Union lowers medical bills with direct negotiations

As companies shift more and more healthcare costs to their employees, the doormen, office cleaners, cafeteria staff and other members of the union 32BJ SEIU remain among the lucky few who pay no premiums and have no deductibles as part of their benefit plan.

Keeping it that way has been no easy task. With each new collective-bargaining agreement, the employers who contribute to the plans point to their fast-climbing premiums, said Sara Rothstein, director of the 32BJ Health Fund.

That inspired the union to forge a deal with Mount Sinai Health System three years ago, Rothstein recently revealed during Crain's healthcare summit on empowering patients. Such deals are usually kept private, but Rothstein has been outspoken about the prices the benefit fund has paid hospitals. In the deal, the union will negotiate the price for joint replacements and bariatric surgery at Mount Sinai as part of a bundle that includes follow-up care for up to 30 days after discharge.

Though rare, forming direct contracts with hospitals is one way some of the country's largest employers are attempting to lower the cost of care. The average price of family coverage in job-based plans in New York increased by nearly two-thirds in 2017, to more than $21,000, compared to premiums in 2008, according to figures from the Commonwealth Fund.

Rothstein said the relationship saved the benefit fund, which covers 200,000 people, about $1 million last year. None of the 32BJ members who had a hip replacement at Mount Sinai in the past two years were readmitted to the hospital within 30 days of discharge, and one-third of surgery consultations resulted in doctors advising patients against surgery.

"We told members, 'If you go to this low-cost but very high-quality program at Mount Sinai, you'll pay nothing for joint-replacement surgery,' " Rothstein said at Crain's May 17 health summit. Workers also will pay nothing for their first 10 physical therapy visits. Members can choose to go somewhere more expensive, but they will pay the difference up to the out-of-pocket maximum of $6,100.

David Sandman, president and CEO of the New York State Health Foundation, called the business community "sleeping giants" in the fight to control health costs. Businesses should have a better understanding of how much they're paying and what kind of health outcomes they're getting in return, he said at the Crain's summit.

The deal between 32BJ and Mount Sinai began in response to what Rothstein and her team of data analysts had observed in insurance claims: a big difference in what local hospitals charged for the same procedures. The union found that New York–Presbyterian, for example, charged about $83,000 for a hip replacement compared with $50,000 on average at other city hospitals.

"You start to wonder, Why do we have these outliers? Is it worth it to pay sometimes tens of thousands extra for what is essentially a standard service?" said Stephen Furia, senior vice president of population health at Mount Sinai. "Mount Sinai's clinical services are equal to anyone in the city, but we could deliver for substantially less cost."

The union's benefit fund, which receives contributions to premiums from 5,000 employers, negotiated the deal with Mount Sinai without its third-party administrator, Empire BlueCross BlueShield. Empire helps 32BJ run its insurance program but does not bear the financial risk of paying claims as it does for smaller businesses and individuals.

Mount Sinai recruited a handful of surgeons as well as social workers, which it calls care guides, to follow up with patients after surgery. The deal includes amenities such as free rides to visits and grocery delivery for patients as they recover.

A small number of large employers have made direct contracts with hospitals to gain better control of what they're spending on care.

Walmart is approaching healthcare in the same way that it finds low-cost, high-value brands to stock its shelves. The big-box retailer has been paying workers to travel to facilities such as the Mayo Clinic in Rochester, Minn., and Geisinger Medical Center in Danville, Pa., where it has negotiated bundles for procedures. The company has found that employees who receive surgery through the program return to work faster and are less likely to need another trip to the hospital.

Other companies that have set up deals with so-called centers of excellence include Boeing, General Electric, JetBlue Airways, Lowe's and McKesson.

The New York Hotel Trades Council and the Hotel Association of New York City have taken a different approach by opening up their own network of clinics. Union members and retirees can receive primary and specialty care at the facilities at no cost but must pay their own expenses at other medical providers.

About 6% of employers with more than 20,000 workers said they had contracted directly with healthcare providers, a national survey conducted by benefits consultant Mercer found.

In the 32BJ plan, workers are steered to a limited network of medical providers. But the price of workers' visits are much lower than that of others, who pay thousands of dollars to satisfy a deductible before their company or insurer starts footing the bill. The union's members have been pleased, Rothstein said. Around 90% say they're satisfied with their health benefits.

"Rather than saying, 'It's up to you to choose from 17 places to get an MRI,' we say, 'Here's the best place to go. And if you want to go somewhere else, it's going to be more expensive,' " Rothstein explained. "Members find it fair. We're fighting to preserve [their] benefits."

"Union lowers medical bills with direct negotiations" was originally published in Crain's New York Business.