With the impact of rising healthcare costs, employers must begin to consider the influence that Alternative Provider Contracting can have. Alternative Provider Contracting modifies access to physicians and directs employees and their dependents to the most efficient care.
There are several options when it comes to Alternative Provider Contracting. These options include Centers of Excellence (COE), Accountable Care Organizations (ACO), value-based reimbursement, tiered networks, and near-site or on-site health clinics. Let’s take a quick look at each one.
Centers of Excellence (COE)
A Center of Excellence is a nationally recognized clinical setting that provides a best-in-class platform for a certain condition. There are many types of COEs. Some address direct health issues or top chronic conditions, while others address specialized needs or procedures like bariatric or knee replacement surgery. Specialization as a COE in a specific procedure may work well, and has, for some healthcare provider organizations. However, many organizations with the COE designation struggle to provide consistent ‘excellent’ quality across varying procedures throughout their organization.
Accountable Care Organizations (ACO)
An Accountable Care Organization is a healthcare organization that ties payments to quality metrics and the cost of care. ACOs are comprised of a group of coordinated healthcare practitioners. The ACO adopts alternative payment models (e.g., capitation) and is accountable to patients and third-party payers for the quality, appropriateness, and efficiency of its services. Today, many large carriers and major hospital systems offer some form of a proprietary ACO. Carriers are steering employers to their ACOs, but experiencing internal challenges such as access to comprehensive data and issues with provider contracts. They are also coming to the realization that there are varying needs of care among regional healthcare markets, making it difficult to provide a singular model (1).
Tiered Networks
Tiered Networks benefit employees through lower co-pays and contributions in exchange for less flexibility in choosing hospitals or doctors. The hospitals and doctors who agree to participate in these networks have accepted lower rates of reimbursement in exchange for an agreed upon volume of patients. There are different types of Tiered Networks however, and it’s important to know the difference.
Value-Based Reimbursement
An article, How to Pay for Health Care, in the Harvard Business Review(1) identified the term “value-based reimbursement” as a broad phrase that encompassed two very different approaches, capitation and bundled payments. It explained capitation as a “top-down approach that achieves some cost savings by targeting low-hanging fruit such as readmission rates, expensive drugs, and better management of post-acute care without changing healthcare delivery or holding providers accountable for efficiencies and outcomes.” It then compared capitation to a bundled payments approach where customers pay one price for the whole package of care, similar to how services like Lasik surgery or in-vitro fertilization (IVF) are paid for. Ultimately, the authors of this article found that a bundled payment approach transforms patient care because it “encourages provider teams to collaborate to understand the actual costs of each step in the entire care process, learn how to do things better, and get care right the first time.” (1).
On-site/Near-site Clinics
On-site clinics provide convenient access to primary care for employees and dependents at the workplace. This was once a luxury that was only provided by the nation’s largest employers. With the evolution of ‘nearsite’ clinics, all of that has changed. Near-site clinics are typically shared by multiple employers and enable each employer to share in the cost and utilization of primary care services. This reduces overhead, yet allows employees and their dependents very efficient access to care at or near their place of work. Onsite and near-site clinics have produced substantial results by enabling employers to purchase healthcare, such as primary care, at “wholesale” and gain significant savings. For example, a 28-panel blood test retails on average for $185, while through an on-site/near-site clinic can cost an employer approximately $10. Having unlimited convenience of primary care for employees through these arrangements has shown a reduction in specialist and emergency room visits, inpatient admits, days per admit, and has had a positive impact on traditional claims costs. It is also important to factor in the potential return on investment through increased employee productivity. But, not every organization can take this approach.
So, how do you know which option might be best for your organization?
That depends. Alliant’s strategy to help employers curb trend looks at many approaches in order to uncover what’s best for your organization. Ultimately, we can tell you this. Dave Chase, a healthcare industry expert and author, stated “The fact is, more Americans get their health benefits through their job and when employers are smart, they demonstrate that the best way to slash healthcare costs is to improve benefits(2).” We couldn’t agree more.
Sources
Porter, M.E., & Kaplan, R.S. (2016, July). Harvard Business Review: Economics & Society. How to Pay for Health Care. Retrieved January 27, 2017, from https://hbr.org/2016/07/how-to-pay-for-health-care
Chase, Dave. “After Healthcare’s “Katrina”, Who Wins/Loses?” LinkedIn.com/Pulse. LinkedIn.com/Pulse, 27 Nov 2016. Web. 27 Jan 2017. https://www.linkedin.com/pulse/after-healthcares-katrina-who-winsloses-dave-chase?trk=prof-post