News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

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News, Analysis, Trends, Management Innovations for
Clinical Laboratories and Pathology Groups

Hosted by Robert Michel
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More Big Companies Engage Health Networks Directly to Cover Their Employees’ Healthcare: Should Medical Laboratories Be Talking to Self-Insuring Employers?

By negotiating directly with healthcare systems employers garner cost savings, while creating opportunities for clinical laboratories willing to be flexible about claims and reimbursement

It’s a healthcare trend called “direct contracting” and it is the latest method that self-insuring employers are using to better manage the cost of their health benefits plan, while maintaining access and quality for their employees. The interesting thing about direct contracting is that it might be a strategy that could work for innovative regional clinical laboratories to negotiate a place for themselves in that employer’s provider network.

Healthcare costs continue to skyrocket in the United States, and in response, many large companies are providing healthcare services to their employees by working directly with health networks and other organizations, instead of using third-party administrators (TPAs) of insurance plans to create healthcare benefits packages for their employees.

This can provide clinical laboratories and anatomic pathology groups with opportunities to create revenue and further outreach into their communities. Astute lab leaders may want to consider meeting with the decision-makers at large companies in their areas and develop strategies for working together directly. Human resources managers may be interested in the benefits of working directly with medical laboratories.

Employers Already Engaged with Health Networks for Provider Services

Self-insuring is not a new concept. In a direct contracting relationship, the employer skips the TPA in hopes of achieving cost savings. Sometimes the direct contract is for specific services that employees need most often, or they can be designed to cover the entire spectrum of services available to employees.

Many companies have already engaged in direct contracting for healthcare services. Among them are: Cisco Systems, Boeing, Intel, Walmart, and Whole Foods. Amazon, JP Morgan Chase, and Berkshire Hathaway also have announced a joint agreement to self-insure their employees, which Dark Daily reported in June. (See, “Six New Jersey Hospitals and Several Major Corporations to Self-Insure Their Million+ Employees; Trend Could Impact How Local Clinical Laboratories Get Paid,” June 11, 2018.)

Cisco has negotiated a direct healthcare agreement with Stanford Health System. Stanford operates a clinic at the Cisco campus, so that the primary care doctor is a member of the community within the company.

“I’m in their space. I’m actually where they work. I’m a bit of a village doc,” Larry Kwan, MD (above), a doctor of internal medicine with Stanford Health Care, told Reuters about his role in the Stanford clinic at the Cisco campus. About 1,000 Cisco employees are enrolled in the Stanford plan. Katelyn Johnson, Integrated Health Manager at Cisco Systems, says it’s a program that requires a more active approach from companies than traditional health benefits plans. (Photo copyrights: Stanford Health Care.)

Boeing, too, has explored direct contracting in a program where the company negotiated directly with hospitals in four different states. The direct contracts have resulted in cost savings and cover some 15,000 employees plus their families. Some of those cost savings have come from things like getting doctors to prescribe generic drugs.

Intel also has a similar program, covering around 38,000 employees and their families. They have found success in managing chronic conditions like diabetes. Technology, such as video-conferencing, also has helped lower costs and improve retention.

Even health networks are getting into the game. One recent example is the Healthcare Transformation Consortium (HTC), a six-hospital healthcare systems in New Jersey that formed to self-insure and provide direct healthcare coverage for their employees.

Companies may gain some cost savings from directly negotiating, but there are gains for the health systems as well. In a deal with Whole Foods in 2016, Adventist Health System gained a new set of skills that they plan to use in negotiating similar deals with other employers.

“We have a little bit more flexibility as a health system to design around what Whole Foods defines as quality, or what Whole Foods defines as patient satisfaction, which is sometimes different than the traditional definitions,” Arby Nahapetian, MD, regional chief medical officer and SVP at Adventist-Southern California told Modern Healthcare.

Signs Point to Trend Continuing

The Healthcare Transformation Consortium in New Jersey, along with the joint agreement between Amazon, JP Morgan Chase, and Berkshire Hathaway, are examples of what the future is likely to hold. The more these kinds of collaborations and direct contracts result in both cost savings and patient satisfaction, the more companies will likely consider direct healthcare contracts.

Hospital-based and independent laboratories may want to consider meeting with the larger employers in their service regions and explain to the HR benefits managers how better utilization of selected lab tests could improve patient outcomes and contribute to better managing costs.

After all, employers tell health insurance companies what they want to cover with their health benefits plans. So, educating the employers’ HR teams about the true value of clinical laboratory tests could be a winning strategy for labs willing to take the time to do this.

Dava Stewart

Related Information:

Fed Up with Rising Costs, Big US Firms Dig into Healthcare

Left Out of the Game: Health Systems Offer Direct-To-Employer Contracting to Eliminate Insurers

Six New Jersey Hospitals and Several Major Corporations to Self-Insure Their Million-plus Employees; Trend Could Impact How Local Clinical Laboratories Get Paid


Six New Jersey Hospitals and Several Major Corporations to Self-Insure Their Million+ Employees; Trend Could Impact How Local Clinical Laboratories Get Paid

Plans by large-scale employers to self-insure brings into question how clinical laboratories would submit claims and get reimbursed from inside and outside of a corporate provider/payer network

Clinical laboratories and anatomic pathology groups serving the nation’s hospitals and health systems may get increased network access to patients due to new developments in the health insurance marketplace. In recent months, both large corporate players and a number of smaller hospital systems have decided to form their own health insurance companies.

