Hospitals Boost Revenue By Partnering With Local Employers
Healthcare Marketing Report
By Yale Miller
The success of population health management in the U.S. will depend in large measure on how well health systems can partner with employers. That’s because there are both demographic and psychological obstacles to improved community health.
Numerous studies show that most working-age Americans are either ashamed about – or in denial about – their health risks. A recent U.S. Census Bureau study found that 90% of working-age adults consider themselves to be either in “excellent” or “good” health. Only 2% consider themselves to be in poor health.
Those assessments clearly don’t align with the facts. The National Institutes of Health estimates that 35.7% of adults are obese – and 74% of adult men are either overweight or obese. And the American Diabetes Association estimates that there are close to 30 million diabetics in the U.S. – roughly 10% of the population.
A landmark study by the Commonwealth Fund found that 33% of men and 20% of women have no regular doctor – and denial and embarrassment were key factors. The study concluded that people with health-endangering habits (like smoking or excessive drinking) avoid seeing a physician because they don’t want to get a lifestyle lecture.
The Millennial Problem
Young workers in the Millennial category (ages 18 – 35) are also reluctant to establish ties with a regular primary care physician. They often go to WebMD and other online sources for a diagnosis, and visit urgent care and retail clinics twice as often as older workers. A 2015 study by PNC Healthcare found that only 61% of Millennials have a regular PCP. U.S. Census data reveals that nearly 40% of young adults didn’t even make a single visit to a primary care physician last year. Although younger workers are typically healthy enough to be blasé about primary care, that attitude can cause them to downplay the importance of regular MD visits as they grow older.
To help eliminate these demographic and psychological barriers to treatment, many health systems and employers are creating innovative alliances. Employers are looking for ways to motivate at-risk employees to get regular checkups and establish relationships with area physicians. Health systems, which are increasingly getting paid on the basis of how well they manage community health, are likewise seeking to identify at-risk community members and provide the overdue care they need.
The Need For Local Partnerships
Employer/provider partnerships are not a new phenomenon. Retail giant Lowe’s and food producer Perdue Farms have long partnered with The Cleveland Clinic, sending thousands of their employees nationwide to the hospital’s renowned cardiac centers. But that often requires a long plane flight to Cleveland or other centers of excellence. And by that stage, employees’ heart conditions are quite serious. What’s really needed are more local partnerships designed to identify upstream health risks long before they become costly chronic conditions.
Here’s how a community-based hospital/employer partnership works:
A hospital and local employers (often aided by a population health management company) work together to create a robust health information database. The hospital gathers baseline data by asking employees to complete a personal health profile. This data alone can help identify employees who are at risk, such as smokers, hypertensives, those who are overweight/obese, etc. – and red-flags the ones who have no primary care physician and are overdue for important testing like mammograms, cholesterol checks, and so on.
The employer can guarantee workers that no one from the company will have access to their confidential health information. Employers receive only an aggregate assessment of the company’s overall health status: percentage of smokers, obese workers, etc. These summaries help employers intelligently allocate preventive resources. For example, obesity might be the #1 problem at a factory in Oklahoma City while stress might be the prevalent issue at a Boston investment firm.
The partnering hospital then arranges health screenings at the workplace where data can be gathered from biometric screenings (such as glucose and cholesterol) and face-to-face consultations.
The employer then uses the captured data to create wellness incentives designed to reward employees for establishing ties with a hospital-affiliated physician and for getting regular health screenings.
The employer can test various incentives to determine which ones work best in the long run. These typically include cash bonuses, reduced health insurance premiums, and points toward prizes.
The hospital also sponsors informal “lunch and learn” educational sessions at the employer site. It’s surprising how many employees don’t know what LDL cholesterol level is considered dangerous. And many are not aware of special services the hospital offers, like a sleep disorder clinic or hyperbaric therapy.
Increasing Revenue, Improving Payer Mix
When employees are financially incentivized to visit the primary care doctor and get regular screenings, they’re far more likely to overcome inertia and actually book the appointments. This increases revenue for both the hospital and its affiliated physicians. (See sidebar for three examples.)
By bringing more commercially insured lives into its network, a hospital can significantly improve its payer mix and reimbursement rates. The percentage of community members with private health insurance peaked around 1980, when roughly 42% of patients were commercially covered. Today, only about one-third of patients have commercial insurance, while the percentage of those covered by Medicare and Medicaid continues to rise. Medicaid coverage has nearly doubled since 1980 and Medicare coverage has increased by more than 5% due to the aging of the Boomer demographic.
Medicare currently reimburses hospitals and physicians about 80% of what commercial payers do – and Medicaid reimburses at about 56% of the commercial rate. When a hospital can increase its commercial payer percentage – even by just two or three points – it has a dramatic impact on hospital profitability.
From the hospital perspective, engaging employers is both a population health initiative and a business development program. The hospital/employer alliance works best when there’s a person or department expressly tasked with managing it. Many hospitals can’t afford to add another person to their existing business development teams. That’s why some third-party population health companies are now training and paying employer relationship specialists to run the program as if they were a hospital employee.
Some hospitals are also turning to outside partners to manage the vast population health database that is the centerpiece of both their community wellness and business development programs.
All stakeholders benefit when hospitals establish close ties with area employers. Employers can significantly lower their annual healthcare costs, while hospitals accomplish many goals simultaneously: fulfilling their population health mandate while boosting revenue, market share and profitability. But the biggest winners are those employees who now have strong financial incentives to live longer, healthier lives.
Yale Miller is Client Solutions Principal at Aegis Health Group in Brentwood, Tennessee.
HOSPITAL/EMPLOYER ALLIANCES: THREE SUCCESS STORIES
- A 142-bed hospital in the rural outskirts of a large metropolitan area engaged local employers in an effort to improve payer mix and reduce “outmigration” (local patients seeking treatment in metro area hospitals). This data-driven alliance with local employers has increased hospital new net revenue by an average of around $880,000 annually.
- One 400-bed hospital in the Midwest has partnered with more than 100 local employers, which has added 400,000 commercially covered lives to its network. The hospital has used its population health platform to capture the results of on-site health screenings and to guide the selection of educational events. Using the database, the hospital contacted 3,000 employees who had not used its services in the preceding three years (except for health screenings at the employer site). Nearly 20% of them responded by having at least one service provided through the hospital or its physician network. These new patients generated more than $3 million in commercially reimbursable charges in the period studied.
- A regional health provider in southern California pursued a similar strategy of engaging local employers. The health system identified more than 1,500 area employees who did not have a primary care physician. In a direct mail campaign over 18 months, the health system added 269 new patients and generated more than 1,000 physician procedures.