The Search for Low-Cost, High-Quality Providers
Premise Health and Healthcare Bluebook are partnering to help large employers manage rising healthcare costs related to COVID-19. Doucette and Kampine discuss how the postponement of elective treatments and healthcare providers’ need to make up for lost revenue may spark rising costs in the next plan year and beyond.
Kampine: In late March and early April, providers started to postpone elective surgeries. We saw inpatient, and particularly outpatient, services drop at least 50%, and in April some services, like joint replacements and things like that, disappeared altogether. Since then, some started to restore services, but it’s been a slow crawl back to pre-COVID levels.
Doucette: We saw major transitions from in-person to virtual encounters. A lot of healthcare is hard to do in a virtual environment. We found that 37 states canceled or postponed elective procedures, so it was happening in the vast majority of geographies.
Kampine: It has created problems for doctors, particularly proceduralists. There has also been a severe revenue decline for hospitals. Both of these groups would like volumes to return to get that revenue back. Hospitals are doing a great job in terms of monitoring patients and getting everyone tested [for COVID-19] before they go in for procedures, which keeps people safe, but it slows down the whole mechanics of everything.
There has been depressed utilization. Maybe a month ago, everyone anticipated a big wave as if things would return to normal. But with infection rates fluctuating in different areas, providers are now wondering how to plan for the return of those care volumes. And on the employer side, we are trying to figure out how to plan and prepare for that.
Doucette: We’ve seen a couple of analyses showing that hospital revenues are down $60 billion a month. When those go back up will be geographically and procedurally dependent, and we will probably see a stairstep or maybe a bit of a roller coaster.
Doucette: We anticipate an increase in fee schedules even if demand doesn’t come back right away, and insurers are anticipating that. Providers are going to reprice accordingly.
It will also be situationally dependent. Larger systems have greater leverage with payers, so they can negotiate stronger pricing. Smaller groups have less leverage, so they aren’t going to be able to negotiate similar price increases. We are going to see things a bit all over the map, and it will largely be dependent on leverage.
Doucette: As a provider system pushes too hard, the health plans will be more likely to carve them out of the network because they don’t want their costs to be too high. Providers don’t want them to do that. It will be interesting to see how it plays out with system-payer relationships and dynamics.
Kampine: Providers can’t broadly just increase their prices. It will be regional and market specific. There are some tactics we anticipate in the short run. If they can’t increase their unit price, they may try to schedule procedures at a location that has a higher margin. For instance, if they can perform something at an ambulatory care center, hospital outpatient or hospital inpatient, they may do it at the hospital, which provides much higher revenue. Like some orthopedic surgeries can be $5,000 more at the hospital than at other locations.
There is also some degree of pressure to spread procedures among more places, particularly if they are trying to get a lot of cases scheduled at one time. Then, getting them done and moving to a higher-cost venue is one way to pick up lost revenue.
And prices can vary dramatically within just one market. For instance, in the Denver area, a joint replacement can run anywhere from $22,000 to $82,000 depending upon where it’s performed. We have to be prepared to help patients navigate that when the cases start coming back online.
Doucette: We have not experienced a lot of that kind of variance on the provider side, but there is some in the pricing on the hospital side.
Kampine: Most employers pay for claims processing through their TPA [third-party administrator]. Providers market reduced costs that are below the billed charges, so they say it’s a deal. One of the nuances is that even within network, after discounts are applied, there is a huge variability in pricing. A lot of it has to do with provider leverage, and large, consolidated providers are leveraging better prices. Then there is the site of care. There could be a difference of as much as $5,000 between a hospital and ambulatory care facility that have the same quality. So the challenge for employers is they don’t know the price discrepancies between locations even after the discount is applied. Seeing the differences is what Healthcare Bluebook does. And we can help steer patients within their network to lower-cost, high-quality providers.
Kampine: There is a subset of procedures—the low-hanging fruit, or items that are easily shoppable, that are about 30% to 40% of an employer’s spend. If you took where people typically go in-network and moved them to a more cost effective, higher-quality in-network provider, we typically see 15% to 20% savings simply by doing that.
