Investing in the well-being of your employees is not only an obligation but a strategic advantage in this era of enlightened progress. This investment will ignite productivity, loyalty, and innovation, giving your business a competitive edge. Remember that a healthy workforce is key to success in business and employers who prioritize employee well-being are paving the way for progress.
This episode’s guest Isaac Higgins, Director of Operations at Family Hospital System, explores the fascinating evolution of healthcare and its implications for employers. At first, the chat was about Isaac’s approach to buying healthcare for his staff as a business proprietor. However, the conversation got more intriguing. Isaac went on about the transformative potential of healthcare and how employers can adapt to maximize benefits for their teams. Join us as we delve into the future of healthcare and uncover the shifts, advancements, and opportunities that lie ahead. This episode is a must-listen for business owners, HR professionals, and anyone passionate about the future of healthcare.
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The Future Of Healthcare Management: How Employers Can Lead The Way With Isaac Higgins
It is my pleasure to introduce you to Isaac Higgins, the Director of Operations at Technology at Family Hospital System, which is a remarkable institution. My original goal here was to talk about how Isaac purchases healthcare for his employees as a business owner and what he knows about healthcare. We have had the most thoughtful conversation about the evolution of healthcare and what he thinks that means for employers. We are going to talk about that first. Isaac, thank you for joining me.
Thank you for having me.
We had such a great conversation about cash pay pricing and how you see PPO networks and will not pick on anyone evolving themselves out of business. You have a different reason for thinking that than most people do.
It is a unique perspective because, coming from a family-owned business called Family Hospital Systems, my father was an ER physician of several plus years, got fed up with healthcare as a whole, and was tired of running the medical mill, being an ER doctor, seeing 50 to 60 patients a shift working on a level one trauma center. He was burned out at that time.
When we moved to Austin back in 2011, he came across a new industry at the time called Freestanding Emergency Rooms. He and a couple of partners got together, poured all their life savings into it, and were finally able to operate medicine the way that they saw fit. Through all of that, they had to become insurance experts. They were learning how claims and how the insurance companies don’t sometimes want to pay everything that they need to pay and push a lot of that responsibility back onto the patient.
Evolving out of that one facility, they grew it to about six in the North Austin area and expanded out of emergency medicine into more of a general acute hospital offering things outside of emergency care such as imaging, labs, primary care, and even surgical services in a special substance abuse program that we operate inside the hospital. Through all of that, it has been interesting trying to work with large insurance carriers. Do you think it would be as easy as going to a large insurance carrier and saying, “We want to be part of your network? We think we do good care.” That is not how it goes.
If we were to sign some of the contracts we proposed, we would be running out of business in a couple of months. When you start looking at the Consolidations Appropriations Act, all the price transparency, and everything else that came about, you start recognizing, “A lot of those large hospital systems are getting far more reimbursement than us, the little guy. How can we expose some of this truth and start showing people what the true price is of healthcare?”
We are excited about the cash error. We are blasting our prices everywhere we can because we know what the other guys are paying are getting paid, and we are asking far less than what the average MRI reimbursement is by Medicare. It is almost laughable that we weren’t allowed to go in-network, and we were treated as these evil out-of-network facilities driving the cost of healthcare so high.
I have a client and it is lab-related, which is a little different than imaging. Although we all have our stories about imaging which has had routine lab work and sent it to the lab company, and the lab company built the plan of $498. They build the wrong TPA. They set my client to collection. My client is upset.
When the whole thing got settled, the plan paid $98 for the $498 lab work. The cash price was $80. This gentleman is a lovely man. He could not get his head around this and was completely and utterly outraged. That is the same for imaging, outpatient procedures, and hospital stays. We have had some conversations about what it costs to be operated in your facility. It is a truly reasonable price.
People don’t understand. When you use insurance, there are more costs passed on to the provider and everyone else in the middle. The insurance price is always going to be more than the cash price because I have a billing company I have to pay a percentage to. I have another 2 or 3 full-time employees I’m using to track down all of the AR accounts receivable from these insurance companies and keep track of everything. There is a hidden cost.
