How big employers can become health care gamechangers

Keeping just one newborn out of the neonatal intensive care unit (NICU) could bring joy to a family and save hundreds of thousands of dollars in health care costs. Despite calls for more prevention and ongoing debate about health care reform, the consensus is that the system is inefficient and expensive. Payers and providers are often mired in a bureaucracy that even insiders find difficult to navigate, let alone change. 

Given the cost of care, health outcomes in the U.S. are disappointing at best and alarming at worst. Insurance carriers and PBMs are not graded on patient outcomes, meaning they get paid no matter what kind of job they do and regardless of patient outcomes. In my experience, however, they are not the “bad guy.” They are playing by the rules, but the rules are broken.

Infant and maternal health offers a compelling case study. The infant mortality rate is on the rise in this country; in fact, it rose 3% last year – the largest increase in two decades, according to the Centers for Disease Control and Prevention. In addition, the U.S. infant mortality rate is consistently higher than in other industrialized countries, and there are major disparities by race and ethnicity. 

Payers and providers should be motivated to prioritize patient outcomes. Large employers, with their guidance of their benefits advisors, could be the lynchpin to “buying” better outcomes. To put it another way, it is essential to look at ways to incentivize collaboration between insurance carriers, payers, and providers as a pathway forward to improving the U.S. health care system.

Questioning the status quo – challenges for self-insured employers

In the U.S., where 49% of Americans receive health care through their employers, improving the health of employees, their dependents, and the broader community has an impact on our nation’s health and on businesses’ bottom line. The healthier the workforce, the more cost-effective and efficient the health care system becomes. For big employers, their share of health care costs continues to creep upward as they bear the brunt of both direct and indirect costs. When hospitals do not receive adequate payment from public programs like Medicaid, for instance, that cost often gets passed on to employer-provided insurance. 

The most effective way to address this issue is by reducing the overall cost of health care while improving outcomes. 

Early intervention, if done efficiently, can lead to significant cost savings and better health outcomes. The current system is set up to respond to emergencies rather than prevention. Investing in programs and services targeting early intervention for high-risk groups, promoting preventive care, and fostering collaboration between stakeholders are critical steps. This is where financial incentives can have an impact. For example, if a provider meets national targets for reducing infant mortality rates or reduces the number of days a newborn spends in the NICU, they would be compensated for it. In essence, if a provider participates in a better result, they will get paid more for it. 

3 components to a winning structure

One challenge for large corporations is that they have employees across the country and do not have the time or inclination to do a market-by-market negotiation on rates. This is where carriers can play a prominent role, because they have networks nationwide. For example, large employers such as International Paper and Prudential are joining forces to negotiate for better outcomes and prices for their employees through membership coalitions like the Health Transformation Alliance. 

Providers also need a fair, peer-driven and risk-adjusted opportunity to share the benefits from greater outcomes. Employers can then use their data and their checkbooks to make a difference. Again, this is where collaboration by stakeholders is paramount to improving health care costs and outcomes:

Data-driven decision making: Payers and providers need to discern the difference between rumor and data. Obtain comprehensive and objective data and have it professionally analyzed by a neutral third party, such as self-insured employers. Use this data to identify the performance disparities between the best and worst performers on a risk-adjusted basis. 

Accountability and efficiency: Once you have a clear understanding of what constitutes normal and high-quality performance, collaborate with other stakeholders to negotiate contracts that hold intermediaries accountable for health care outcomes. Introduce performance guarantees to ensure that the focus is on addressing root causes and eliminating excess and wasteful spending in the health care system. 

Transparency and incentivization: Foster transparency by openly sharing information about relative quality with consumers and employers. Implement education initiatives to help consumers make informed health care choices. Consider introducing rewards for members who opt for high-quality health care providers, while making it economically challenging for them to choose underperforming providers, creating a win-win scenario for all stakeholders. 

The U.S. health care system needs transformation, and big employers and their benefits advisors can be the catalyst for change. The most effective way to address this issue is by reducing the overall cost of health care while improving outcomes. 

In my experience, making a difference here requires payers to align the payment of providers with outcomes. This means large, self-insured employers have the greatest leverage with providers, hospital systems, and insurance companies. By working in collaboration with carriers, healthcare providers, and other stakeholders, they can lead the charge in reshaping the system to be more cost-effective, efficient, and equitable.

Robert Andrews is the CEO of Health Transformation Alliance.