Doucette: There is a fundamental misalignment of incentives in fee-for-service. As providers try to recoup lost revenue, there will be an incentive to increase volume and unit costs. We do expect providers to have volume and price increases to try to return to their financial baseline or benchmark. The challenge with healthcare is the misalignment of incentives for people offering the services versus the people paying for them. That misalignment isn’t going to be going away any time soon.
Doucette: Both organizations are on a path to drive incremental value changes, and we are well positioned as a primary care hub for patients. But we need sophisticated partnerships and data to drive home value.
Kampine: We found ourselves both servicing the same employer client at one point. We have become really, really good at helping clients understand price and quality and provide tools to say here is a high-quality doctor and ways to save. We try to drive and guide people to high-quality locations when they need care.
We decided to focus on digital solutions—online and mobile apps—and other pieces where we saw ourselves working together. We thought, wouldn’t it be great, rather than the member being in control of decisions about where to seek care, if we help guide them? We could make referrals when members are going out. If you activate the member directly and make better referrals at the point of care, the opportunity goes up when these two things are put together.
Kampine: When we think about navigation, healthy patients, and cost and quality, there is an opportunity to think about getting them to the right doctor at the right price. Some organizations right now will be thinking about where to place a person for treatment and use the most expensive site or venue if they have multiple ones. And this is a great opportunity with organizations like us to work together and understand the differences; particularly as things start moving forward, it will be important for the rest of the year.
For Bluebook, there are multiple components of how to do this. First is make it simple to understand cost and quality, so we use technology to line up the right doctor and place for treatment. We align the benefit design so patients choose a cost-effective, quality location, and we can offer a reward or some other mechanism as an incentive. Then, with Premise or other clients, we have a layer of support for the person who needs assistance. Jami’s group is one that helps us navigate patients; they use the same set of information to help people make better healthcare decisions.
Doucette: Premise employs a variety of things, from physicians to physical therapists, acupuncturists and fitness, so there is really a trust that is developed that occurs between a member and their primary care provider. They care for patients as a team. Whether it’s a primary care provider or nurse practitioner or care navigator, they all work together to inform a member of the options for their care plan and work off of that information.
In many cases, we have a care navigator on site in a center so the physician or nurse practitioner can determine what referral is needed and walk the person down the hall with a warm handoff. The navigator takes up the referral coordination process by scheduling and making recommendations. The care navigator has access to the Bluebook tool, and they can say to the member, here are three to five options you would be referred to and here is the cost and quality of each facility. We try to steer them to a high-quality, low-cost provider. Ultimately, it is the member’s choice, but providing that information at that point is critical. The navigators also make sure the member comes back to the primary care provider after the procedure or surgery to ensure the appropriate follow-up care ensues. It’s a closed-loop, team-based approach.
Doucette: When you maximize primary care, $1 of prevention saves $3 of downstream treatment. Then you can optimize the downstream care—when it’s needed and appropriate you can drive value out of those treatments. If you take a hard look at incentives from the plan design, you can drive the right kind of patient behavior.
Kampine: We have created something we call the patient savings score. It’s a way of looking at providers and specialty care. When we create relationships with providers, we can see what the savings are downstream. We can see if it’s a high-quality specialist to refer someone to by looking at where they [the specialists] refer patients for tests and other items and, if they do cases themselves, do they use high-quality, low-cost facilities. We can take those things into account, and it’s something we are doing together and employing together. From a primary care environment, if they make referrals, it’s important to think down the pathway where the patient may end up.
It takes large volumes of data, but we can see how doctors practice and make referrals. We’ve been working and thinking on this for years. The app we have with Premise is interesting because we can make the initial referrals from the point of care.
Doucette: It takes simplicity and ability to communicate. If we are able to simplify it into a score, providers have a better understanding of a doctor’s value and can more easily articulate the value concept to members as well. And from that comes better compliance and adherence because a member is more likely to select one of those providers or facilities. There’s more benefit to the member and to the client.