Mercury Advisory Group

When a self-funded employer contracts with a healthcare provider without layering in profit margins of big insurers and traditional PPO networks, they suddenly realize that a few providers in the area are competitive while others directly across the street cost upwards of 240% or more for the same identical service.  If big ticket elective procedures are steered to other markets, local providers will be motivated to bring their rates into a reasonable price range or face loss of market share. 

In severe cases where the value doesn’t exist because providers don’t feel pressure to lower local prices, employers might only encourage the use of local market providers for emergencies and urgently needed care, or when the procedure or treatment is required by a patient that cannot safely travel to a nearby or distant medical hub of health tourism cluster offering price or value arbitrage.

This could easily lead to two very beneficial effects for payers and plan participants:

The first beneficial effect occurs when the market begins to notice attrition on the more lucrative cases. For many hospitals, this is not well-tracked. Unless the employer announces its intentions or somehow the information is “leaked” to the hospital, it could take a few months before the figure out where the cases have gone…and why. When they learn what’s happened, they often sharpen their pencils and revise the price tag.

The second benefit effect is that the movement to lower priced high quality providers, equals better value for select cases steered towards health travel as a savings option.

In southern Ohio, for example, a lumbar fusion surgery can cost an employer between $110,000 and $130,000. Why is it that few people know that just 90 minutes away, the same surgery can be had for less than $45,000? The answer is because nobody asked, assuming they would not have access to the answer anyway. Price transparency has been elusive for decades. New companies have launched but they regrettably fall short of what the market needs, because they only report on publicly available (if one know where to look) billed charge data on a relatively small number of procedures, they require the customer or information seeker to use an online portal, rather than speak with a person, and many of their recommendations have a tendency to disrupt the doctor patient relationship, which is a non-starter for most patients.

As a result, for years, it has been all but impossible to engage employees and their families to select lower cost, high-quality healthcare.

First, because copays and deductibles were low. Second, because in many cases, PPOs and HMOs negotiated market rates with tiny differentials and copays were flat fees, not large percentages of the payment due. Third, because nobody would provide transparency to drive utilization to the lower cost provider.  Fourth, the programs would have to be both confidential, voluntary, and could not steer the plan participant to choose an out of network provider or disrupt the doctor patient relationship.

But recently, the market has evolved with healthcare reform and high deductible health plans coupled with consumer-directed choice. Copays and deductibles are now much higher for the employee and they care about saving money. PPOs and HMOs have traded price negotiation leverage (since they now pay less of it) for participation and geo-access in anticipation of the Noah’s Ark model for network adequacy (to make sure they have two of each type of provider on the HIE boat before January 2014) and as a result have allowed these 240% price differentials between two similar providers across the street, and employers now demand that they have access to the secret price lists because they are now the payer of record, not some insurer that collects premiums, takes insurance risk and pockets savings if utilization is low or employees choose lower cost providers.

What is needed is access to transparent price data that reports on the actual network rates negotiated with providers for a particular PPO, or provider network, and that reports on the actual discounted rate, not billed charges.  Figure 1 (below) shows an example of the misdirection that can occur by steering traffic off of billed charges instead of actual contracted network negotiated rates.

If billed charges are used to make recommendations, the patient or plan member would be steered to a provider costing $175 more than is necessary to obtain the service. The typical 30% coinsurance savings of $175 in higher allowable that is paid by the plan participant is $52.50. If that is not enough to drive plan participant engagement, what if the employer offers to share $25 of the savings from the $175 just for calling a special transparency counselor to see where they can go in their existing network to find a lower cost provider.  Everyone can find some use for a $77.50 savings!  Narrow network solutions developed with collaborative partners in a health tourism cluster can help an employer save money, whether the partners are around the corner or across the country.

Is anyone doing this currently in the market?

Yes.  Three fully-insured plans in the Northeastern part of the USA have begun such a service for their subscribers. They include Anthem and Harvard Pilgrim. The programs are limited in scope to the Boston region.

On the independent side, the only one we are aware of is the My Health Savings USA™ program. It is available to employers as part of their amenities package when they sign up for the domestic health travel program through MHI Benefits Group.  Several fully-insured HMOs, PPOs, small insurers, associations and TPAs have requested to use this program as a private label product.

When an employer signs up with MHI, they receive the My Health Savings USA™ price transparency personal concierge and nurse support service as part of a suite of services. The suite also includes a discount pharmacy transparency card, the MHI domestic and/or international health travel network access, and comprehensive third-party health travel logistics management administration for one low per-employee-per-month (PEPM) fee.  The entire program can work as an extension of any employers’ PPO arrangement and overlays on the existing network without disruption.

How much the employer chooses to reward the employee for choosing a lower-cost provider, if anything, is entirely up to the employer.  Some choose to instead offer the reward as an additional tax-free contribution to the employee’s HSA account.  The transparency price check counselor services, a nurse counselor line to explain tests and review preparation procedures, as well as the processing of the reward payments to callers is all included, and employees and plan participants and association members can inquire about pricing on over 1450 diagnostic testing and minor surgery procedures. The program has produced savings in the range of 30X ROI for existing clients.

For more information, call your benefits consultant or contact MHI Benefits Group at 800.727.4160.