Obamacare is struggling. Trumpcare is...well, who knows what's really happening with it? But if you think the U.S. will just have to wait for any healthcare reform, think again.
Several large companies are taking matters into their own hands. Boeing (NYSE:BA), General Electric (NYSE:GE), JetBlue (NASDAQ:JBLU), Lowe's Companies (NYSE:LOW), and Wal-Mart (NYSE:WMT) are moving forward with a major change in how healthcare is reimbursed. Here's what they're doing -- regardless of what the federal government does about healthcare reform.
Aircraft manufacturer Boeing began contracting directly with healthcare providers in 2014. The company gave employees an option to stay with their existing health plan or switch to a more limited provider network with which Boeing negotiated prices. This was a key step to implementing a new way of paying for healthcare known as bundled payments.
What are bundled payments? It's a model where healthcare providers are paid for an "episode of care" -- everything involved in a patient's care, including all tests, procedures, medications, and services -- in one bundle. Currently, most healthcare costs are paid in a kind of "a la carte" fashion, with each individual healthcare provider receiving payment for their part of a patient's care.
General Electric is another leader among employers in advancing use of bundled payments. In 2014, GE contracted with hospitals in different cities to provide hip and knee replacement surgeries under a bundled payment model. The big conglomerate had previously used bundled payments with other providers for for organ transplants, weight-loss surgeries, and some types of care for cancer patients.
In 2013, Lowe's, Wal-Mart, JetBlue, and other companies, in collaboration with the Pacific Business Group on Health (PBGH) and Health Design Plus (HDP), launched the Employers Centers of Excellence Network (ECEN). ECEN assists employers in setting up bundled payment deals with healthcare providers.
ECEN started out with bundled payment arrangements for only hip and knee replacements. The organization later added spine procedures. More recently, ECEN has established a bundled payment deal for weight-loss surgery.
Why it's a good thing
Boeing, GE, Lowe's, Wal-Mart, JetBlue, and other companies are interested in bundled payments for the same reason that Medicare has experimented with the idea: It holds the potential to save money. Research has found huge variations between the cost for the same procedure at one healthcare provider compared to another. Use of bundled payments presents an opportunity to address this problem.
But do bundled payment actually reduce healthcare costs? Based on what Lowe's has found with its participation with ECEN, the answer is yes.
According to an article in the Harvard Business Review, the average Lowe's employee undergoing joint replacement surgery saved around $3,300 in copayments and other fees compared to employees with traditional health insurance who had the same procedure performed. Lowe's estimates that roughly $1.3 million was saved in a 12-month period from avoiding unnecessary surgeries.
Lowe's experience doesn't appear to be an exception. A study published earlier this year in the Journal of the American Medical Association stated that between 2008 and 2015, Baptist Health System in San Antonio, Tex. reduced costs of joint replacements by more than 20% in a bundled payment arrangement. And those savings were achieved without any impact on quality of care.
What about the financial impact on healthcare providers from bundled payments? Some don't like the idea, because they're afraid they'll make less money. Others see opportunities. Geisinger Health System, for example, has worked with Wal-Mart and with ECEN for several years. Geisinger found that the re-engineering of its processes to work with the bundled payment model led to improvements in other areas as well.
Trumpcare -- or at least the American Health Care Act version of it passed by the U.S. House of Representatives -- doesn't include any references to bundled payments. Secretary of Health and Human Services Tom Price, an orthopedic surgeon, has been adamantly opposed to mandating of bundled payments by Medicare in the past, stating in a letter last year that it's "experimenting with Americans' health." At this point, it doesn't seem likely that the federal government will be championing the approach.
American businesses, on the other hand, seem likely to forge ahead. These companies must answer to boards of directors and shareholders who demand continued improvement on the bottom line. With healthcare costs becoming an increasingly larger burden for employers, bundled payment models will probably grow in popularity in the corporate world. The potential for reducing healthcare costs is too attractive of an opportunity to pass up.
Keith Speights has no position in any stocks mentioned. The Motley Fool owns shares of General Electric. The Motley Fool recommends JetBlue Airways and Lowe's. The Motley Fool has a disclosure policy.