Chesterfield] we will have work to do," says Lang, of HooPayz. "I don't see us getting to a collapse of pricing in medical services in my lifetime, but certainly there's big opportunity for the next decade."