Bundling health costs for savings
Start-up rewards efficiency
Treating a torn anterior cruciate ligament in the knee can cost anywhere from $11,001 to $27,489 in the Milwaukee area. For carpal tunnel surgery, the cost can range from $4,003 to $8,936. For lower-back surgery to fuse two or more vertebrae, the range is $69,259 to $109,432.
Those well-documented variations, spelled out on guroo.com, can also be seen throughout the country. They are just a sampling of one of the most glaring examples of the inefficiencies in the U.S. health-care market.
Once people have reached their deductibles, they have little incentive to seek out doctors and hospitals that provide quality care at the lowest cost.
Access HealthNet, a Milwaukee start-up founded in 2014, has developed a service to
counter those flaws and potentially save employers as well as employees thousands of dollars from a single episode of care.
The service, which is layered over an employer’s existing health plan, doesn’t limit the choice of hospitals or doctors. Employees and family members still can go to anyone within the health plan’s network. But it does give them a strong incentive to get care from the hospitals and physicians that do the best job in controlling costs. Here’s how it works:
Access HealthNet has created bundles that include all the care, such as physician fees, tests, hospital costs and physical therapy, that goes into more than 1,100 medical services, ranging from a blood test to back surgery.
The company asks the hospitals, physicians and other health-care providers in a health plan’s network in a geographic area to give their best price for an episode of care.
Employers give a financial incentive — typically waiving co-pays and deductibles — to employees and family members who get care from the hospitals, physicians and other health-care providers who have the lowest prices.
Health-care providers with the lowest prices benefit in two ways. First, they get more patients. Second, the health plan pays the bills in full, sparing them the hassle and expense of collecting deductibles that can run into thousands of dollars — money that the patients may not have.
Access HealthNet charges the health-care providers 6% of the total bill for the service.
“This is an elegantly simple business solution,” said Eric Haberichter, co-founder and chief executive officer of Access HealthNet.
Haberichter was co-founder of Smart Choice MRI, known for offering MRIs for a flat price of $600 or less. He left the company in 2013, and with James Kolb and Leslie Kolowith founded Access HealthNet with an initial investment of about $700,000 of their own money and money from associates.
Access HealthNet began building out the service last January, starting with a few common medical services, such as imaging, lab work and physical therapy.
The service is designed for employers who self-insure — employers who pay most of their employees’ medical bills themselves. Those are typically employers with 100 or more employees, though some smaller employers also self-insure.
John Torinus, chairman of Serigraph Inc. in West Bend, which makes graphic parts such as the faces of automobile instrument panels, has given employees similar incentives for about seven years.
He tells the story of an employee who needed to have both knees replaced some years ago. The median price was $95,000. Serigraph shopped for the best price by directly contacting health systems. The lowest price was $52,000.
The company then asked for an additional price break because the employee was getting both knees replaced at once. The health system, which Torinus had agreed not to disclose, lowered the price to $39,000.
The savings for Serigraph: $56,000.
Serigraph in turn waived the deductible and co-pays for the employee, saving him $6,750.
Torinus is an investor in the Wisconsin Super Angel Fund, which was the lead investor in a group that recently invested $1.5 million in Access HealthNet. BrightStar Wisconsin Foundation Inc. also was part of the investor group.
“This is the silver bullet for transparency,” Torinus said.
Most large health plans now have so-called transparency tools that provide information on medical prices. But study after study has found that as few as one in 10 people use them.
People tend to defer to their doctors, and, again, once people reach their deductible, they have little incentive to care about the cost.
Many people also equate higher costs with higher quality. Yet studies have found little connection, either positive or negative, between the cost of medical services and their quality.
Although Access HealthNet’s concept is relatively simple, determining what goes into
an episode of care — and developing the underlying information technology systems for all this to work — was not.
Access HealthNet worked with Alithias Inc., a Milwaukee company that provides information on health-care prices to employers and employees, on developing the bundles.
Access HealthNet, which has 26 employees in Milwaukee, also employs people trained in the intricacies of medical codes for billing.
The challenge now is building out its service.
It has five sales representatives throughout the country to explain the concept to healthcare providers and other people on staff to request bids and contract with health-care providers where customers have employees.
The company’s goal is to be working with 10,000 health-care locations — up from 4,000 now — by the end of the year.
The service itself will be sold by third-party administrators, who manage health plans for employers, as well as benefit consultants and insurance brokers.
EBSO Benefits Inc., which has an office in Glendale and other cities, and BPA Benefit Plan Administrators in Eau Claire are third-party administrators now working with Access HealthNet.
The company has an estimated 65,000 people covered in health plans that use its service, and Haberichter expects that number to jump to 250,000 people by April or May.
“It’s an ocean of opportunity,” he said.
The potential appeal to employers and employees alike is clear.
Richard Vallin, president and chief executive officer of Advanced Manufacturing Technology Inc. in Grafton, worked with Access HealthNet when it was developing the underlying technology, and he quickly realized the potential savings.
The company, which employs about 42 people, saved $12,000 to $15,000 on the cost of just one knee surgery.
“What I am trying to do is make health care affordable to my employees,” Vallin said.
Menasha Corp., based in Neenah, will waive deductibles
and co-pays for its 5,500 employees and their families who use Access HealthNet starting March 1, said Rick Fantini, vice president of human resources.
The company plans to work with Alithias to help employees understand how the option works.
Fantini estimates that Menasha, which spends $35 million a year on health care, could save millions of dollars a year from employees’ use of Access HealthNet.
“And it’s completely voluntary,” he said.
That’s another advantage: Access HealthNet’s service is all carrots and no sticks. It also is relatively simple to add to a company’s health plan.
In contrast, reference pricing and tiering — two other approaches used by health plans to lessen the variation in the cost of medical services — indirectly have penalties and are more complicated to put in place.
With reference pricing, patients pay the difference if they go to providers who charge above a specified price. With tiering, patients pay a larger share of the cost if they go to providers in higher-priced tiers.
Access HealthNet’s service — as with reference pricing and tiering — gives health-care providers an incentive to eliminate waste and become more efficient.
That incentive is limited in the current system. The market in some ways even rewards the most inefficient providers: They can charge higher prices. And unlike other markets, the health-care providers that are more efficient and have lower prices rarely are rewarded with additional market share.
Access HealthNet’s service, which it estimates could be used for 43% of medical services, is designed to change that.
The company is in the process of moving to larger offices. And Mark Wiesman, an investor and the company’s new chief operating officer, estimates that Access Health Net could employ 100 people by next year.
“We think we have a very good mousetrap,” he said.