Are Provider Discounts the Best Way to Control Plan Costs?

January 22nd, 2019

The myth

Self-funded plans can maximize cost savings by negotiating discounted fees with providers. A 20 percent discount on billed charges should result in overall cost savings of 20 percent as well.

The facts

A discount can be defined as the difference between a provider’s full billed charges and the amount the provider agrees to accept as allowed charges within the payer’s network.

Network discounts alone are unlikely to maximize savings to the plan, because:

• The discount is applied to billed charges rather than an accepted “fair price,” which can result in an inflated payment.
• Discounts have no effect on plan utilization and the volume of services the plan reimburses for.

The supporting evidence

A large body of research suggests there is widespread waste and inefficiency within care delivery systems. For example, recent research concludes that 71% percent of emergency department visits could have been treated safely in an urgent care or primary care setting.

Other inefficiencies include overtreatment, duplicative testing, mismanagement of chronic disease, and unnecessary surgery.

There are also unwarranted variations in both the price of care and standards of care. The Institute of Medicine (IOM) reported that “geographic variations in spending are substantial, pervasive and persistent over time” and that “there is little or no correlation between spending and health care quality.”

The EBMS position

“There is no single magic bullet to reducing costs,” says Mike Trent, EBMS vice president of sales. “At EBMS, an alternative cost-containment strategy we utilize is direct contracting and reference-based pricing. We also know that appropriate utilization can save substantial amounts of money, while simultaneously improving the quality of care. Our miChoice solution allows us to proactively navigate members toward low-cost, high-quality facilities through innovative programs like concierge services and medical tourism. EBMS has also demonstrated considerable cost savings on primary care services with our miCare health centers. We are essentially changing the landscape for self-funded plans.”