The insurance price is always going to be more than the cash price. Click To TweetIt is not so hidden. It is a lot of bodies in an office that does not practice medicine. They practice billing. I’m not sure they like it either.
They do not. There is an error of cash coming our way from providers tired of submitting insurance claims. They spend 30 to 40 minutes charting each patient. That is dictated by the insurance company on how they are supposed to chart to get paid. Every obstacle they put in front of these providers is driving them closer to the cash model. You have many providers, especially in primary care, that have broken free from insurance altogether. The rise of direct primary care, which is a monthly subscription model to your local provider, has grown greatly here in Austin.
In San Antonio too, and continues to scale at a remarkable pace.
People can’t believe that they can pay $60, $70, to $80 a month and have unlimited access to their healthcare provider.
Yes, and for more than five minutes at a time.
I speak broadly here, but people are scared to go to the healthcare provider for a lot of different reasons. A big one in my mind is the financial aspects. I’m already paying, especially if I’m a family of upwards of $1,000 a month for a $2,000 to $3,000 individual deductible. At the end of the day, I don’t want to have to pay another $60 plus meet my deductible to see a provider that could or could not give me the right answer about something with my illness. There is a financial aspect that is keeping people away from healthcare, and the availability of direct primary care alleviates a lot of that financial burden.
I have a dear friend who has been a widow for a few years now. She had a medical issue that certainly wasn’t life-threatening but required medical attention. She had gone to the emergency room and was advised by her emergency room physician that said, “You need to see your doctor tomorrow.” She called her doctor. This was at the end of April. They could see her in July.
I was doing a LinkedIn live with a mutual friend of ours who is a DPC doctor and is a remarkably calm, nice, settling presence, as many doctors are. She called me crying, “I don’t want to die. This is what happened to Richard. He got shoved from provider to provider. This is terrible. I don’t want this to happen to me. I have this thing. I can’t see my doctor until July. I want to see Dr so and so.” I said, “We will deal with the rest later, but I can fix the first problem.” I could fix the first problem. What if I’m a regular everyday person, and I don’t know somebody to fix that problem for me? It is not good for the humans.
I was spoiled growing up. My dad was a doctor. If I got sick, I didn’t go to the doctor. I said, “Dad, I got strep throat again. Can you write me amoxicillin? Thank you.” I never knew the lack of access that people had to healthcare. It is amazing when you talk to some people who haven’t seen a doctor of any kind in a decade. I’m like, “I don’t know, but if I was you, I would get some basic blood work done to get some basic labs and figure out where everything is. Who knows? You are walking around fine now. Tomorrow, you could have a stint placed in your heart.”
It's amazing when you talk to some people, they haven't seen a doctor of any kind in years. Click To TweetThat is no joke. My father had renal cell carcinoma about a decade ago. It was discovered because he decided he wasn’t sick. He wasn’t going to the doctor. He didn’t go to the doctor for several years. He got a letter from his now primary care physician saying, “If we don’t see you by the end of the year, we are going to assume you are not our patient. I’m not renewing my admitting privileges in the local hospital.” We looked at him and said, “Please, go see him because you are going to get a hospitalist if something happens to you. There is nothing wrong with a hospitalist. They don’t know who you are.”
He had renal cell carcinoma. The thing was this big. It weighed ten pounds. That is not uncommon. Don’t go to a doctor. Find a serious thing. He is fine, but what if he didn’t go back to the doctor? It is a problem when people don’t get basic medical care, especially people on a high deductible plan. The purpose of a high deductible health plan is to help a person be a good consumer, except there are no tools for them to be a good consumer. Now we have some tools, and they get better all the time, including family hospital posting their pricing, which is remarkable to people.
The purpose of a high deductible health plan was to help a person be a good consumer, except there are no tools for them to be a good consumer. Click To TweetWhy do you mean the price?
It is the price.
$50 for an X-ray. That sounds good.
$400 for a CT. Do you mean it doesn’t cost $2,500? No, it does not.
If you force us to use your insurance, it is going to be because if you got another hour and a half, I can sit here and explain to you the entire process behind the scenes.
