A smaller network, but better health?
How big of a health care network do you really need?
Do you need an inch-thick directory of primary care doctors and specialists to choose from? Would you give up some choice for more convenience? How about agreeing to a few restrictions in return for lower premiums?
These are the questions employers ask themselves every year when it comes time to renew health care plans. Striking the right balance between giving employees a wide choice of doctors and limiting costs is critical to the bottom line.
Larger networks offer more choices, but they make it difficult to control costs. That’s why Preferred Provider Plans, better known as a PPOs, charge patients more for visiting an out-of-network doctor while still agreeing to pay some of the bill.
The other option is a Health Maintenance Organization, or an HMO. Now I know uttering those initials will send cold shivers down readers’ spines because HMOs don’t cover out-of-network doctors. Many also know the bureaucratic horror of faceless insurance adjustors arguing with their doctors over proposed treatments.
That’s why most people prefer PPOs, because they can make an appointment with any doctor or specialist they want. That kind of freedom comes with a high premium, though, and studies show it doesn’t necessarily result in the best care.
That’s because about 30 percent of health care spending goes toward unnecessary procedures that might actually hurt patients, according to a 2012 study in the Journal of the American Medical Association. That’s $1 trillion in waste from redundant tests, un-
“We get paid on a monthly basis to keep patients healthy … with a quality of service patients find attractive.” Spencer Berthelsen, Kelsey-Seybold’s recently retired board chairman
necessary care and doctors acting on hunches rather than relying on data.
If you recognize the business opportunity to cut out waste and offer better services, get in line. Doctors’ groups across the country are overhauling the HMO model to put themselves in charge of patient care and installing high-tech systems to improve quality, all the while cutting back on overhead to bring down prices.
Some are even offering their own health plans and helping companies self-insure, cutting out middle-man insurance companies. In Houston, a prime example is KelseySeybold and its KelseyCare program — where the decisions are made by doctors instead of insurance bureaucrats.
The first step is to align everyone’s financial interests. Instead of billing by the procedure, KelseyCare charges a flat annual fee based on a person’s age and pre-existing conditions. If that person stays healthy, Kelsey makes a higher profit. If that person has a heart attack, Kelsey will likely take a loss. This is called a capitated system, and the doctors assume a lot of risk.
“We get paid on a monthly basis to keep patients healthy over a period of time, with a quality of service patients find attractive,” explained Spencer Berthelsen, Kelsey’s recently retired board chairman who developed the model. “In capitated care, we try very hard not to provide services the patient doesn’t need.”
If that sounds like an opportunity for doctors to deny care and save money, consider that when patients don’t get treated, they usually get worse. A sicker patient is more expensive to heal, so the incentive is to provide quality care, not ration it.
And what if you need a specialty outside the Kelsey network or have an emergency?
“Those bills are sent to Kelsey-Seybold,” said Ann Cook, vice president for business development.
Since physician care is paid upfront, there is no surprise billing. The only bills will come from clinics and hospitals. The money saved on billing and collection is invested in electronic health records accessible by all of Kelsey’s 430 doctors and 1,600 affiliates in 20 Houston metro locations. A Kelsey doctor will always have your most up-to-date health record.
Those records also feed a database that lets doctors know how they are performing compared to other doctors. If one has a lot of readmissions or complications, the computer alerts a supervisor. Groups that do this are called Accountable Care Organizations. Many of them offer low-cost HMO plans to employers.
Amy Milstead, president of Milstead Automotive, put her 130 employees and dependents on KelseyCare three years ago and switched to a self-insurance plan in which she pays the bills, reducing her premiums. Kelsey doctors also visit her shop four times a year to teach healthy living classes, and Kelsey staff visit twice a year to administer flu shots and schedule routine checkups. She says the program has saved her company about 10 percent on health care costs, and she believe she gets more for the money.
This winter, Kelsey provided every employee with a Fitbit health monitor and will award a prize to the first employee to walk 1 million steps, all at Kelsey’s expense. Kelsey wants to keep her employees out of the hospital.
“It helps keep our employees healthy. They teach them healthy eating habits, teach them to move more,” Milstead said. “They are so helpful, so over the top.”
Federal surveys show that Kelsey’s patients are among the most satisfied in the country and their health care outcomes are among the best. But Kelsey doesn’t own a copyright on this kind of care, and more ACOs are forming and offering similar plans in Houston every year, including Memorial Hermann.
So let me ask again, how big of a health network do you really need?