Daniel Goldberg and his Free Market Health Group are part of the emerging and growing cast that is introducing physicians to the idea that embracing the discipline of the free market, rather than rejecting or resisting this force, can actually be good for the physician’s practice. Mr. Goldberg recently contributed an article to the periodical “Orthopreneur” which you can read here. I informed him on a Facebook post that I was going to take friendly issue with part of his article, as I believe he has understated the very point he was making, the result being a far too kind characterization of our friends in the insurance world.
Towards the end of his article he writes:
With self-funding, the employer “rents a network” from a larger carrier like Cigna or Blue Cross. This rental simply means that the employer will pay the same cost for procedures as guaranteed under Cigna’s network. However, instead of the insurer paying the claim, the employer pays the claim and acts similar to an insurer. Also, unlike most plan arrangements, the employer is not precluded from contracting with providers outside of the network for lower rates.
The italics are mine and are the heart of my issue with this paragraph. You see, here in Oklahoma, self-funded employers are securing pricing that is far better than the pricing “negotiated” for them by their “network.” The savings that Advantage Health Plan (part of the Kempton Group) has realized, for instance, is almost 8 million dollars in just over 2 years and is calculated as savings compared to what would have been paid at “network” rates. Same goes for Oklahoma County, $570,000 saved in 5 months! Compared to historical network payments for the same procedures.
While the big carriers who often are administrators of self-funded plans claim to have their client’s interests at heart, they shun from their network the highest quality and lowest priced players in the market, my facility being a classic example. Part of the reason for this is the massive revenue generated by selling their “discounts” or repricing of claims, the carriers claiming as their own, a percentage of the “savings” they have generated for their clients. With this arrangement the last thing the carriers want is to seek out reasonably priced care, particularly from a transparently priced facility, as the absence of any claims adjudication eliminates their repricing opportunity and revenue.
Employer groups are directly contracting with facilities like mine, shoving their PPO or network aside and realizing huge savings as a result. Mr. Goldberg and I are in agreement. I just think it bears pointing out that his point is even stronger than he has made it out to be. Employer groups are not just looking for cash based physician practices and facilities. They are willing to give their carrier the boot to reach those bold enough to make this change in their medical practice.
G. Keith Smith, M.D.
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