You could give us the abridged version.
As a consumer, you spend maybe 30 to 60 minutes a year evaluating your health insurance plan.
On a good day.
You have a broker and a couple of HR meetings telling you what’s coming out that year. Beyond that, how often are you checking into the latest trends in healthcare?
You are not.
We are in the industry looking at every little thing coming up that is new, and all the tools that are coming out fantastic. Your average consumer wants to know, where can I go? How much is it going to cost? Are they going to take good care of me? Educating the consumer on all of these different tools and everything else is tough. Explaining why you are getting a high EOB is tough. Why you have to charge me more for my insurance versus paying the cash is tough. There is no real simple solution as to here is how healthcare works in a sixth-grade format, and everybody understands it.
Healthcare does not work in a sixth-grade format. The system is not designed for consumers. It is designed for systems, and people are not systems.
People benefit greatly from the system.
Not most people.
The people that set it up benefit greatly from it.
One of the challenges is that facilities simply don’t know what things cost. You started out in a cash-pay environment. You had to know what things cost. Most facilities simply do not. I made an appointment with my dermatologist the other day. I said, “I’m a cash-pay patient.” It was a nice woman who answered the phone. She said, “Could you hang on for a second?” I said, “Sure.”
She came back. She said, “Apparently, it is $85. You have to pay for that when you arrive.” She was completely confused by that. She was nice. It is a nice practice. They do good work. They have a nice staff, but she was completely confused. I got there, paid, and left. They are like, “We will send you a bill.” I’m like, “I just paid.” They are like, “You just paid?” Even to people that work in it, it is confusing.
We had quite a few patient access representatives that do the registration come over from larger hospital systems. Whenever we run the cash model, they get extremely confused. They were like, “I don’t have to go here and get approval from my manager over there to authorize a cash payment. It is listed right here. This is nice.”
Nobody is going to yell at them.
There is a program that we offer at our hospital system called prompt pay discount because we don’t know if your insurance, even though they are legally supposed to, is going to pay the bill at all or going to assign some funky little code that makes it all your responsibility. To avoid that, we offer prompt pay discounts for patients that walk through the door at the emergency department. Depending on the level of visit, it could be $400 up to $1,200 between level 1 and level 5. If you move into observation, we have a flat rate of $3,000.
The majority of our cases are going to be in the $400 to $800 range because a lot of people use the emergency room inappropriately. We are frustrated by that. We don’t want you to come here for a hangnail. That is not a true emergency. We do want you to come in if you have shortness of breath, you are having chest pains, or you are getting lightheaded, dizzy, and about to faint. Those are true emergencies. If there is an obvious laceration and you are profusely bleeding all over the lobby, please come back. Don’t wait there to fill out the paperwork.
People have been treated in the emergency department for so long as their primary care provider. We saw a real opportunity because, being the small system we are, if we identify a problem, we can implement a solution extremely quickly. Several years ago, we recognized there was a huge shortage at the time of direct or primary care providers as a whole. We have seen the rise of direct primary care providers in the area, but not everyone is adopting that model.
We recognize that there was an opportunity to become more of a localized small, neighborhood-type healthcare system, offering things beyond emergency care, primary care, labs, imaging, and more outpatient-type services, bringing in specialists to work in our facilities, and things along that nature. We believed in that model so much that we wanted to develop a membership to our hospital system.
As an individual, you can have unlimited imaging, labs, primary care, and emergency care coverage for $1,200 a year. That is $100 a month. That takes care of all of the costs behind the scenes of employing the providers, the nurses, the techs, the labs, and all the wonderful property taxes we have to carry around here. In all seriousness, healthcare at a local level can be delivered in a cost-effective manner.
Healthcare at the local level can be delivered in a cost-effective manner. Click To TweetWhat I would encourage employers to do is to work with those local healthcare providers in that area. Start developing a real relationship and get involved with the local chapters of things like the Free Market Medical Association, where we already are banding together the good providers that want to see change. Be involved as an employer, and you will find the right solutions in those chapters.
