Methodist Le Bonheur Healthcare in Memphis, Tenn., recently discovered how high-deductible health plans change patient behavior. Memphis-based FedEx Corp. moved its 400,000 U.S. employees and dependents into high-deductible plans with health savings accounts as of Jan. 1, 2014. Methodist had a contract with Cigna, which administered FedEx's plan. Most FedEx employees in the Memphis area use Methodist providers and facilities.
Then, in the first three months of 2014, Methodist began losing money. The not-for-profit health system was $17 million behind budget at the end of that first quarter. Michael Ugwueke, Methodist's president and chief operating officer, said that when the system's number of commercially insured patients came in well below expected, it was evident that FedEx's new high-deductible plans had contributed to the loss.
Methodist quickly responded with modest layoffs and added cost-control measures. Some of Methodist's patient volumes returned at the end of the year, after patients met their deductibles and were more willing to use healthcare services. The system ended 2014 with a surplus. But the experience was a signal to Methodist's leaders that high-deductible plans were changing the dynamics of the health system, for better or worse.
“We've read and heard about employers introducing high-deductible plans as a means of dealing with healthcare costs,” Ugwueke said. But until the FedEx experience, “we didn't really feel it that much.”
Some health policy experts and lawmakers see high-deductible health plans as a key to reducing U.S. healthcare costs through a consumer-driven model. The concept is that patients will use healthcare services more thriftily—avoiding medically unnecessary care and shopping around for lower-priced hospitals, doctors, products and services—if they face greater out-of-pocket exposure to costs. Free-market advocates long have pushed this approach.