Peak Health Alliance expects to be able to offer its memberspremiums next year that are at least 20 percent less than currentrates. (Image: Shutterstock)

Colorado’s ski resort areas in Summit County have a high cost of living, among the highest in the country. Thepeople who visit these places — Keystone, Breckenridge and CopperMountain ­— can afford it.

Many of those who live and work there can’t, especially whenthey get sick.

In addition to expensive rent, they pay some of the steepesthealth insurance premiums in the nation. Hospital costs are alsopricey, with most business generated by tourists, skiers andoutdoors enthusiasts.

But locals may soon get a break after a group, fed up with thecosts, negotiated a deal with the hospital system. The group, whichcame to be known as the Peak Health Alliance, expects to be able tooffer its members premiums next year that are at least20 percent less than current rates.

Related: Employer health coalitions chipping away at plancosts

About 6,000 people, among them individuals as well as employeesof local businesses and the county government, can buy coveragethrough the alliance, which cut a deal for a discount of aboutone-third off the local hospital’s list prices (although at leastone expert thinks they could have done a lot better).

“It wasn’t for the faint of heart,” said Tamara Drangstveit, whoran a county social services organization before becoming Peak’sexecutive director and, effectively, one of the leadnegotiators.

Fed up with high hospital prices even after insurers’ negotiateddiscount, more employers are cutting out insurance middlemen andengaging in what is known as “direct contracting” with medicalproviders. They cut their own deals.

Direct contracting is a hot topic among employers because theyare “up in arms about insurers not keeping prices in check,” saidChapin White, a Rand Corp. researcher who studies the tremendousvariation in hospital prices. The citizens here in Colorado aretaking the approach to the grassroots level.

What Peak did — starting with painstakingly gathering data aboutexactly what hospitals in the region were being paid by insurers,employers and consumers — might be an answer for some.

Such efforts may be helped by Congress, which is considering barring secrecy clauses inhospital and insurance contracts that can prevent employers fromlearning exactly how much insurers pay. The Trump administration isalso considering proposals to require more public disclosure of negotiatedhospital prices.

And, according to press reports, the experience with Peak may go statewide.Colorado’s insurance commissioner and Gov. Jared Polis say they areconsidering an alliance that could bring together state employees,individuals and private employers in a similar health carepurchasing network.

“It feels like the curtain is going up on health care costs andprices,” said Cheryl DeMars, CEO of The Alliance, a group of 240self-insured private sector employers that directly contracts withhospitals in Wisconsin, northern Illinois and eastern Iowa.

While interest is growing, experts caution that directcontracting won’t work in many places.

“It won’t have impact in urban areas where no one hassignificant market share, but it could work in rural areas wherethere is a dominant employer or some other large group,” saidGerard Anderson, a professor at Johns Hopkins University inBaltimore who researches health care costs.

First step: Get price information

It takes a great deal of effort — and some luck — to peer behindthe curtain.

“The people buying the plans, employers and workers, are oftenbarred from viewing the contracts insurers have negotiated on theirbehalf … so they don’t know if they are reasonable,” said White atRand.

The Peak Health Alliance in Colorado was lucky that the state isone of at least 18 that have made public some medical care price information from insurers. It also gathered similarinformation from local self-insured employers’ insurance plans.

Peak was able to compare the payments made to Centura Health,which owns the local hospital and others in the state, to whatMedicare would pay.

“We found the average emergency room claim was 842% of whatMedicare would pay — and our outpatient rates were 505% higher thanMedicare,” Drangstveit said.

That helps drive up premium costs. It isn’t unusual, Drangstveitsaid, for families who don’t qualify for a federal subsidy throughthe Affordable Care Act to face $2,500 monthly premiums with an$8,000 annual deductible. Many area residents go uninsured or areforced to make hard financial choices.

“The stories we hear are heartbreaking,” said Drangstveit.

Second step: Negotiate with the hospital

Lee Boyles, CEO of Centura Health’s St. Anthony Summit MedicalCenter in Frisco, said he wasn’t surprised by the findings ofPeak’s analysis.

Charges are high, he said, reflecting the cost of living, aswell as the need to maintain round-the-clock trauma coverage,emergency helicopter service and physicians who specialize in thekind of head and limb injuries that can result from mountainsports.

Plus it’s the only hospital in town. Others are a 70-mile drivedown the mountain in Denver.

Unlike some hospitals elsewhere with similar exclusivity,Centura was willing to bargain.

“We were going to do what’s right for our community,” saidBoyles.

It also helped that granting discounts to locals wouldn’t affectthe bottom line much.

Residents account for only about 15% of the hospital’s business,Boyles said, which is a far smaller portion than at a typicalhospital.

Tourists and sports enthusiasts — many well-heeled, with goodinsurance — make up the largest share of the hospital’s business.Thus, any new prices negotiated with Peak would not apply to mostof the hospital’s business.

The deal reached with Peak, Boyles said, represents a discountof about one-third off the hospital’s “list prices.”

Third step: Keep pushing

Anderson at Johns Hopkins said shaving this amount from alreadyhigh charges isn’t much of a break. A discount pegged to Medicarerates, plus a bit for overhead and profit, would be better, hesaid.

In a report released in May, Rand used claims data fromemployers in 25 states to show a huge variation in prices paid tospecific hospitals and show a huge variation between the pricespaid by employers to those facilities and how much Medicare wouldallow for the same services.

To be sure, hospitals have long argued that Medicare doesn’tcover their costs. The Randstudy found that employers paid an average of 241% of Medicarerates in 2017, but some saw rates three times those paid by thefederal program or more.

Gloria Sachdev, CEO of the Employers’ Forum of Indiana, a groupworking to lower health care spending there, cautioned that pricetransparency alone is not a panacea.

Her organization, which commissioned the study, is pressing formore quality and cost data as well as tougher negotiations by itsinsurers.

“We need to take the driver’s seat,” said Sachdev.

Kaiser HealthNews (KHN) is a national health policy news service. It is aneditorially independent program of the Henry J. Kaiser Family Foundation whichis not affiliated with Kaiser Permanente.

Read more: 

• New employer/provider partnerships take directcontracting to next level
• CMS moves toward direct providercontracting
• Unraveling the complexity of our health carebilling system