Spring/Summer 2018


Embracing the Self-Funded Model of Health Care


By Jay W. Kempton


We all know that the current health care system is unsustainable, difficult to navigate, expensive, confusing and often


provides low value. While the media continuously discusses the direness of the situation for patients who have coverage through a carrier, what is not at the forefront of the never- ending discussion on costs, access and coverage is the impact on the more than 100 million citizens with benefits through their self-funded employer.


More than 60 percent (http://goo. gl/7YNqH5) of all employers in the United States elect to self-fund their employee benefits. In the simplest terms, this means that these employers are paying their employees’ claims out of their own pockets. Being self-funded means the employers have more control over their Plan and can offer benefits tailored to their employees and control costs more effectively.


As an independent, third-party administrator (TPA), I believe helping self-funded employers manage their health Plans should be our primary focus. But it was in 2011, right after the passage of the Affordable Care Act, that I felt like I had run out of ideas to help these employers control their costs while providing high-value benefits. Many third-party vendors showed up on the scene shouting about the savings they could offer to health plans, all while claims costs continued to skyrocket. It was around this time that I met Dr. Keith Smith of the Surgery Center of Oklahoma and the idea of connecting self-funded employers with free market-friendly, high-value providers was born.


We formed a program in 2011 that was based on the premise that the buyers and sellers (employers and providers) needed to cut out the third- party vendors from the transaction and work directly with each other in a mutually beneficial way. Seven years later, there is a growing movement towards embracing the free market in health care, with many employers, TPAs, associations and advocacy groups all working toward the same goal.


Understanding the Model When a self-funded employer works directly with independent providers, the patient out-of-pocket expense can be eliminated (unless the employer offers a qualified, high-deductible health plan). Providers agree to a bundled, cash-based price paid by the employer. Providers have no accounts receivable to chase, and the employer can potentially save between 50 and 80 percent (http://goo.gl/3mYrgb) over the network allowables at hospitals. The patient is incented to use this option because there is no cost to them.


Since these are bundled, transparent prices offered voluntarily by the provider, there is no ability to upcode and upcharge for extra services or foreseeable complications if the provider is low quality as it is already included in the price. This means that facilities and surgeons will only offer services under this model that they are the best at performing in the most efficient way.


Self-funded employers using a free market program typically report a reduction in unnecessary procedures. Frequently, a patient would be told they needed a surgery or treatment by their hospital-employed physician or surgeon, but upon having their


consultation with a free market provider, a more conservative, non- invasive treatment was found to be the better option.


Momentum Building The Free Market Medical Association (https://fmma.org/), an apolitical association for buyers, sellers and valuable vendors, reports that more than 300 independent facilities now offer bundled pricing. Half a million patients now have this option for their care. Not only have self-funded employers started to embrace this model, but a growing number of health care sharing ministries encourage their members to use these types of providers for services.


This movement is continuously expanding. As more TPAs create their own free market programs, everything from governments to large employers are working directly with providers without the interference of third parties. Many organizations are now helping to promote the goal of changing the paradigm of health care across the country.


We can change our health care system without more vendors, schemes, government intervention, regulations and mandates. To quote my friend Dr. Smith, “Health care is not expensive. What is charged for it is a whole other matter altogether.” Let’s change that.


Jay W. Kempton is president and chief executive officer of The Kempton Group in Oklahoma City, Oklahoma. Write him at jkempton@kemptongroup.com.


The advice and opinions expressed in this column are those of the author and do not represent official Ambulatory Surgery Center Association policy or opinion.


Study: Fewer Post-Surgery Adverse Events in ASCs vs. HOPDs


A recent study published in the Journal of Health Economics compares the rate of adverse events, defined as inpatient admissions or emergency room (ER) visits, following outpatient procedures in ASCs and hospital outpatient departments (HOPDs).


4 ASC PHYSICIAN FOCUS


The study examined Medicare claims data for physicians who operate in both ASCs and HOPDs, looking at the 10 most common procedures in ASC volume. Researchers found that patients experienced a reduction in ER visits when undergoing procedures in


ASCs relative to HOPDs. The study also concluded that the reduction in post- procedure adverse events exists for low- and high-risk patients.


Access the study at https://goo.gl/ JncbM1.


Vol. 2, No. 1


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