By Bruce Clarke, Co-CEO, Catapult

As an employers association, we’ve spent the last three years working to find an effective way to help employers resolve the quality, service and cost challenges in healthcare. All are in pain, but the small and medium-sized workplaces have the fewest options.

As employer advocates, we cannot always solve a complex problem, but we can find a meaningful pathway toward something better.

You know the stats about the annual increases and the cost shifting to employees. You don’t feel good about it and your employees certainly don’t.

You see the mathematical trajectory toward complete unaffordability and maybe even government takeover as a viable option. You probably don’t feel good about that either.

Sometimes we joke we should have picked something easier to tackle, like, say, reforming public schools or fixing climate change.

Let me say sincerely and clearly how much we all appreciate the good things about American healthcare. The skill and heroics that have saved family members or friends. Specifically, the incredible sacrifices made by direct care providers during Covid. Direct care providers are, generally speaking, terrific and well-intended, and looking out for your best interests.

But, the business model of healthcare – specifically, the business model in large healthcare systems and pharmacy benefit plans – is not looking out for your best interests. That business model harms access, choice, outcomes, quality, and cost.

That is why we say we are working to disrupt the current model from the ground up. We have to unbundle and demystify the system and give each other real decision-making information and authority. At the employer and employee level.

Let me give you 10 things we have learned about the business model problem that are generally true across the US. Of course, there are always some localized exceptions, and it is those exceptions we are working to find and build upon.

These are my conclusions from the last three years of seeking solutions, and not necessarily the views of the NC Chamber.

1. Healthcare is not a free market. It is a very personal service, with an authoritative and trusted gatekeeper, sometimes on an emergency basis, with unsophisticated customers, and inelastic demand, that uses third-party payers and other devices to prevent true comparisons and choice.
2. Healthcare systems by and large do not know what a service or procedure costs them to perform, and pay too little attention to cost control. They use regular increases in their Chargemaster (or rack rate) to drive up network payments without real regard to the cost of service.
3. Prices for common tests and procedures vary greatly and unpredictably between different systems, within a carrier network and between carrier networks.
4. Healthcare systems consciously use the private payer as the unwitting balancing number on their income statement, charging about 250% or more of the comparable Medicare reimbursement via these third-party networks.
5. The uninsured rate in America is down nearly 50% since Obamacare, and hospitals average only 1.5 to 3.0% of bad debt write-offs each year, reducing the past claims of a charity care problem.
6. It is normal for a hospital to offer a “cash price” for care that is significantly below the fake discounts provided through carrier networks.
7. The business model today works well for large healthcare systems and carriers. It is not broken. It was made this way: there is little genuine interest in meaningful moves to “value-based care” and such, and away from chargemaster-driven fee-for-service.
8. Anti-competitive behavior, large system mergers, political influence: all have contributed to the economic rents the large systems enjoy.
9. McKinsey has advised healthcare systems that 55% of their future net profit should come from buying other providers, who were originally created to be independent, lower-cost competitors, and then perversely and automatically raising their prices and Medicare reimbursements to the hospital’s price level. Because they can. And then use them as referral sources, of course.
10. Pharmacy Benefit Managers are now infamous for spread pricing, retained rebates and quiet payments to partners. These undisclosed, or fine-print practices, hurt the plan and your employees without adding any value.

Employers around the country are learning and using the tools necessary to begin leveling the playing field: the way forward is known, it is local and it is gaining vitality one workplace at a time.

Insurance carriers, PBMs, and healthcare systems are not genuinely interested in reducing healthcare spending. Their contracts with providers usually prevent employers from steering within the network based on quality or price. Carriers just need to keep the large systems in their network happy. And pay about the same overall as the other carriers pay.

Some brokers are helpful to employers in understanding and meeting these challenges, many are not. To be fair, sometimes that is because the employer-client is not ready to cross the Rubicon to a different model: one that begins to shift the decision-making to the real payers and real customers in our workplaces.   Rather than one that converts non-routine interactions with the system into an endless chain of EOBs, fake discounts, over-charges, uncertain quality, co-pays, co-insurance, family maximums and too often, personal bankruptcies.

There are a few hospital systems that have abandoned the confusing pricing,  surprise billing and collections lawsuits against patients (Columbus NE) and do just fine. But not very many, yet.

There are some large employers very serious about improving quality and price.  You don’t have to have their scale to become one of them, over a period of time.

You have to be curious, ready to abandon the easy button of a turnkey carrier or PPO network, capable of understanding and adopting a new financial model, resist the price reductions and incentives a carrier will throw at you when you announce you are leaving, and be very communicative with your employees over the what, how and why.

Ideally, you will seek these four priorities, in this order:

1. Doctor QUALITY scores;
2. Facility QUALITY scores;
3. Member OUT-OF-POCKET cost (zero is ideal);
4. COST SAVINGS to the employer.

We have adopted this model at Catapult for our employees. We are also a part owner of the local leader in this model known as Hero Health. Hero assembled the back-office technologies, direct provider contracts, transparent PBM, open network, and nurse navigation needed for results. There are other models in the marketplace with varying features and a great broker can help guide you and assess fit. The best models follow principles from the nonprofit organization healthrosetta.org. I love their motto: Healthcare is already fixed. Join us to replicate the fixes.” That is what we are working to do at Catapult. Locally in NC.