Could Corporate Contracts with Health-Systems Help Curb Care Costs?

Corporations are directly contracting with health-systems to provide higher-quality care to their employees at a lower cost.

A big example of this is Boeing, which has negotiated directly with local health-systems to offer more affordable health benefits to more employees.

The airplane manufacturer just added direct health contracts with Roper St. Francis Health Alliance in Charleston, South Carolina—a major hub for its airline business—and Mercy in St. Louis, Missouri. The corporation first introduced this health care cost reduction strategy last year in Seattle.

Boeing employees are not obligated to select these plans, but those who do will opt into a narrow provider network in exchange for free primary care and generic prescriptions, lower premiums, and greater contributions to health savings accounts.

“Boeing is taking action to improve the overall health care experience for our employees and better manage our costs,” stated Boeing health care strategy director Jeff White in a press release. “If we can improve the health and productivity of our people and share the resulting cost savings with them, that’s a win for our people and for our business.”

Directly contracting with health-systems to reduce care costs is not a novel concept for corporations.

In 2009, Intel launched the Healthcare Marketplace Collaborative (HMC), an employer/health-system pilot program in Portland, Oregon. Beyond Intel, HMC participants included Cigna, 2 Oregon state benefits agencies, the large health-system Providence Health & Services, and the small health-system Tuality Healthcare.

The HMC program was only used for 6 conditions and services: uncomplicated lower back pain; shoulder, knee, and hip pain; headache; upper respiratory illness; diabetes; and screening.

Although the cost of treating individual patients for these conditions is relatively low, the potential cost savings are substantial due to the total amount of claims processed for them.

After 5 years, the HMC was shown to eliminate unnecessary care, give patients quicker access to care, create high levels of patient satisfaction, eliminate more than 10,000 hours of waste in business processes, and reduce costs for 3 of the 6 conditions.

The essential idea behind the health-system collaboration is to eliminate inefficiencies in the same way that a company would streamline processes to solve manufacturing problems.

Local health-systems have several incentives to contract with large corporations. First, it positions them to grab a greater market share of patients in a given locality and share in the savings generated by reducing health costs. Second, they gain access to more patient data, which helps providers determine the least expensive and most effective approaches for a patient’s care.

In practice, only large corporations are likely to have the resources to create and manage such a collaborative agreement. Other major US corporations adopting similar health-system contracts for their employees include Lowe’s, Walmart, Perdue Farms, and Toyota.