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How to Reduce Benefit Spend: Lessons from a Self-Insured Company

October 29, 2019 • Practice Leadership • Larry Benz

In a 2018 National Business Group on Health (NBGH) survey, 170 large employers shopping for 2019 health care benefits for their employees projected that their total benefit spend would rise 5% for the sixth consecutive year in 2019.

The average total cost of care for each employee and their family in 2019 is estimated at $14,800, up nearly $800 from 2018. In recent years, some employers have attempted to reduce health care spending by shifting costs to employees via high-deductible health plans. But even so, the aforementioned large employers are covering roughly 70% of those costs, leaving the other 30%, or approximately $4,400, for their employees to pick up out-of-pocket.

After years of fighting the same rising costs, we at Confluent Health decided to take matters into our own hands. Here’s how we did it:

  • Self-Insure

I know it sounds daunting, but self-insuring is not just a solution for Fortune 500 companies or mega employers anymore. It allows for more decision-making freedom and financial control and can reduce an employer’s health care spending by 4 to 10% annually. What will you do with that newfound decision-making freedom?

If you’re not in the industrial sector or your employees aren’t often actively engaged in heavy lifting what I’m suggesting might not seem like the natural next step, but consider the 124 million Americans who reported a musculoskeletal condition in 2015. Back pain alone accounted for more than 264 million lost workdays in one year, or two days for every adult with full-time employment.

That pain is costly, both within the healthcare system and in lost wages. In 2013, total medical services expenditures for musculoskeletal care totaled more than $190 billion dollars. The following year, musculoskeletal disorders accounted for 5.76% of the United States GDP, surpassing defense spending that year.

Historically, patients with musculoskeletal conditions are sent to a primary care physician who may refer them for subsequent imaging or to see a specialist, all before they are finally referred to physical therapy (PT). But what happens if that patient were, instead, to immediately book an appointment with a physical therapist?

A 2015 Health Services Research study compared the routes, and the findings were eye-opening. To paraphrase, Patient A and Patient B went to their doctor on the same day complaining of back pain. Patient A was referred straight to physical therapy and was seen by a PT two days later. Patient B was sent for an MRI and, given current wait times to see both physicians and specialists, was not seen again until three weeks later, where they were referred to physical therapy by a specialist. Patient A was nearly finished with their physical therapy visits before Patient B ever began.

There’s also a dramatic cost difference between the two. Over the course of a year, Patient A spent $1,871 in low back pain related costs. Patient B spent $6,664 – a $4,793 difference.

The real question becomes, “how do we effectively treat our employees so they’re better quickly and cost-effectively, back to work, and experiencing results that will last for the long haul?”

  • Change the Musculoskeletal Pathway

For years we’ve seen plenty of data and evidence to back up this change, and we’re finally starting to see some action. Humana has lifted their prior authorization requirement for outpatient physical therapy. Medicare is no longer capping how much physical, occupational, or speech therapy their beneficiaries are eligible for, as long as their doctor confirms the need for therapy.United Healthcare is rolling out no co-pays for PT in some markets.

In 44 states, if a patient is suffering from musculoskeletal pain and wants to make an appointment with a physical therapist, off they go. Only 6 states have laws that require a physician to refer a patient for physical therapy services beyond an initial evaluation.

Self-insuring in 2019 allowed us to incentivize our employers and their dependents with musculoskeletal conditions to become “Patient A” in the 2015 Health Services Research study mentioned above. If an employee or dependent is suffering from an ache, pain, or sprain and goes directly to a Tier 1 physical therapy provider that we’ve designated for the treatment of musculoskeletal care, their cost per visit is $0*. If they first see their primary care physician, a specialist, or visit urgent care or ER, they pay their regular copay for that visit as set forth in their chosen plan.

We’re still collating hard data, but early indications are that this is working. In the first quarter, one of our employees hurt her back on a Friday evening. She went to the ER Saturday morning, was told she would need surgery, and was referred to a neurosurgeon, who set her up with an appointment for the following Wednesday. Monday morning, she spoke with her supervisor at work who suggested PT, which she started that day.

Not only was she able to cancel Wednesday’s neurosurgery visit, but she also missed only one week of work, was back to 100% after eight visits, and did not see a physician for the pain again. She completely avoided surgery, opioids, and imaging. Four months later, she is still symptom-free and has sent her husband straight to PT for back pain. The direct and indirect savings are astronomical. The average spend for back surgery is more than $32,000 and would have required much more time off of work. The total spend for eight physical therapy visits? $800.

If self-insuring is an avenue you’re interested in exploring in 2020 or beyond, or you’re already self-insured but looking to make tweaks, consider changing the musculoskeletal pathway as part of your model. Research supports physical therapist first as both effective care and at a lower total cost.

* Employees who have the High Deductible Health Plan must first meet their deductible before the $0 visit fee kicks in.

Larry Benz

Dr. Larry Benz, DPT, OCS, MBA, MAPP, is the Executive Chairman of Confluent Health. He is nationally recognized for his expertise in private practice physical therapy and occupational medicine. Dr. Benz’s current areas of interest include conducting research and integrating empathy, compassion, and positive psychology interventions within physical therapy. He released a book on September...

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