A trend to watch: large employers & local strategies
September 11, 2018
Over the past several years, many large self-funded employers have been implementing value-oriented strategies in an attempt to bend the rising cost curve and improve care for their populations. Large companies often have employees spread out across the U.S. with some concentrated in specific markets or geographies. Their size and geographic spread leads many of them to work with health plans that have a national reach to administer health care benefits for their populations.
At first, many employers worked with their national health plans to pilot value-oriented initiatives across all of their geographic locations. By implementing a national strategy, they can treat all employees the same and not risk certain employee populations missing out on the potential benefit of a program designed to lower costs and improve outcomes. In addition, benefits teams have an easier time managing and overseeing one national strategy, rather than several smaller, tailored approaches.
However, no two markets are alike. What may thrive in one geography may fail to engage critical health care actors in another. This comes as little surprise to us, as CPR has long explored how the dynamics of key players and local laws and regulations impact the potential for payment reform or other value-based initiatives. Given these barriers, employers are now turning to localized strategies to provide lower cost, better quality care to their employees and dependents.
Let’s explore an example. “Company” has over 500,000 covered lives concentrated mostly in three markets across the country. Market 1 is highly competitive, as there are myriad health plan and provider options available. Due to this competition, the prices and the quality of care vary minimally across providers. As one of the largest employers in this market, the Company can play off of this competition and examine plan and provider willingness to partner on a customized solution. Because of the Company’s size, partnering would be a significant growth opportunity for any of these key players.
Market 2 is only moderately competitive and prices for services vary significantly across providers. Of the three markets, this one is home to the fewest of the Company’s covered lives. As a result, the Company does not have the size to warrant a customized solution with a plan or provider. Instead, to address the variation in prices across the market, the Company could work with a health plan to incorporate reference pricing.
Market 3 is highly consolidated with only two provider systems and a few health plan options. Prices are very high and quality varies significantly across individual providers and services. Given the lack of competition, care from these provider systems can be incredibly expensive. Therefore, the Company could look to providing alternative options for members to seek care, such as direct contracts with centers of excellence, so that they have a less expensive, high-quality option.
While customizing value-oriented strategies for specific markets takes extra work, employers in this scenario may have more success at procuring better, more affordable care for their populations if they think locally and take market dynamics into account.
Interested in having CPR analyze the market dynamics of a particular region? Contact firstname.lastname@example.org today!