Large employers exerting their influence on the costs of surgery

With the news of Kroger negotiating its own fixed-price surgery deals, we may be approaching a critical mass of employers who are taking health care matters into their own hands.

The Dayton Daily News describes the type of deal Kroger negotiated to ensure excellent surgical care for its employees at a more affordable price:

Fixed price deals … [bundles] all the costs associated with a common surgery into one sticker price instead of an unpredictable list of line-item bills. Kroger became the latest major employer to negotiate a bundled payment deal when it struck an agreement with The Christ Hospital Health Network for a fixed price for spine surgery and total hip or knee replacements for its employees.

Similar deals have been struck by Boeing, Walmart, Lowe’s, General Electric and others. Lowe’s employee plan was particularly noteworthy. It provides employees free heart surgery at The Cleveland Clinic, including airfare, hotel and meals.

The common denominator in these deals is bundled payments. Because they involve a fixed price, bundled payments provide a crucial benefit to employers: predictability. With many companies now spending as much on employee health care as they do on suppliers for their core business products, predictability is a godsend.

On the other side of the coin, large hospital systems are willing to accept a lower price for common surgeries because they’re gaining new customers.

Ensuring that the care in these negotiations is high quality, companies are often hiring outfits like the nonprofit Pacific Business Group on Health (PBGH) to vet potential health systems. PBGH conducts a rigorous review of potential health systems to ensure that they can meet quality care standards, as well as bring the cost of care in under budget.

How do employees like the new benefits? It’s hard to know. If a patient receives free heart surgery, I assume he is very happy. Others might view the benefit as restrictive of their choice. Boeing, for example, negotiated a deal for its St. Louis employees with Mercy Health. Mercy provides an extensive range of medical services, but not everything. So employers must figure out how to accommodate the full spectrum of their employee medical needs.

In any case, these companies have chosen a path that eliminates the middlemen in the health care equation. In that regard, they join the 41-company Health Transformation Alliance and the upcoming Amazon troika, companies using their size to influence the future direction of health care.

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