For example, six New Jersey hospital health systems announced they have taken steps to self-insure their employees by forming the Healthcare Transformation Consortium (HTC). This follows a similar joint agreement by Amazon, Berkshire Hathaway, and JPMorgan Chase to self-insure their employees as well. Inhouse medical laboratories and anatomic pathology groups that service these entities will likely find themselves part of new private provider/payer networks, which will impact how and when they get reimbursed for their services.

Both groups hope to slow skyrocketing healthcare costs, improve outcomes, and avoid having to navigate the increasingly complex insurance industry. Between the two groups, nearly one million employees will be insured directly by their companies.

Another reason these two events could be good news for the hospitals, doctor’s groups, and medical laboratories involved is they will no longer have to deal with narrow networks and mandates required of health plans subject to the federal Employee Retirement Income Security Act (ERISA) of 1974. This also may include regulations in the Health Insurance Portability and Accountability Act (HIPAA), which amended ERISA in 1996.

Local clinical laboratories will likely automatically become part of the combined provider group as well, which is good. But will they have to alter how they submit claims and get reimbursed for services rendered to a private corporate payment system?

Goals of Corporate Healthcare

In a press release, Amazon, JPMorgan Chase, and Berkshire Hathaway stated they are “partnering on ways to address healthcare for their US employees, with the aim of improving employee satisfaction and reducing costs.” A not-uncommon healthcare goal, these days.

One of the few concrete details in the release stated, “The initial focus of the new company will be on technology solutions that will provide U.S. employees and their families with simplified, high-quality and transparent healthcare at a reasonable cost.”

The six N.J. healthcare providers in the HTC include:

Together, they employ approximately 50,000 individuals who all will be enrolled in a single health plan, scheduled to go live January 1, 2019.

Kevin Slavin (above), President and CEO of St. Joseph’s Health in Syracuse, N.Y., told HealthLeaders Media. “Each of us have had our different strategies to reduce costs and improve care for our beneficiaries, but now we have six systems that can share those ideas and harness power together.” He added that they expect to see immediate cost savings per enrollee for hospital, outpatient, and medical laboratory services. (Photo copyright: St. Joseph’s Healthcare System.)

Stocks Fall in Response to Announcements

On the day that Amazon (NASDAQ:AMZN), JPMorgan Chase (NYSE:JPM), and Berkshire Hathaway (NYSE:BRK.A, BRK.B) made their announcement, UnitedHealth Group (NYSE:UNH), Anthem (NYSE:ANTM), and other healthcare companies saw their stocks fall. This demonstrates how disruptive such partnerships and coalitions can be in the healthcare marketplace, the New York Times reported.

They can be disruptive in more immediate ways, as well. For example, companies may use collected patient data to devise wellness programs they then offer their employees for free—even going as far as providing a financial incentive to participate. A healthier employee workforce means lower healthcare costs, but also less revenue to surrounding hospitals, physician’s practices, and medical laboratories.

What’s good for one group is not so good for the other, even though people are getting healthier in the long run.

And, to be fair, removing a million people from health insurance plans surely will negatively impact those companies’ finances, as well. The six HTC entities spend approximately $250 million annually for health benefits.

Kevin Joyce, VP of Insurance Networks at Atlantic Health System, a six-hospital health system in Morristown, N.J., told Healthcare Finance that, because the organizations involved in the HTC are healthcare providers themselves, the consortium has a particularly intimate knowledge of the issues causing the ever-rising cost of care.

“This is one of the ways to try to bend the cost curve,” he noted. “I honestly believe with the rise in high-deductible plans, trying to make healthcare more affordable should be the mission of both payer and provider. What makes us different from Amazon is that we as competitors came together to do this. This should have a ripple effect across all of our membership.”

Kevin Lenahan, CPA, Senior Vice President, Chief Financial and Administrative Officer, at Atlantic Health System agrees, adding, “It’s like-minded organizations that came together. We know each other. We all felt that we have a responsibility to improve quality, help transparency.”

Huge Obstacles on All Sides

In a CNBC interview covered by Inc. Magazine, Berkshire Hathaway CEO Warren Buffett emphasized that the obstacles such coalitions face are enormous.

“You talk about something that has $3.3 trillion in revenues presently going to people, and most people that are on the receiving end of the $3.3 trillion are happy with things.” He added, “If it was easy, it’d have been done.”

Nevertheless, both coalitions hope to serve as models for others. “By working closely with like-minded organizations, we can share best practices, learn from one another, and lead the transition from fee-for-service to value-based care, using our own benefit plans as proving grounds,” Joyce told Healthcare Finance.

As the trend to self-insure employees gains steam across corporate America, it will be interesting to see how the inhouse medical laboratories, and independent clinical laboratories and pathology groups that service these entities, are affected by the change.

—Dava Stewart

Related Information:

New Jersey Beats Amazon to the Punch on Self-Insured Health Plan

Amazon, Berkshire Hathaway, and JPMorgan Chase to Partner on US Employee Healthcare

Amazon, Berkshire Hathaway, and JPMorgan Team Up to Try to Disrupt Health Care

Six New Jersey Health Systems Borrow a Page from Amazon