Cash for colonoscopies: Colorado tries to lower health costs through incentives

State workers in Colorado are being asked to be better consumers when shopping for health care services. And if they choose a low-cost, high-quality provider, they may receive a check in the mail for a portion of the savings.

It’s part of an initiative called the Colorado Purchasing Alliance, through which employers in the state are coming together to negotiate lower prices for health care services. The state government is one of 12 employers who have agreed to join the coalition and will be the first to use the new negotiated rates and consumer incentives.

The goal is to encourage employers and employees to make better choices and force state health systems — which have some of the highest prices and profits in the country — to cut their rates, disrupting what is considered an inefficient market for health care.

Starting July 1, state employees have access to Healthcare BlueBook, an online tool owned by a health data company of the same name that ranks health providers based on both cost and quality. The top 25% of providers for quality are designated in green, the bottom 25% in red, and anyone in between in yellow. The same color scale is used for costs.

“If you go to a green-green provider, we’ll send you a check,” said Josh Benn, Colorado government’s director of employee benefits contracts.

Checks can range from $50 for something like a mammogram to thousands of dollars for surgery. In most cases, the money helps offset employee copayments, coinsurance or deductibles. But for preventative services like colonoscopies, which have no copays, that’s extra cash in the employee’s pocket.

The rewards program is available only to employees who choose the state’s self-funded health plan, which is administered through Cigna, not Kaiser Permanente Alternative, which has a closed network of providers. Of the nearly 20,000 people in Cigna plans, both employees and family members, more than 1,200 used the tool, conducting 4,500 inquiries in the first six weeks.

“We can cut the network to the bone and really limit choice, but part of what I want to do is encourage people to make better decisions,” Ben said. “There are ways to reduce health care costs without hurting employees.”

While it’s too early to say how much the state will save through the program, the Healthcare Bluebook estimates that employers save an average of $1,500 each time an enrollee uses the online tool to choose a provider.

“And you end up with fewer complications and sick days,” Ben said.

Larimer County, in northern Colorado, has been using the Health Care Bluebook since 2018 in its incentive program to prevent workers from paying higher prices for care under its self-funded plans. With little competition, the local health system is charging county employees nearly twice as much as in Denver, just two hours south.

“We have a particularly dominant health care system here that knows they’re the system of choice, just based on market reputation, and they’re willing and able to charge accordingly,” said Jennifer Whitener, the county’s benefits manager.

Whitener withdrew an employee who needed a hip replacement and found a free-standing orthopedic surgery center that cost $20,000 less than the hospital-owned facility and had a higher quality rating.

“Being able to share information in terms of how you can shop for health care and not everyone is charging the same price for everything, and — oh, there’s actually a difference in quality depending on where you go — was eye-opening,” she said. said.

In the first four years, the county awarded an average of $15,000 per year in awards. The county calculated that for every $1 it spends to offer Health Care BlueBooks to its employees, it saves $3.50.

Andrea Bilderback, the county’s health promotion and outreach specialist, recently used the tool when deciding where to get a mammogram and a colonoscopy at age 40. She wound up getting a check for $100 for a colonoscopy and $35 for a mammogram. That was no out of pocket expense. She and her husband used the funds for a date night, a welcome respite for parents of a 1½-year-old son.

“It was like free money,” Bilderback said.

Such incentives have been used with varying degrees of success across the country. California Self-Insured Schools, a purchasing alliance representing 450 school districts in the Golden State, implemented a similar system a few years ago. Officials compared prices paid for five common procedures — arthroscopy, cataract surgery, colonoscopy, upper GI and endoscopy — at hospitals versus free-standing surgery centers. They found that surgery centers were generally much cheaper and care was often rated as good. The group capped the amount it would pay hospitals, leaving employees on the hook for any balance. If they went to the surgery center, there wouldn’t be a cap.

For example, the limit for arthroscopy was $4,500, so if a hospital charged $6,000, the patient could be billed for the remaining $1,500. But if that patient goes to a surgery center, the plan will cover the entire cost, regardless of the amount.

In the first year, beginning October 1, 2018, 54% of the new procedures were transferred from high-cost hospitals to low-cost surgery centers, saving school districts $3.1 million in health care costs.

“If you can pay $25,000 or $75,000 for a car and the only difference is dealership overhead, why should you pay $75,000?” John Stenerson, Deputy Executive Officer of California’s Self-Insured Schools. “That’s what we do all the time with medical costs.”

The Colorado Alliance conducted a similar analysis of the 10 most frequent outpatient procedures paid for by its employer members. Before even negotiating a rate, those employers can cut their costs for those procedures in half by sending employees to surgery centers instead of hospitals. Surgery centers charge less than hospitals for the same procedure, and hospitals often charge a convenience fee that increases costs for consumers and employers. A recent study found that ambulatory surgery centers cost an average of 26% less for orthopedic surgery than hospitals.

The cash-back incentive program is part of a larger effort by the Colorado Coalition to reduce health care costs for state employees and 12 other employers, mostly school districts and local governments. But state employees also give the coalition a larger portion of covered life and greater negotiating power with doctors, hospitals and other health providers.

Robert Smith, head of the Colorado Business Group on Health, which is leading the coalition, believes the purchasing-coalition model could revolutionize the health care market and harness the power of employers to lower costs. Most companies, he explained, pay premiums in a health plan to cover their employees but allow those health plans to negotiate rates with hospitals, doctors and other providers. It would be too complex and time-consuming for most businesses to undertake that role themselves.

Health-purchasing coalitions, on the other hand, allow employers to come together and negotiate rates for a much larger group of workers, giving them greater market power to negotiate lower rates.

“Health care outcomes are not related to price,” Smith said. “You can pay twice as much for some bad health care at one facility, and then you can get some of the best health care for half the price at another facility 10 miles away.”

But if employers change the way they buy health care, that could create a competitive market, Smith said.

Until now, most negotiated rates were limited to providers in Colorado’s populous Front Range region, which includes Denver, Fort Collins and Colorado Springs. The coalition is trying to sign up providers in other areas, particularly in the western part of the state, but fully transitioning to the new model could take three years or more.

Purchasing alliances have been attempted in other regions of the country with limited success. A report by the nonprofit Catalyst for Payment Reform found that such alliances often have initial success but can’t be sustained, because of the backlash from large health care systems. These systems often reduce the price of buying alliances to put them out of business.

So far, Smith has negotiated with free-standing ambulatory surgery centers, imaging facilities and physician-owned clinics. But he had less luck getting a larger health system to play ball.

“If it’s disruptive enough that it affects their bottom line and they notice it,” said Benn, the state’s director of employee benefits, “then, yes, I think they’ll come to the table.”

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