Headway & Headwinds in Colorado: What purchasers can do when health systems won’t budge
September 28, 2020
The new RAND Hospital Price Transparency results once again turned a spotlight on the high and disparate prices employers and other health care purchasers pay for health care services. The study allows benefit managers – or anyone for that matter – to look up hospitals by name and compare prices. But price transparency is only the first step for benefit managers and their consultants; much of the hard work comes after in the form of designing and implementing benefit and network strategies to guide plan participants to more affordable care.
Local market dynamics constrain the success of an employer’s high-value purchasing strategies. As our Executive Director, Suzanne Delbanco, shared with Reed Abelson of the New York Times, “In a market that is highly consolidated with no choices, it can be logistically infeasible [to negotiate with health systems].” Abelson’s article goes on to quote Robert J. Smith, executive director of the Colorado Business Group on Health (CBGH), about the challenges Colorado employers currently face in this arena:
“In Colorado, employers have had productive discussions with some of the specialty hospitals and independent hospitals,” said Smith. “We’ve made very little progress with health systems.”
While Smith’s situation is frustrating, it didn’t surprise CPR’s staff. In November 2019, CPR published the Denver-Area Market Assessment Report examining who holds the market power in Colorado’s capital. Using our market assessment methodology, we interviewed stakeholders, collected data on market conditions, and developed recommendations to assist Denver’s employer-purchasers in using payment reform to improve health care value. Our analysis found that providers and health systems have the upper hand in Denver. During our interviews, employer-purchasers consistently identified consolidation among providers, hospital ownership of physician groups, and providers’ lack of incentive to reduce prices or provide price transparency as the biggest barriers to effective payment reform in their market.
Here we are, almost a year since we published the report; COVID-19 and the economic downturn has only heightened the need for Colorado employers to implement high-value health care purchasing strategies. We decided to revisit the Report’s recommendations to help Colorado overcome the stalemate with large health systems.
Aggregating Purchaser Volume
CBGH continues to build out its statewide purchasing cooperative, which has the potential to bring together a critical mass of purchasers to drive payment reform forward. Group purchasing efforts are top of mind for many stakeholders, given the realization that traditional health insurance companies have been unable to deliver on their promise of getting better deals from providers by aggregating volume. We’ve been exploring this topic on our most recent Listening In (With Permission) podcast interviews and are actively working to support purchasers like CBGH in pursuing group purchasing strategies.
As self-funded health care purchasers, employers can design their health plan products to guide plan participants to lower-cost providers delivering equal or better-quality care. Colorado employers can learn from Self-Insured Schools of California’s Reference-Based Pricing program that encourages employees to receive care at ambulatory surgical centers instead of costlier hospital settings.
Moving to Payments with Downside Risk
If purchaser-led attempts to move health systems to financial risk aren’t working, it’s possible the purchasers need to think outside the box. Recently, CPR explored which stakeholders can help increase the use of bundled payments (a two-sided risk payment reform model with consistently positive quality and cost saving results), and we found that employers have multiple options to pursue. Three purchasers shared their experiences implementing bundled payment through three different avenues during our July 2020 Virtual Summit. Of course, as page 16 of our Denver Marketplace Report documents, stakeholders in Colorado will need to navigate certain regulatory restrictions when pursuing payment models with two-sided risk.
Last but not least, Colorado is a pioneer in the area of transparency with its well-established All-Payer Claims Database, which provided data to the RAND study. Notably, CBGH broke new ground in quality transparency by adding in Quantros CareChex hospital quality analysis to their RAND study results to create the “Colorado Hospital Value Report.”
But is it time to bring the price and quality findings to the media and the public? Colorado employers might find inspiration from CPR’s most recent case study “Making the Case for Cost-Effective Networks,” and consider developing public-facing campaigns to build awareness of the wide variation in prices and why change is necessary. While this is extra tricky right now due to COVID-19, it may help create the glide path to reform that Colorado employers seek.
We’re rooting for the employer, employer trust, and Taft-Hartley purchasers in Colorado – and purchasers everywhere – as they work to overcome the difficult market conditions in their markets. CPR is proud to have partnered with CBGH on the last year’s market assessment report and to continue to learn from their example.
If you have any questions on CPR’s Market Assessments or would like to commission one for your region, please contact CPR at email@example.com.
Photo by @kayboh on Unsplash.