The high cost of insurance and surgical procedures is leading some large companies to negotiate lower prices for their employers with hospitals directly.
The cost of healthcare has changed the game for employers and their employees. But the game may be changing again.
Many employers have increased their out-of-pocket expenses and co-payments for employees, making it difficult for workers to ever go to the doctor. When life produces a debilitating physical injury, employees can be out thousands of dollars to meet their deductible, then face thousands of dollars of medical costs they cannot afford.
But the cost of some medical treatments is negotiable, and hospitals and hospital groups are now engaging large employers to create a system where employers save money by paying all of their employees’ surgery costs.
Lowe’s, the home improvement store, and airline United are among the big firms that have negotiated rates with special hospitals to provide surgeries at prices so reasonable, the employers can afford to fly employees to the site of the surgery on the company’s dime rather than pay for standard insurance coverage.
For instance, Lowe’s and other companies negotiate one flat rate for particular procedures from a number of hospitals, often within the same health provider system. The agreement calls for the hospitals to handle all of the treatment within a certain time frame for that one low price.
For Lowes, it is offering free surgeries for hip and knee replacements in 67 metropolitan areas across the country.
In an interview with National Public Radio, Lowe’s senior vice president for compensation and benefits Bob Ihrie explains how he came up with the idea for such a medical payment advancement back in 2010.
“We were able to get a bundled price, which actually enables us to save money on every single operation,’’ Ihrie said.
When he first proposed the system, managers assumed it was only for upper management, but Ihrie immediately explained “This is for any Lowe’s employee in the Lowe’s health care plans.”
The program is optional for employees, but Ihrie said 700 employees have taken the company up on its offer, saving themselves the extended out of pocket that would come with traditional insurance coverages.
The price for Lowe’s, Walmart and others was negotiated by the Pacific Business Group, and the rate for work was 20 to 30 percent below what the companies previously paid for similar procedures.
The lower negotiated rate creates an incentive for the hospital to be careful, thorough and prompt with responses to patient needs. This produces “huge savings on the back end, from matters like reduced re-admissions, reduced return to the O.R. and lower rates of blood clots,’’ according to Olivia Ross, Associate Director of Pacific Business Group.
These bundled rates are available through Medicare as well, and that program is saving close to $4,000 on orthopedic cases thanks to the negotiated rate.
The new system also encourages surgeons to NOT recommend surgeries that are unnecessary, where in the past they might have gone ahead to repair a knee or hip that could be treated without surgery first.
United Airlines is traveling employees from around the country to Rush University Medical Center in Chicago for hip and knee replacements and spinal fusion surgeries, paying for all travel costs, and all costs are covered by United after employees meet the annual deductible on their insurance policies. There are no extended co-pays or co-insurance. United also makes available a guest house for employees who travel to avoid hotel costs.
"The entire motivation for us is the quality of the care," said United compensation and benefits program vice president Anthony Scattone to the Chicago Tribune. "We're getting at costs by improving quality."
United also has a deal with Cleveland Clinic for some heart procedures.
The only market that does not like the new idea of negotiated group rates is the insurance industry. When United made contact with Rush, they skipped the step of dealing with insurance companies who negotiated rates with providers, in effect cutting out the middle man.
"They don't like it," Ross said. “They don't like that they are getting cut out of the money flow."
Kent McDill is a staff writer for Millionaire Corner. McDill spent 30 years as a sports writer, working for United Press International and the Daily Herald of Arlington Heights, Ill. From 1988-1999, he covered the Chicago Bulls for the Daily Herald, traveling with them every day through the nine-month season. He also covered the Bulls for UPI from 1985-88, and currently covers the team for www.nba.com. He has written two books on the Bulls, including the new title “100 Things Bulls Fans Should Know And Do Before They Die’, published by Triumph Books. In August 2013, his new book “100 Things Bears Fans Should Know And Do Before They Die” gets published.
In 2008, he resigned from the Herald and became a freelance writer. The Herald hired him to write business features and speeches for the Daily Herald Business Conferences and Awards presentations.
McDill also writes a monthly parenting column for the Herald’s Suburban Parent magazine.
McDill is the father of four children, and an active fan of soccer, Jimmy Buffett and all things Disney.