Carrum Health, in partnership with Employer Health Innovation Roundtable (EHIR), a coalition of the largest and most progressive employers, revealed that employers’ desire to drive down healthcare expenditures and improve quality will likely lead to an increase in usage of Centers of Excellence (COE).
Overtreatment – including invasive treatments and unnecessary surgeries – wastes up to $101 billion a year in the U.S., according to a study published in the Journal of the American Medical Association. Furthermore, because of pent-up demand, surgical volumes are expected to increase 5% compared to pre-pandemic levels into 2023, according to McKinsey. The combination of these factors led EHIR and Carrum Health to assess how employers perceive their overall surgical spending and its relation to COEs. The survey was conducted in partnership with Carrum Health, the first digital health company connecting employers and employees to Centers of Excellence (COEs) through a technology-powered platform. Responses revealed that surgical costs are 34% of employers total spend, yet most of the cost-reduction solutions relied on by many are not containing these expenditures.
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“Mounting healthcare costs, exacerbated by COVID-19, have become an even more prominent concern for self-funded employers. The pent-up demand for elective surgeries could have a significant impact on their total medical spend,” said EHIR CEO Michael Laquere. “We’re hearing from our EHIR members that they’re concerned with rising surgical costs, and our survey, along with anecdotal evidence, indicates an increased interest by our members in Centers of Excellence as an enabler to reduce expenditures and improve quality.”
In January 2022, Carrum Health, with support from EHIR, conducted an online survey of 217 benefits leaders working at U.S.-based companies with 3,000 or more employees that offer employee health insurance and are self-insured. Respondents overwhelmingly noted that:
- Containing post-pandemic healthcare costs is a priority – Because of surgeries postponed during the peaks of the pandemic, providers expect pent-up demand to exceed capacity, particularly for orthopedic, cardiovascular, and general surgery over the next year. This problem can only be resolved with increased surgical volumes, which will increase cost for employers. The survey found that 59% indicated lowering costs was a very high, or high, priority – up from 52% prior to the pandemic.
- Surgical expenditures are a significant part of the cost problem – Over half of the employers surveyed indicated that surgical costs were a significant issue, with surgery accounting for 34% of their total healthcare spend. About 75% noted that by controlling surgery costs, they can largely reduce their total spend.
- Adoption of COEs is still in a nascent phase – Even though 69% of employers have a COE, the majority of them have been implemented within the past two years, and not with an eye to specifically reducing surgical costs. While employers are still discovering the full value of having a COE in place for surgical care, a value-based COE that rejects the fee-for-service pricing model has the potential to address both the quality of surgical care and surgical backlog created by COVID-19.
- Future is bright for third-party COEs – Only 9% of respondents rely on carrier-sponsored COEs, which suggests that they are seeking out third-party vendors for this benefit, as either the sole COE provider or as a partner with the employer’s health plan carrier. As employers evaluate third-party COEs, respondents indicated that they wanted options that prioritize care and quality outcomes, offer a wide and convenient provider network, and help them mitigate any impact on the health plan relationship.
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