More solutions than you would think were possible. We were at an FMMA meeting. There was primary care, secondary care, tertiary care advisor community, and employers. You had the entire model in the room. It is possible to do that.
It is special when things happen like that because everybody gets to see the perspective of everyone else. For so long in a broken out disenfranchised type model of health insurance, the right hand usually doesn’t know what the left is doing. I like to talk about our journey if that is okay. As an employer of 140 full-time employees, 300 of mixed part-time and PRNs, we started out, at the time, through the evolution of our company, having a fully insured health plan.
How did you feel about doing that?
At the time, we were still learning how health insurance worked. It was interesting. The thing that taught us the most from a healthcare provider standpoint was being the employer. You don’t dig into that stuff until it directly affects you. We started out in the fully insured model. We only had 35 full-time employees on that fully insured model. We were looking at the price tag because we were getting ready to scale and bring on a lot of these different facilities, inherently growing in staff. At that price tag, we were like, “I don’t know if we can do this.”
The thing that taught us the most from a healthcare provider standpoint was being the employer, you don't dig into that stuff until it directly affects you. Click To TweetNot only the price tag but the lack that came with it.
We would request our claims data, and it was like, “What do you mean we can’t have it?” If you force them to give you any data, it only shows you the little graphs. You are like, “That doesn’t help me out with anything other than this is how much of my money you spent. Congratulations. Thank you.” We started out in the fully insured model and quickly recognized that there were better alternatives out there, but it wasn’t easy. You had to roll up your sleeves, put on your big boy pants, and figure out how to get it done.
Let me throw in there that what you did is a little easier to do now.
It has grown in popularity.
People are talking to each other and the solutions are better but what you did was hard.
Several years ago, we moved from the fully insured model and tiptoed into a level-funded health plan. We had some smart people around us that had been in the industry for quite some time that were advising us, “We should do this.” We got back the renewals from our fully insured plan and stacked that up against these new proposals. I’m going to take the 30% to 40% savings on this model of the level funded as opposed to, “Thank you, big insurance carrier, but no, thank you.” We are learning, at the time, to move into a fully referenced-based pricing model.
How do you do with your employees in that model?
It was trial by fire because yours truly over here was saying, “This is going to be the best thing ever. We are going to have so much savings. Our employees are going to love it. They are going to have such low premiums.” It was all true, but no one held my hand through the reference-based pricing mess at the time. We had grown out of state at this point, where we were in Nebraska and two different markets. We were familiar with Austin but not so familiar with Nebraska. We come to find out, Nebraska is a big no-no state for reference-based pricing. A lot of the hospitals banded together and said, “We are not going to take it.
That left me in a situation with several of my employees where we had to duke it out with those larger hospital systems. Sometimes, they wouldn’t budge on the price. Once things like that started happening, we had a bad health insurance plan. They wanted a logo because it made them feel safe and comfortable. Their provider and registration aren’t giving them, “We have never heard of this insurance before. This can’t be good insurance.”
We dealt with that with our employees. The year after that, taking the feedback from them, we moved into the Aetna network, but we made a switch on the backend from the level funded to a captive at that time called BevCap. With the help of a couple of advisors, we were able to get into that program. We started learning how the captive worked as a unit, with all of the other employers banding together to share in that risk. From the employee friction standpoint, we had very little to none because we had the network associated with it. On the financials, we took a hit.
I’m going to stop you there for one second. I’m going to explain to people that don’t always understand the journey there. Fully insured means that you transfer all of your risks to an insurance carrier. Typically a Blue Cross, Cigna, and United network. In the industry, we call those the BUCA. Level self-funding is when you partially self-fund your claims. You can see your administrative bucket, claims bucket, and reinsurance bucket.
Even if you are fully insured, you have those buckets. They benefit the carrier and not you. You can see those buckets. You pay the maximum claims liability for the year, and you retain, depending on the program you are in, 50% or 100% of the unspent claims dollars. Technically, you are self-funded, but you are protected. Your finance mechanism doesn’t look like self-funding. You are paying a fixed premium for every employee every month. For a smaller employer, it is a cashflow management issue. You are going to pay the maximum. If there are any unspent dollars and in 6 years out of 7, there will be, you will get those back. They don’t stay with somebody else.
