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An employer case study of a value-based insurance design strategy for surgical procedures
For many years, employers have embraced the idea of value-based benefit design, which offers incentives for providers to deliver high-value care and for consumers to choose providers with the highest quality at competitive costs. The most prevalent and accepted example is offering a lower co-pay for generic drugs to encourage employees to avoid the higher-priced, but no more effective, brand names (see, for example, value-Based Insurance Design Sparks Increased Interest).
As employers continue to struggle with rising costs while ensuring employees have access to high-quality care, surgery is beginning to get more attention. Studies have shown minimally invasive surgery (MIS) can often result in better or equal care while reducing overall health care costs compared to traditional, open surgery.
Episode-Related Average Cost Comparison: Open Surgery vs. MIS
Source: “Regional Disparities and Economic Outcomes Associated with Minimally Invasive and Conventional Surgeries of the Chest, Abdomen and Pelvis,” International Society for Pharmacoeconomics and Outcomes Research (ISPOR) Conference, 2009.
Moving from open surgery to MIS also provides the opportunity to move patients into an outpatient setting where even more dramatic cost-savings can be realized.
Less Trauma, Faster Recoveries
There is a growing trend of employers who are implementing MIS programs and finding it reduces overall health benefit expenses while ensuring employees are being treated by surgeons who can deliver the most advanced care. Unlike traditional open surgery where large incisions are made, MIS uses specialized laparoscopic instruments inserted through small incisions in the body to perform the procedure, resulting in reduced trauma to the patient. Patients who undergo MIS instead of open surgery experience a host of benefits including:
• Shorter hospital stays, resulting in lower hospital costs.• Reduced post-procedural pain, which minimizes or eliminates the need for prescription pain medication and leads to faster recovery. • Minimal scarring.• Reduced risk of hospital acquired infections (see, for example, The Effects of Laparoscopic Cholecystectomy, Hysterectomy, and Appendectomy on Nosocomial Infection Risks).• Faster return to work and normal activities.
• Shorter hospital stays, resulting in lower hospital costs.
• Reduced post-procedural pain, which minimizes or eliminates the need for prescription pain medication and leads to faster recovery.
• Minimal scarring.
• Reduced risk of hospital acquired infections (see, for example, The Effects of Laparoscopic Cholecystectomy, Hysterectomy, and Appendectomy on Nosocomial Infection Risks).
• Faster return to work and normal activities.
These benefits not only help employees recover quicker and experience fewer complications, they also extend to the employer through:
• Reduced absenteeism because of faster recovery after surgery and quicker return to work.• Improved employee productivity resulting from reduced post-procedural pain and decreased need for prescription pain medications that can affect mental alertness.
• Reduced absenteeism because of faster recovery after surgery and quicker return to work.
• Improved employee productivity resulting from reduced post-procedural pain and decreased need for prescription pain medications that can affect mental alertness.
A program that incentivizes the choice of MIS over open surgery is one of the best value-based benefit design programs because it requires no up-front investment, provides immediate benefits and keeps the most important asset, the employee, on the job.
A School District Saves $1 Million in Two Years
Colorado School District 11 is a kindergarten-to-12th grade school district with 6,000 members in its self-funded medical plan. The plan is governed by an Insurance Committee consisting of union and other employee groups that advise the Board of Education on issues related to health care. Realizing the value of an MIS program, in April 2007 the Insurance Committee received approval from the Board of Education to launch a value-based plan design that would educate members about MIS and encourage them to consult with surgeons who are capable of performing minimally invasive and open surgery. The plan design became effective on July 1, 2007.
A study was launched to review the district’s prior two-year claims data for laparoscopic procedures, covering June 1, 2005, to May 31, 2007. The evaluation determined that MIS increased overall value to the benefit offering by improving quality of care and decreasing overall costs.
The school district engaged in discussions with Memorial Health System, the network hospital, and Medical Network, the third-party administrator (TPA) to select five surgical procedures based on their recommendations, which included colectomy, cholecystectomy, hysterectomy, appendectomy, and bariatric surgery.
