More than half of Americans have employer-sponsored health insurance. However, it is extremely challenging for employers to understand what they are actually paying for healthcare services because there is a lack of transparency and standardized methods for calculating savings.
That’s why Lantern, a specialty care platform, recently publicly released its methodology for calculating surgical savings. The company serves employers and offers a network of excellence for surgery, cancer and infusions. It uses this methodology to show its employer clients how much money Lantern saves them and is offering it publicly so that other benefits leaders can adopt it in their own work.
The methodology has seven steps:
- Clean up missing or inaccurately transformed claims data after it passes through intermediaries
- Allow six months to a year of claims lag
- “Precisely” define episodes of care
- Account for differences in site of care and geography
- Individually review claims outliers before dropping extremes
- Don’t rely on machine-readable files
- Include implant (devices or tissues put in the body) costs for accuracy
“We describe how Lantern benchmarks costs, how we treat outliers, and our approach to consistently defining episodes of care and accounting for missing claims data. … Without a standard approach, decision makers may think they’re making apples-to-apples comparisons when, in reality, the real numbers tell a very different story. This shouldn’t be in a black box — it’s something we should all discuss publicly,” said John Zutter, Lantern’s CEO, in an email.
Lantern spent the last two years validating this methodology with employers, consultants, health plans, actuaries and academic researchers, Zutter added. The company also received feedback from Ellen Kelsay, president and CEO of Business Group on Health, and Caroline Pearson, executive director of the Peterson Health Technology Institute (PHTI). Business Group on Health is an advocacy organization for large employers, while PHTI is an independent evaluator of healthcare technologies.
There is a reason employers need a better way to calculate savings, according to Zutter. He gave the example of a CEO of a 1,000-person manufacturing company.
“You’re going to pay $16 million per year to provide healthcare for your people and their families,” he said. “So, your sales leader has to sell $16 million in contracts just to break even on healthcare, let alone generate any profit or cover payroll. How can you ask an employer to do that when it’s not even clear how the stuff in there is priced? You can’t. Benefits leaders have one of the hardest jobs in this country – we owe it to them to give them better insights so they can make better decisions about how they steward the healthcare dollars for more than half of this country.”
In releasing this methodology, Lantern hopes to not only provide employers with more price transparency, but encourage others to take similar steps.
“More than anything, we want to start a conversation and move to a more consistent standard so we’re all talking the same language,” Zutter said. “We invite healthcare experts, actuaries and benefits leaders to read our methodology, challenge it and help us make it better.”
Photo: sorbetto, Getty Images
