A local, independent primary care physician recently shared a story with me that is important for every business owner, CEO, CFO and HR executive to understand. As is more and more common these days, there are a number of hospital-owned primary care practices in the same area as her practice. She explained to me that the insurance companies pay these hospital-owned primary care physicians 40% more than her for the exact same visit. This dramatic price differential has nothing to do with care quality or service – it is completely based on the hospital’s dominant market strength and negotiating leverage.
Now here’s the kicker.
The folks who run the health plan for the hospital’s own employees approached her to figure out how they could encourage more of their employees to come to her practice, instead of the hospital’s own primary care practices. Why?
You see, the hospital self-funds its health plan. Meaning, rather than paying a third-party insurance company, it pays the actual cost of the healthcare services its employees and their families receive from doctors, hospitals and labs. Now, if you’re on the hook for the costs, would you want to pay 40% more for the identical service? The answer is most likely no, and they don’t either.
The truth is that there are vast cost differences for care when delivered by an independent primary care physician versus a hospital-owned physician practice. These variations can be 70%, 122%, or even 222% more for the hospital-owned practice.
But it gets even worse.
Let’s say one of your employees (or their family member) needs a knee replacement. In Philadelphia, the cost of a knee replacement can vary from $17,000 at one local hospital versus $46,500 at another local hospital. That’s a glaring 165% difference between the two. (Blue Cross Blue Shield the Health of America Report)
This one patient’s choice of hospital can have a nearly $30,000 impact on your company’s bottom line. Now, who will the patient naturally look to for advice on which hospital and specialist to choose? Their primary care doctor.
If the primary care practice is owned by a hospital, their financial compensation is tied to referring care within that hospital system. This is true regardless of whether the hospital is $30,000 more expensive for the particular procedure, without offering any quality advantage.
As a patient, what you actually want is a relationship with an independent, objective primary care physician whose primary goal is keeping you out of the hospital and is free to refer necessary care to the specialist or hospital that delivers the best value for your particular situation.
As an employer, you need an objective ‘healthcare quarterback’ whose interests align with yours and who is responsible for delivering this massive project called ‘healthcare’ on time and on budget.
Direct Primary Care is a growing national movement of employers partnering directly with high-performing, independent primary care physicians within their communities. Direct Primary Care combines the traditional core values of convenient, personal primary care, with innovative data analytics and care management, as well as a financial structure that holds the physicians accountable for the quality and cost of the care your employees and their families receive.
Empowering the relationship between your employees and independent primary care physicians is one of the most effective tools in your arsenal for regaining control of soaring healthcare costs.