TRANSPARENCY AND THE FREE MARKET = FOCUSING ON VALUE
The free market movement in healthcare is gaining steam quickly. As the industry grows and changes, with premiums and out-of-pocket costs soaring, consumers are taking a much closer look at their total healthcare costs than ever before.
Consumers expect to know the value of a purchasing decision. Before setting out to make major purchases, individuals scan the landscape of advertisements and consumer reviews, looking for quality products and determining a fair price they are willing to pay. However, when making healthcare purchasing decisions, any analysis of cost versus value is nearly impossible.
It stands to reason that a patient in pursuit of actual pricing for medical treatment should be able to obtain that information. Frustratingly, that is rarely the case. The American healthcare system functions on the predication of a lack of transparency. As more and more patients begin to scrutinize their own healthcare costs, the demand for transparency is intensifying.
Healthcare transparency provides consumers with the information and the incentive to choose healthcare providers based on value. Value is not just about price; but rather price and quality. True free market healthcare is consumer-driven. Patients are taught that valuable healthcare has to be expensive and that the highest quality will cost more. But when it comes to health services, the opposite is true, the quality of healthcare is not related to the price in the way we are used to.
In reality – the vast majority of the time better quality care is almost always a lower price. A recent study indicated that if everyone in the U.S. got their care from the Mayo clinic, health costs would sharply decline. Mayo has excellent quality care, but their prices are far less than the competition.
TRANSPARENCY IS VITAL TO A SELF-FUNDED HEALTH PLAN
Many healthcare providers and hospital systems have a great deal invested in the status quo of healthcare. It is becoming widely known that many healthcare systems are masking revenue streams, taking federal dollars to reimburse themselves for ‘uncompensated care’, and relying on political favors to maintain their monopoly status. They are bankrupting patients and self-funded health plans while claiming imminent bankruptcy.
Self-funded employers have been forced to rely on PPOs to give a percent off billed charges from these providers. This has done nothing to curb the rising cost of care as most PPOs are taking a portion of ‘savings’ as an additional revenue stream. It benefits them if the billed charge is excessive. In addition to the PPO, many more layers between the patient and the provider further add to the cost.
For a self-funded employer, these costs are not monopoly money. The cost increases can mean the difference between paying claims or giving raises; buying new equipment or increasing staff. Incenting employees to use providers who offer bundled, cash-based pricing can save that employer millions of dollars in claims in just a few years.
TRANSPARENCY FROM THE TPA
Transparency from an independent TPA is not scrutinized as closely as the free market movement in the provider sphere. However, it is just as important for the TPA to embrace transparency in their own business as it is for the providers.
Many times TPAs have multiple revenue streams from commissions to percentage of savings on out of network or third party recovery. This may be standard industry practice, but is not transparent, nor is it in the best interest of the client.
IS YOUR CLIENT AT THE FOREFRONT OF YOUR DECISIONS?
Regulatory compliance- ERISA requires that employers use plan funds for reasonable expenses. The inability to quantify the exact compensation paid to their TPA puts employers in a non-compliant position with ERISA. (Class action suit example)
Trust of the client- When your total compensation is stated on an up front, per employee per month basis, it shows the client that you have their best interest in mind. Aside from potential ERISA issues, it is an example that you will work for their best interest.
Recommendations for plan design, stop loss, cost containment vendors, etc. can be made purely with your client’s goals in mind. These decisions will never again impact your bottom line.
Getting an automatic raise when your client has a poor claims year puts the TPA at odds with the best interest of the client. Self-funded employers should never need someone to ‘protect’ them from their TPA! Compensation should always be based on value. Value is determined based on what is fair and equitable to both the buyer and the seller.
Equality- When a TPA embraces and promotes the free market in healthcare, how then does it look when the TPA gains compensation in the exact manner that they are asking the providers not to use?
Why make the change to bundled administration fees? Because it is knowable to the client; it is in the client’s best interest; it is in your best interest; and it is the right thing to do.
WHY CAN EMBRACING TRANSPARENCY AT ALL LEVELS GROW YOUR BUSINESS?
TPAs who have embraced transparency at all levels of their business have seen their businesses grow and thrive over the last few years. Refocusing the independent TPA industry back to their roots of providing valuable services based on their client’s needs and goals helps independent TPAs take back their niche from the carrier ASOs.
PUTTING THE BUYER BACK IN THE DRIVER’S SEAT
Many TPAs like the idea of transparency, but do not know the how-to’s of working with free market providers or how to structure the benefit designs. They may be utilizing carrier networks with contracts that do not allow direct contracting or enhanced benefits for specific providers. Their compensation may be entirely dependent on anti-free market revenue streams. These are all things that can be easily worked around!
Here are some tips:
Plans can include incentives for the free market! The Phia Group can help with this.
Fire the carrier PPOs! This may seem scary, but there are PPOs who will not prohibit direct contracting with free market providers.
Worried about discounts? Don’t be. The discounts off of ‘billed’ charges are entirely made up and hold no value. Utilizing free market healthcare sellers will more than make up for any loss in ‘discounts’.
Do the math. Add up your total compensation and figure out what it would take to convert it to one line item on the spreadsheet.
Start with one client. They may be astounded when your admin fee line goes from $15 to $40, but when they see the overall picture of reduced stop loss premiums and return of the whole amount on subrogation or out of network negotiations, they will sing your praises and trust will grow.
Still need help? Call the Free Market Medical Association 866-901-FMMA (3662).