Healthcare prices are racing upward with the speed of a runaway train, leaving cost-burdened employers no option but to keep pace. In recent years, market consolidation has empowered oversized networks like Mass General Brigham, Sutter Health, and John Muir Health to monopolize regions and essentially dictate prices to employers.
“[Consolidation] is the largest driver of health care cost increases. It’s hospital prices [driving those costs],” Elizabeth Mitchell, the CEO for the Pacific Business Group on Health, told Lesley Stahl on 60 Minutes. “And they’re not providing more services. And the quality isn’t increasing. They are just charging more for the same thing. It is just the prices. And they do it because they can.”
Data backs Mitchell’s assertion. One recent study from the RAND Corporation found that employers and private insurers paid a whopping 247 percent of what Medicare would have paid for identical services at the same facilities. Prices are increasing, too; the same study also found that private-pay prices saw a 5.1 percent compounded annual rate of increase between 2016 and 2018.
The current situation is untenable for employers struggling under the ever-increasing cost burden posed by unscrupulous networks — as well as the employees struggling to afford care amid a troubled, pandemic-wracked economy. But now, a digital health company named Carrum Health may have found a way to tap the proverbial brakes on runaway care prices.
Carrum Health is one of the first health organizations to connect employers and employees directly to Centers of Excellence via a digital marketplace. The company proactively negotiates with the nation’s top providers to develop comprehensive bundled payment arrangements for common, high-cost surgeries. Instead of fielding fee-for-service charges as they come, employers can purchase surgery bundles directly from providers for a single, transparent price. Every bundle also comes with a minimum of 30-day readmission warranty, which aligns provider incentives with quality and leads to further savings for employers.
The potential cost savings provided by this approach are both remarkable and demonstrable. In March, a study published in Health Affairs noted that Carrum’s bundling reduced overall spend for selected surgical procedures by more than 10 percent — even with just 20 percent utilization. On a unit cost basis, the procedure prices came down by more than 45 percent. According to the researchers, employers captured around 85 percent of these savings. Employees benefited as well, paying roughly 27.7 percent less in cost-sharing per episode of care.
“Our analysis of Carrum Health’s market-leading COE platform shows that both employers and patients can see immediate and significant savings on completed surgeries, while getting high-quality care from the top hospitals around the country,” Dr. Christopher M. Whaley, the study’s lead author and healthcare policy researcher for the RAND Corporation, commented in a press release.
The study, which is one of the first to assess the value of applying a bundled-payment approach to the commercially insured population, demonstrates that it’s possible to lower healthcare spending while maintaining or even increasing quality.
“When it comes to COEs, employers tend to take the easy path of using their carrier’s COE option,” Carrum’s founder and CEO, Sach Jain, told me in an interview.
“Carrum’s model is proven to be more effective than alternative solutions and it is designed for easier adoption. We deliver better outcomes and an improved patient experience by combining Carrum’s bundled payment-based contracting with a hyper-focus on quality and appropriateness of care in our COE selection. Now we are expanding the COE model beyond select procedures to cover almost the entire surgical care spectrum. This coupled with an end-to-end technology platform makes the program essentially plug-and-play for employers.”
Carrum’s model provides a new blueprint for a more affordable care payment model — and, equally important, it provides employers hamstrung by monopolizing networks like Sutter an avenue for pushing back on dictated prices.
Given its potential to disrupt healthcare reimbursement for the better, it should be no surprise that Carrum Health has undergone considerable growth in the last year. In January, the company closed a $40 million Series A funding round. Carrum has also forged partnerships with several notable Centers of Excellence, including the Cleveland Clinic’s cardiology division and the Memorial Sloan Kettering Cancer Center.
Carrum’s agreement with the latter is particularly notable because what it offers is unprecedented: a two-year warranty on all in-person medical care relating to a patient’s breast or thyroid cancer diagnosis.
To put this offering in perspective — cancer is one of the most expensive conditions to cover. According to the Northeast Business Group on Health, cancer accounts for roughly 12 percent of employers’ annual healthcare spend, or approximately $125 billion per year. The price of a single cancer surgery can range from $10,000 to $200,000. A full course of treatment might top $400,000. But per Carrum’s agreement with Memorial Sloan, employers can pay a set price for two years of top-tier medical treatment and achieve considerable savings over the usual fee-for-service approach.
As the company wrote in a recent press release, “This approach serves both employers and patients. Employers have full transparency into the cost of care, enabling them to better manage healthcare spending and direct their employees to high-quality providers, which improves outcomes. And patients have peace of mind that they’re getting the best care possible with little to no out-of-pocket costs.”
Carrum Health has found a way to tap the brakes on runaway healthcare costs and check the power leveraged by outsized, monopolizing networks. Their model stands as a potential blueprint for affordable, high-quality care in America. It benefits every stakeholder — from patients to providers and, of course, overburdened employers.