Self-funded pay-as-you-go means you have the same three buckets. You have an administrative bucket, a reinsurance bucket, and a claims bucket, but you pay the claims as you go. You still know what the maximum is, but you are paying your claims on a weekly basis. A captive means you are self-funded. You have banded together with a group of other like-minded employers. You have pooled your money, and you still have reinsurance. If there is profit in the captive at the end of the year, it comes back. If there is not, there is not. You are in a captive. You take a financial hit because there is no reference-based pricing.
We move from reference-based pricing to a network contract. Going back to our earlier conversation, it benefits insurance companies to keep the cost of healthcare high because they can justify charging you more on the premium.
They can say they have the best discounts. A discount is a made-up number on a chargemaster, which is a made-up number.
It means nothing. We went from maybe 160% of Medicare claims to upwards of about 240% when we moved into those network contracts. When you talk about a $100,000 knee replacement, there is a big difference between 160% and 240%. When you have the severity and the frequency of claims that pile up, that can easily get you to $1 million or more in medical spending.
The Milliman national average is almost $16,000 now. In Texas, that is a little high. Texas’s high is $10,000 or $11,000. If you are at $15,000, you are on fire. $10,000 or $11,000 is the average that we see in Texas. Depending on the industry, it might be a little higher or lower. For 100 employees, $10,000 an employee. That is $1 million. It is not hard to do that at 240%.
Where is that balance? You want your employees to feel like they have a good health plan. You want to do the financial thing that is right for the company because you don’t want to spend more money on their health insurance premiums for no reason. I would rather give my good employees a raise. Why can’t my employer give me a raise? Every year, 30% or 40% of my increase is on the second most expensive line item after my wages, which is my health insurance.
I have a client. Their employee premium has now been the same for several years, but we cut it by 25%. There was applause for the CEO, who is an introvert and was not thrilled by this. That was the first year that they had gotten their merit increases about two months before. They were not clawed back by a health insurance increase. They have done a remarkable job of keeping their costs in check and flat. We have been doing some good things, but we do that because we control the cost of some of their things, not everything. We don’t do everything I want, but we do some things.
There is an incentive. At the end of the day, you are looking at that analytical data. It is not a financial incentive but the overall health and well-being of your employees, that, “Maybe we can get those A1C levels a little lower. We have this cool weight loss program that we offer. Would you be interested in participating? It is going to cost zero for you. We have this cool insulin kit that we can get to you at cost.”
We have ramped up our behavioral health program because I don’t have a client that is not having a mental health issue in their workplace. I’m sure you don’t either.
Not at all. That doesn’t exist. At least we don’t talk about it.
It is a problem. When the manufacturers come to you and say, “We have a mental health problem,” we seriously are having a challenge.
Going through all of these different evolutions of the health plan, operating them, and eventually ending up where we are now. In our captive with BevCap, we took a different approach, but a 50/50 in the sense that we used somewhat of a network, but it is more of a localized network with much lower rates negotiated with the hospital systems. For those in Nebraska, we don’t have that localized network option there. We did have to lean on a PPO.
Sometimes, you have to do that for now.
The majority of our employee base is here. We can see in the recent claims and everything else that there is a downward trend as far as medical spending as opposed to 2022, which is good. Employees are still accessing healthcare like they normally were in 2022 with the ease of access of having a logo, but we would like to get back to the reference base pricing model, but we are not going to jump fully in until we ease our employees into it step by step.
Is that the most valuable lesson you learned over the course of this? You have to help your employees understand what it is that you have done that the communication is the key piece.
Going back to our early conversation, most employees spend 30 to 60 minutes reviewing their health insurance a year if they are lucky. It is that ongoing education and getting the buy-in from HR. There are two ways that HR can look at a self-funded health plan. “That is a lot of work. You are asking me to do what? I have to do that every week or every month. I don’t know if this is a good idea.” On the flip side, once you get their buy-in and they start recognizing, “We are able to reduce those premium costs year over year. We are able to get employees A and B the healthcare they need at affordable rates. They are not all coming to me with a problem I don’t have a solution for.”
