Unlike most businesses, hospitals are major consumers of their own product.
Surprisingly, hospitals are not especially savvy in purchasing healthcare services for their own employees or structuring their health plans to their own benefit.
To make matters worse, hospitals are considered among the less appetizing groups to insure. Hospitals employ a disproportionate share of women, who typically utilize more services than men do. Hospital employees also work in a stressful environment, where illnesses and occupational injuries are more likely to occur. And hospital employees are knowledgeable users who have direct access to the care they think they need.
There's a particular conundrum for high-cost specialist-dominated hospitals, such as academic medical centers. The wish to curb expenses normally would lead any employer to channel employees to a low-cost provider, possibly by asking them to pay more of the cost in exchange for greater choice of provider. A large tertiary hospital might try to triage necessary care to less-expensive providers within the network.
Yet such an organization must be mindful of the messages it puts out. If it is advertising to employers and the larger community that choice, access and quality are the values to be upheld in selling healthcare, and that high quality necessarily fetches a higher price, then it would be less than prudent to coerce the hospital's own employees into low-cost HMOs that penalize them for using the hospital where they work.
A quarter of the hospitals in this year's Deloitte & Touche employee benefits survey rely on one of the most antiquated modes of health insurance: the major medical plan. "You see this in heavily unionized, traditional industries," said Bill Chafetz of Deloitte.
Almost half the hospitals surveyed offer comprehensive coverage, 39% offer HMOs, 37% offer PPOs, and 11% have a point-of-service plan.
But one way or another, most hospitals are trying to bring their employees into their own systems. Among the variety of ways they do so is to reduce premiums, to give higher coverage at the home hospital or to adjust copay amounts.
About 28% of hospital employers pay more of the coinsurance if the employee uses the home facility. Just over half reduce the deductible, which Chafetz says is administratively simpler than tracking coinsurance.
Amazingly, 22% of hospitals offer no incentives for employees. Enticing the hospital's own workers in the door as patients is an obvious and easy way to fill beds that might otherwise go empty. And, the hospital, especially if it's self-insured, may realize cost savings over conventional insurance by treating its own people at marginal rather than full cost.
But it's not always so easy for hospitals to figure out how to implement such goals, Chafetz said. You can invite employees to come to their own shop, but some may live in another part of town. It may be easier to contract with a commercial HMO or PPO that includes the hospital within its network.
"Geographic dispersion of employees is a challenge to channeling employees to your own hospital," Chafetz said. "Coming together as a hospital network helps answer the challenge. They cover a broader geography and services.
"If you're (a hospital) and (an insurer) is the medical vendor, you can tinker with the benefit plan to make your hospital top-tier for your own employees," Chafetz said.
It may also be possible to structure the health benefit plan to suit the hospital's financial goals. Hospitals that want to show a lot of revenues will bill at full cost; those that want to show low employee-benefit costs may bill at a hefty discount. Given that compensation may constitute 50% to 60% of a hospital's cost structure, and that health benefits could be 15% of that, these decisions can assume an elevated importance in the hospital's overall financial profile and how it is perceived financially.
At just about half the hospitals surveyed, employees have no incentive to use the facility's affiliated physicians. "It doesn't surprise me," Chafetz noted. "There are a whole lot of affiliated physicians who aren't economically integrated with the hospital. It seems like hospitals are missing a big bet. The physicians' groups I've worked with would appreciate the hospital doing anything it can to increase their volume. There is an opportunity here to improve physician relations."
It appears that some physicians, at least, are willing to meet the hospital halfway. About 35% of hospital-affiliated physicians will discount their fees to the hospital's employees; 60% do not.
At Northeast Medical Center Hospital in Humble, Texas, the health plan allows 95% coverage if employees use their own hospital or the network, and 70% coverage outside the network. The hospital is part of the Memorial Sisters of Charity network.
"They like to come to this hospital," said Syble Missildine, interim administrator and a registered nurse. "I bring my family here. They get good care, and the benefits are greater."
Employees don't get incentives directly from the hospital for seeing hospital-affiliated physicians. Rather, any financial inducements come from participating in a hospital-affiliated managed-care program.
Northeast is self-insured. A third-party administrator helped write the benefits plan and distributes the payments. Any employee working 32 hours a week joins the health plan 91 days after the date of hire.
This year the hospital has given employees and families credit for taking part in a wellness program by subtracting $200 from the deductible. Normally, the deductible is $400 per individual or $600 per family. After the wellness program, it's $200 and $400.
Missildine said the program is yielding strong results, both in reduced illness and sick days, and in improved morale.