Employers focused on reducing healthcare costs know one thing for certain: Sometime today, tonight or tomorrow — whether for a sore throat or major surgery — members of your health plan will need care.
Each time they do, there will be budget impacts. Whether those impacts are slight or significant has everything to do with a trio of cost factors:
- Price: The unit price charged by the provider or facility.
- Utilization: The volume of services consumed.
- Mix of services: The type, or acuity level, of services used. A subset of utilization.
News reports suggest providers are feeling urgency to raise prices. Among other reasons: to make up for revenues that fell, and expenses that surged, during pandemic-intensive 2020 and 2021.
According to Kaufman Hall, which tracks hospital finances, the four main expenses hospitals face — labor, purchased services, supplies and drugs — all increased 18% or more between September 2019 and the same month in 2022. Labor costs grew the most, 29%. Perhaps not surprisingly, hospital operating profit margins dropped an average of 34%.
Experts predict these sorts of financial realities will cause healthcare prices in 2023 and beyond to rise at rates above the current high inflation affecting other consumer products and services.
A recent Mercer article predicted that “inflationary cost increases will continue to be phased in over the next few years as contracts come up for renewal and providers negotiate higher reimbursement.” It called long-term cost management “a growing imperative” for employers, adding that “traditional tactics” — such as shifting costs to employees — are “off the table,” given intense competition to recruit and retain talent.
How navigation works in reducing healthcare costs
Given the forecasts of provider price inflation, self-insured employers and benefits consultants have every motivation to explore strategies for managing the other two big cost factors: utilization and mix of services.
Quantum Health recently conducted a study of how its independent healthcare navigation and care coordination solution works to produce cost savings by guiding and informing members’ care utilization and the mix of services they receive.
Among the study’s findings — summarized in a downloadable e-book: How Navigation Works to Control Healthcare Costs — from 2016 through 2019:
- While many employers were experiencing annual healthcare cost trend increases of 6% or more, Quantum Health clients saw the cumulative claims cost impacts of utilization and mix of services held to below 1%.
- In-network care steadily increased year over year, helping employers take greater advantage of negotiated rates with network providers.
- Clients’ members had fewer avoidable ER visits, while use of urgent care grew at four times the rate of ER use.
- Inpatient admissions, length of hospital stays and readmissions within 30 days of a hospital discharge all declined over the study period.
- Surgeries performed in more cost-effective outpatient settings grew while surgeries done in more costly inpatient settings declined.
- For the most prescribed specialty drug, treatments administered in home and office settings increased, while those performed in more expensive outpatient hospital settings declined.
The study also examined how navigation informs and guides utilization and mix of services. It starts with Quantum Health serving as the single point of contact for both members seeking answers to benefits questions and providers needing to confirm benefits eligibility and receive service authorizations.
Those engagements enable the company’s Care Coordinators to guide and inform healthcare decisions as they happen, in real time. In a given scenario, that might mean helping a member find a high-quality in-network provider, educating them on their telehealth benefits, working through administrative barriers that could delay a timely hospital discharge, or collaborating with a treating physician to shift a member’s specialty drug treatments to a less costly, more conveniently located site of care.
A real-time cost management solution
Employers and consultants know there is no single strategy for reducing healthcare costs. And all signs indicate that provider prices contributing to rising costs will continue to stubbornly defy solutions.
A 2020 report from the Brookings Institution compared U.S. healthcare prices with those in seven other medically advanced countries across 14 different common medical services, from angiograms and appendectomies to colonoscopies and hip replacements. Across all 14 services, in only one case was the price in another country (New Zealand, for cataract surgery) higher than that charged in the U.S.
Meanwhile, Quantum Health’s 2022 study indicates employers have an option — independent navigation — to proactively manage the other main drivers of rising healthcare costs: utilization and mix of services.
For more details on how navigation works as a strategy in reducing healthcare costs, download the e-book: How Navigation Works to Control Healthcare Costs.