Surgical costs represent 34% of employers' total spend, yet most of the cost-reduction solutions relied on by many are not containing these expenditures.
Recent reports indicating that overtreatment wastes up to $101 billion per year in the United States and that surgical volumes are expected to increase 5% into 2023 compared to pre-pandemic levels have resulted in questions about how employers perceive their overall surgical spending.
To find answers to those questions, Carrum Health (a digital health company connecting employers and employees to Centers of Excellence) — in partnership with Employer Health Innovation Roundtable (EHIR, a coalition of large and progressive employers) — conducted a survey of benefit leaders at self-insured companies. They determined that employers' desire to drive down health care expenditures and improve quality likely will lead to increased usage of COEs.
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In the self-insured world, "centers of excellence" refers to specific hospitals that have been selected by large employers for bundled pricing of high-ticket, higher-volume surgeries — such as knee replacement.
Survey responses revealed that surgical costs represent 34% of employers' total spend, yet most of the cost-reduction solutions relied on by many are not containing these expenditures.
"Mounting health care costs, exacerbated by COVID-19, have become an even more prominent concern for self-funded employers," EHIR CEO Michael Laquere, said in a statement. "The pent-up demand for elective surgeries could have a significant impact on their total medical spend. We're hearing from our EHIR members that they're concerned with rising surgical costs, and our survey, along with anecdotal evidence, indicates an increased interest by our members in Centers of Excellence as an enabler to reduce expenditures and improve quality."
In January, Carrum Health and EHIR conducted an online survey of 217 benefit leaders working at U.S.-based companies with 3,000 or more employees that offer employee health insurance and are self-insured.
Respondents overwhelmingly revealed the following:
Containing post-pandemic health care costs is a priority.
Because of surgeries postponed during the pandemic, providers expect pent-up demand to exceed capacity over the next year, particularly for orthopedic, cardiovascular, and general surgery. This problem can only be resolved with increased surgical volumes, according to Carrum Health officials, which will increase cost for employers. The survey found that 59% of respondents indicated lowering costs was a "very high" or "high" priority — up from 52% prior to the pandemic.
Surgical expenditures are a significant part of the cost problem.
More than half of employers surveyed indicated that surgical costs were a significant issue, with surgery accounting for 34% of their total health care spend. About 75% noted that by controlling surgery costs, they can largely reduce their total spend.
Adoption of COEs is still in a nascent phase.
Even though 69% of employers have a COE, the majority of them have been implemented within the past two years, and not with the intention of specifically reducing surgical costs. While employers are still discovering the full value of having a COE in place for surgical care, a value-based COE that rejects the fee-for-service pricing model has the potential to address both the quality of surgical care and the surgical backlog created by COVID-19, Carrum Health officials said.
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