One of the most underrated virtues of a self-funded plan is there are some things you can’t do, but you can do about anything in a self-funded plan that you want to do. You can’t discriminate. It can’t be illegal. That is pretty much it. Other than that, you can do anything you want. You can build a plan that works for your population and good conversations.
You need buy-in from HR and executive leadership that we are doing this because we want you to have access to healthcare. It is not because we are trying to cheap out because that is what people think. Aside from the communication, what would you like other employers to understand about cash pay, self-funding, and things that you have done both from a business perspective and as an employer with people that depend on you?
The first thing is don’t go from one end of the spectrum being full to the other right off the bat. It looks great financially on paper, but you are going to have some struggles with your HR and your employees at that point. Start picking out things that you can chip off year by year. Move into a level-funded health plan. Start getting the idea of funding those accounts and understanding with your benefits advisor all the different minutiae of where your dollar is going.
Why is it like that? What does max funding? What does that mean? Can you tell me? There is a whole lot of terminology that you are going to have to adapt, especially if you are not already in the healthcare industry. You are going to start hearing things like reference-based pricing. What does that mean? I’m referencing the Medicare rate or Fair Market Health. There are a lot of different tools out there that allow us to pinpoint the price of healthcare. Now it is cash. You can compare your cash rate to your insured rates, to your contractual agreed-upon insured rates, or to the Medicare rates.
As an employer, the best thing you can do is align yourself with providers that are willing to change and think differently. If your healthcare provider is incentivizing you to do Blue Cross Blue Shield again because they are getting the highest reimbursement, that might not be the best healthcare provider for you to work with. If you are an employer that cares about your people and wants to see a long-term company grow, flourish, and build a great reputation, I don’t believe you can stay in the fully insured model for much longer.
If you are a company that can handle 20% to 30% renewals year over year, you must be cash rich because that was not our company. If we had stayed on that same trajectory and not done anything about it, I don’t think we could even afford to meet the minimum payment that is required for having a health insurance policy for our employees.
I understand. It is a big nut.
If you told me five years ago that I was going to have 150% of what I was paying then to now, we financially could not do it. You are going to have a rough first 1 or 2 years moving into a level-funded or a self-funded plan because of the terminology. You are learning while you are also trying to educate your employees. That is a struggle.
I’m going to throw something in there. It is the responsibility of the advisor to provide a fair amount of support there and to field the communication. I will criticize my own community and say that many do not have a full understanding of themselves and, therefore, cannot communicate what has happened.
I have also seen where there are a lot of producers who fully understand level funding, self-funding, captive, single parent captive, all the tools, reference-based pricing, direct contracting, bundled surgeries, cash pay pricing, and you name it, but they don’t train their staff. The work falls to the staff. Unless you have a well-educated advisor team, it is going to be harder. A solid advisor team can pick up that, educate quickly, answer quickly, and help people get where they need to go.
I will piggyback off of that a little bit because we had a couple of different advisors with our hospital system for some time. Necessarily bigger isn’t always better because when you start getting behind the scenes and you start realizing where some alliances truly are, there is no incentive for them to help reduce your cost. That is their paycheck. If they got a 10% increase, they got a 10% percent raise. Sometimes you have to look at who your advising team is and where their incentives are because if it is against my own, how can I expect you to be on my team and help me bring down these costs?
It is an important question to ask and I ask it all the time but that is my business. They’re like, “You’re just saying.” “No, I’m not.” I know some of the folks you have worked with. You have some excellent advisors, and you are lucky to have found them.
We are lucky to have them because without having someone else to guide us through this mess of healthcare, even being in the healthcare industry, we don’t know anything about health insurance.
As an industry, we have done such a good job of convincing people that health insurance is healthcare. I’m sorry, it is not. Healthcare is what you do. Risk financing is what we do. They are two different things. It is not the same. Blue Cross is not providing any of your healthcare. Neither is Cigna, Aetna, Blue Cross, and Humana while they are still at it. They are not. They are financing your risk. It is their job to make a profit. It is your job to make a profit for your business. You are clear about it.