Traditionally, patients that require surgery are usually referred to a surgeon through a primary care provider or medical group. Without prior knowledge about the various types of surgical options available, patients usually end up undergoing whatever type of surgical procedure the doctor they are referred to performs. Patients might not be informed about the differences between open and minimally invasive surgery, so they basically take the advice of their referring providers.
One of the key strategies used in the MIS program is to educate and incentivize our patients to seek out doctors who perform both types of surgeries and, if appropriate, would be able to offer a minimally invasive surgery. Thus, working closely with the network hospital and TPA, which administers the medical network and processes all claims, was essential to making the program successful.
The district designed the plan so that a member who opted to undergo a minimally invasive surgical procedure over open surgery for the five procedures identified would be offered a reduced co-payment: $400 less for an in-patient surgery and $200 less for an outpatient surgery.
In an effort to ensure that surgeons were aware of the intent to increase the use of MIS, the Medical Network preauthorization process was modified so that a surgeon requesting an open procedure for the five surgeries identified would have to obtain approval from the preauthorization manager and the medical director of the TPA. Failure to obtain preapproval would require members to pay the higher co-payment unless there were circumstances requiring an open surgery over MIS.
Increasing Member Participation
The district launched an educational campaign to inform members about the changes in co-payments and MIS. Topics included benefits of a minimally-invasive approach over open surgery, how the procedures are performed, tips to help patients speak with their doctors and the risk factors that might exclude them from MIS. Informational materials and links to web sites on minimally invasive procedures, such as MIPInfo.com, were provided to members as added educational resources.
Additionally, Medical Network communicated with the primary care physicians in the network to inform them about the program as they knew the patient participation would significantly increase if they were initially referred to a surgeon that performed MIS. The district’s TPA highlighted surgeons trained in MIS on their web site so members could evaluate their credentials and easily identify them to seek them out for their procedures.
Results of the MIS Program to Date
A two-year review of actual claims data with emphasis on lengths of stay and return to work showed the district was able to save almost $1 million in direct hospital and surgeon claim costs over that two-year period.
These savings are conservative because indirect costs from patient benefits such as lower costs from reduced prescriptions, physical therapy, and complications arising from hospital-acquired infections were not included in the analysis. Additionally, the monetary benefits realized through quicker return to work, improved productivity and reduced costs for classroom substitutes were not quantified and incorporated into the final savings figures.
The results after one year indicate that:
• The 28 percent MIS adoption rate for hysterectomies increased to 81 percent.• The rate for cholecystectomy increased from 93 percent to 100 percent.
• The 28 percent MIS adoption rate for hysterectomies increased to 81 percent.
• The rate for cholecystectomy increased from 93 percent to 100 percent.
The preauthorization coordinator for Medical Network indicated that the district’s members are both accessing the hospital’s web site and contacting him directly to identify surgeons who perform MIS.
Needless to say, these results are encouraging and show that savings can be further realized through continued adoption of MIS.
Brossette SE, Hacek DM, Gavin PJ, et al. "A Laboratory-Based, Hospital-Wide, Electronic Marker for Nosocomial Infections: The Future of Infection Control Surveillance?," American Journal of Clinical Pathology, 2006; 125:34-39.
Innovations Center. "Future of General Surgery: Strategic Forecast and Investment Blueprint," The Advisory Board Company, 2005.
Brill A, Ghosh K, Gunnarsson C, Rizzo J, Fullum T, Maxey C, Brossette S. "The Effects of Laparoscopic Cholecystectomy, Hysterectomy, and Appendectomy on Nosocomial Infection Risks," Surgical Endoscopy, 2008; 22(4): 1112–1118.
Ken Detweiler is the former director of risk-related activities for Colorado Springs School District 11. He worked for the district for 14 years and was responsible for employee benefits, risk management, insurance and safety. He is currently retired and consulting with the district. Prior to District 11, Mr. Detweiler worked for the Bell System for 30 years including AT&T, Bell Laboratories and two Bell System operating telephone companies. He retired as vice president of risk management and employee services at USWest. He is currently serving on the Board of the Colorado Business Group on Health. He recently served as a member of the Boards of Education Self-Funded Trust and as the Chair of the Board for the Colorado Delta Dental Insurance Co., on which he served for nine years.
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