Price Transparency, Bundled Payments And Direct Employer Contracting. The Future Of Healthcare

While the term “value-based care” has become somewhat of a catchphrase in healthcare, the entrenched problems of our current healthcare system, not the least of which remains the lack of price transparency for a majority of treatments, skew the value equation away from discussion of cost to discussions of how quality improvement will increase value. This fails to address the biggest problem in modern healthcare which is that it is far too expensive and cost and quality are not reconciled in a fee-for-service system which has no standardization across diagnosis or procedure.

The staggering cost of providing health coverage for employees is causing significant economic strain for both patients and companies alike and shifting the cost of care to the patient through high-deductible health plans. The annual premium increase is unsustainable for many companies and many patients and yet these increases continue unchecked while health systems and insurance companies report annual revenues in the billions of dollars and 20% of the GDP of the US goes to healthcare spend. A growing number of self-insured companies are moving to skirt the traditional fee-for-service pathway wherein the price of care is only known after the care has been delivered. There is no other sector of the economy where consumers would tolerate such a transactional relationship and yet in healthcare this has become the norm and expectation.

Price transparency is essential to incent proper consumer behavior which is the only way to truly drive value in healthcare. This means that the patients or the self-insured company can know the cost of care for a procedure in advance and can shop for value the same as if purchasing a new car or flat screen TV. Like any of these consumer products, many parts are aggregated into a whole and the whole has a price tag. When we buy a car, we do not pay by the line item for each of the components that make up that car. The same can be done for many diagnoses and procedures in healthcare where the entire episode of care can be priced in advance. This synthesis of a care episode into a single, fixed price is known as bundled payment. In other words, all of the services are bundled into one fixed price, known in advance of the care with no balance billing or surprise costs. 

Direct employer contracting (DEC) is an arrangement where self-insured companies may circumnavigate traditional insurance to pay cash for an employee’s procedure directly to the care provider for a bundled procedure. This has been successfully done for many orthopaedic procedures that are amenable to structuring as a care episode from diagnosis through surgery and 90 days of the recovery. Joint replacement is a great example of this but it can be done for many other procedures. A key component of DEC is having physicians who are capable of providing fixed priced care and sophisticated care management. Physicians owned by hospitals or health systems generally cannot do this in a price competitive fashion because the administrative cost of care is so much higher in the hospital setting.

With the coming price transparency rules of 2022, the expectation is that direct employer contracting and bundled payments will become more mainstream, and those physicians that are able to provide competitive fixed price care for individual diagnoses and procedures will benefit by contracting with companies who direct patients toward these providers not just for improved quality but substantially reduced costs. Our practice has been performing bundled hip and knee replacements for over 3 years with a quality track record that has a complication rate 1/10th of national metrics. We have a platform in place to bundle multiple diagnoses and procedures for direct employer contracting and are readily available and willing to pursue relationships with companies looking to save money on the orthopaedic healthcare spend. If you are a patient or company representative or a broker looking to provide DEC services, contact our knee, hip and shoulder center here.

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