We don’t need to have multibillion-dollar buildings downtown that are write-offs for us.
What is your best piece of advice for somebody who understands they have a problem? We talk to employers all the time. They understand they have a problem. They don’t know how to fix it.
Bunker down, find good people that understand the real issues of healthcare and how to fix them, but dedicate your time and energy to learning the problems. Someone can present you with the solution, but if you don’t know what the true problem is, you don’t recognize that as a great solution. Spend time with your employees. Ask them what was their last visit to the doctor like. What was the feedback that that employee gave to you? How could you go back and make the program better?
We have a vocal company. If they don’t like something, they are not afraid to stand up and talk. I did get a trial by fire the first year that I switched from fully insured to the current pricing. I tried to educate at the same time while I was learning it. It is hard to do both. You need to dedicate your time to educate and teach. You also need to have benefit advisors and HR that are saying the same message. Your executives are on the same plan, doing the same things you are, Mr. or Mrs. Employee.
The key is that the executive teams need to be using the same strategies as regular staff, and everybody is in the same boat, like, “That is okay for them. It is okay for me too.”
My biggest advice would be education. Sit down with your broker more than once a year. Have ongoing quarterly check-ins, evaluate your plan, and get familiar with the analytics that you are now going to be receiving if you move into a self-funded or level-funded type plan because you can get down to the penny of where everything is going. If you ask about your commercially insured health plan, you will not get anything near that information.
It will be a mind shift. You will think a little bit differently about healthcare and ways that you can incentivize with programs by removing copays, deductibles, and income insurance. You have the carrot and the stick model. You reward employees for doing good behavior. You don’t punish, but there is what already is in the existence of deductibles, copays, and co-insurance if they fall outside of that model and don’t want to adhere to the carrot you have given them.
We build them that way. We found that it is better not to force people into your model but to incent them into your model. Let the employees have a good experience in that model. Let that grow. Maybe they have a longstanding relationship with a provider, and they are not going to give it up. It is a provider that doesn’t meet the specifics that you would like. They are not going to get the benefit of zero copays or zero out-of-pocket, but there is still coverage there when something happens. What if there is an emergency? You have to allow people some flexibility there.
An incentive could also look like you have a $5,000 deductible and zero over here for something that is non-emergent. Maybe it is surgery or a knee replacement. How is that going to save the plan any money if you are giving it to him for free and paying it 100%? Mr. Employer, we did a cost analysis between provider A and facility A and provider B and facility B. Provider B over here is about $20,000 or $30,000 cheaper. It is the same surgeon but a different facility and location.
We had somebody that had back surgery. We will leave the opinion about back surgeries off the table. The bill charges were $80,000. The PPO discount ended up being in the $30,000s. The RBP price was $10,500.
Was that an ACDF?
The plan was an RBP plan. We have modified the plan somewhat. There is a direct contract at the same facility for $11,500. Direct contracts are a little bit easier than RBP. I would have taken that contract without any headache at all. That is amazing to employers. They are like, “What do you mean?” It is not hard to do.
I’m putting my employer hat back on. What we have always struggled with as an operational entity is the cashflow because of us being out of network, and there are no guaranteed reimbursements. Going back, we have to bill crazy high prices to get a 20% or 18% reimbursement on those billed charges. We will take cash all day long because, like every other business owner, we have overhead. We have employees we have to pay. We have the rent we have to make. We have electricity. We got to keep the water running.
There is a huge incentive on both sides not to us carry the crazy high accounts receivable over the course of a year and a half and end up writing most of it off because we were never going to see it ever. The other side is the consumer of healthcare that doesn’t have to see that $20,000 ER bill and all of a sudden is at a reasonable rate of $400 to $1,200. It is a better system overall for everybody except for maybe a handful of entities.
I would agree wholeheartedly. We will leave it there. Thank you very much. This was helpful to people.
Thank you for having me, Allison. I appreciate it.
