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Real Cost Control Strategies Save Millions

You might think reducing claim costs by approximately $3.9 million since 2008 would be the first thing a hospital CEO would mention when asked about the success of their employee health benefit plan.

Not so for Rebecca McCain, CEO of Electra Memorial Hospital who said, “It can be all about the money but, when it's better for the employee, it's also usually better for the hospital. That goes without being said.”

The millions in savings since 2008 are a result of limiting the amount paid on claims exceeding $50,000 to the rate Medicare pays.

Rebecca explains, “Since we’ve had the Medicare language in our plan, it has really helped us. What happens is, if we have a claim over $50,000, our plan says that we will pay the Medicare rate. Some facilities won't accept it. Some will. But when they don't, we now have a mechanism to negotiate with them on the balance of the claim.”

How is it better for the employees?

When asked how saving millions has been better for Electra’s employees, Rebecca said, it’s a combination of eliminating deductibles, educating employees about how much is actually being spent on their behalf, and implementing wellness challenges that reward positive behavior.

“The employees absolutely loved it from the very beginning, because they said, ‘What do you mean I don't have a deductible?’ Now, there are different levels of copays... but if they go to the doctor's office, they know what they will pay, so they just pay the copay and they're done.”

“We also use a simple ‘you pay… we pay’ format when communicating the cost of claims paid.”

What is “real” cost control?

Real cost control is one of the driving principles behind the successful achievement of the Rural Hospital Insurance of America (RHIA) program’s mission. RHIA is here to help you stay safely ahead of the game of risk and insurance management.
Real cost control has three key characteristics:
  1. It is permanent, long term, and strategic
  2. It delivers significant results and empowers CEOs to gain better control of their present and future
  3. It is not stopgap, short term, or transactional. (It is not something you regret implementing a year or two down the road.)

Bringing it home with 340b

Being vigilant means leaving no stone unturned when it comes to finding sustainable ways to control costs. In the case of Electra Memorial, simply by monitoring claims and then exploring new ways to reduce them has lead an $8,000 per month reduction in one claim alone. (At the time of this interview, Electra had already saved $80,000.)

This one case lead Electra to focus on motivating employees to use its in-hospital pharmacy, and in this specific case, come to the hospital for infusion therapy.

Rebecca explains, “We started seeing large claims for one employee, so we started looking into providing that service here. When we looked into it, we discovered that we could do it here just as easily. We changed that over, and so now that employee’s primary care is here in our clinic, and we can buy the drug on the 340b program. Rather than paying $10,000 claims once a month to another provider, now it’s costing us about $2,000.”

This is an important opportunity to explore for any hospital trying to control the cost of their employee health plan. Specialty drugs have become the single largest driver behind rising healthcare costs. In 2016, prescription drug costs increased by between three and four percent while specialty drug costs rose by more than 12 percent. It is the fastest-growing segment in the pharmacy industry. In 2018, it is estimated specialty drugs will account for almost 50 percent of the money people spend on drugs. That’s a dramatic increase; they only accounted for approx. 30 percent in 2016. (Source: Express Scripts 2016 Drug Trend Report)

Strength in numbers

Rebecca says participation in programs like RHIA is where her and her colleagues are exposed to strategies like these; “Because we're all here to support each other, the one thing I think the RHIA program can do really well is bring everybody together and create a network of people.”

Her advice to a new CEO or a CEO whose hospital who is considering joining RHIA is two-fold, “Don't be afraid to ask questions. Ask what are the most important things other people are using. And, talk to other CEOs. I've done that since I started working at Electra, even when I wasn't the CEO. I constantly call people and ask, ‘What do you do about this?’”

Rebecca’s says the number one benefit from participating in a program like RHIA is the collective strength it creates. “One small hospital is never a big player in any market. It's nice to be able to have a forum for us to come together and become a larger group where we do have a voice.”

Risk and insurance

When asked how she would recommend a CEO can get the most out of what the RHIA program has to offer, she said, “I would start using the program managers as a resource. In fact, even if you're not sure about them, you should use them because Brant and Barry have always been really good about getting you any information you need. You don't even have to be their client. They will answer your questions.”

Keeping you safely ahead of the game

RHIA’s mission is to help community hospitals stay safely ahead of the game in the increasingly complex world of risk and insurance. Contact Brant Couch today at (512) 292-3315 to get the answers you need.

NRHA commissioned the above piece from HealthSure, a trusted NRHA partner, for publication within the Association’s Rural Health Voices blog

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