Baylor Scott & White Health

Baylor bends the cost curve on employee health care. Can DART do the same?

by Mitchell Schnurman, Business columnist | October 14, 2018

For years, as medical expenses kept climbing, many have talked about bending the cost curve for health care.

Baylor Scott & White Health, pursuing a giant merger with Memorial Hermann in Houston, has actually done it — on a limited basis with its own workers.

Now it’s pushing that model hard, offering its accountable care organization to other employers and even teaming with Blue Cross Blue Shield of Texas. As with other ACOs, Baylor says companies can lower prices and improve care by using a narrower network of providers and putting more emphasis on prevention and healthy habits.

In industry parlance, it’s putting value-based care ahead of traditional fee-for-service formulas.

Dallas Area Rapid Transit signed on to the Baylor ACO for 2018, and early results are promising. The agency didn’t increase employee premiums for next year, and it has saved enough to add new benefits, such as coverage for hearing aids and sleep disorders.

“We’re just trying to slow the cost trend,” said Cheryl Orr, vice president of human capital at DART. “But we’ve got to make sure we’re offering quality care to our people.”

From 2012 to 2017, DART’s medical and pharmacy expenses grew from $40 million a year to almost $59 million. Its average annual increase was well above the rate of health care inflation.

Compare that with Baylor’s company health plan, which covers about 65,000 employees and dependents. It has managed to keep costs flat for five years.

Last year, the total price for single coverage was $481 a month, one dollar less than in 2012, according to Baylor. Over the same time, health plan premiums nationwide increased an average of 19 percent, and rose even higher in the Dallas area.

By Baylor’s estimate, it has saved $125 million in medical spending compared with prices from a local health care market index.

First goal

Baylor’s merger with Memorial Hermann would combine the biggest players in Texas’ biggest markets, and the not-for-profit systems say the primary goal is to lower health care costs.

It’s natural to be skeptical, because several waves of industry consolidation have not altered medical spending trends. Why does Baylor believe it can slow the increases?

“Because we have a five-year track record of having done just that,” Baylor CEO Jim Hinton said in a recent interview.

Baylor merged with Scott & White five years ago. In addition to holding costs flat in its employee health plan, the company said it cut $740 million by reducing redundancies and making other improvements.

Teaming with Memorial would offer more money-saving opportunities, from bulk buying to spreading the costs of technology to sharing best practices. Perhaps the most intriguing prospect stems from combining their network of providers and the focus on value-based care.

Baylor Scott & White hospitals and doctors stretch from North Texas to south of Austin. Memorial would add a rock-solid base in Houston — and another reason for companies to embrace the Baylor network.

If employers are serious about slowing the growth in health costs, Hinton said, they have options.

“Do they want a narrow network?” Hinton asked. “Do they want to narrow choices with the idea of channeling more volume to fewer providers [so] they get better rates? These are interesting questions.”

In its employee plan, Baylor said hospital admissions were cut by 22 percent, and there was a sharp increase in patients using in-network care. Those are strong selling points for its ACO, known as the Baylor Scott & White Quality Alliance, and it’s grown rapidly. In 2019, the alliance expects to cover almost 700,000 lives, 250,000 more than this year.

The Baylor ACO would be considered “a high-performance network” because doctors and hospitals are grouped together based on cost, quality and efficiency. This year, about 16 percent of large companies offered such a network, according to a survey by Willis Towers Watson, a consulting firm that worked with DART on its current plan.

By 2020, just over half of the respondents said, they would consider adding a high-performance network to their benefits.

Baylor’s ACO on the rise

These networks often use cost-sharing incentives to win over enrollees. DART offers lower premiums, lower deductibles and lower co-pays to those choosing the Baylor ACO — and patients are restricted to providers in that network.

But DART also has an open access plan with many more providers. Employees just have to pay extra.

“To a lot of workers, it’s not a choice because their doctors aren’t in the Baylor network,” said Kenneth Day, president of Amalgamated Transit Union Local 1338, which has about 2,100 members who work at DART.

Focus on prevention

This year, over half of DART employees signed up for the Baylor ACO. Open enrollment is underway, and Day said many are trying to decide which way to go.

“I’m having that conversation now,” Day said. “Is it important enough for my wife to continue with her physician?”

Beyond better terms with providers, the ACO offers the prospect of reducing medical services — or at least reducing the most expensive ones. Orr said that too many DART employees end up getting treatment in the emergency room when that could have been avoided.

This year, the company has focused on the transition to an ACO, but efforts will soon turn.

“Next, we want to focus on wellness and prevention, and Baylor is thrilled,” Orr said. “That’s where the whole ACO focus on quality care really kicks in.”

More choice, higher prices

DART employees can choose a narrower network with Baylor’s ACO or an open access plan with many more providers. How an employee’s monthly costs compare for family coverage:
Feature ACO Open access
Monthly premium $393 $478
Annual deductible $1,000 $3,200
Primary doctor visit $25 $35
Urgent care visit $50 $100
Generic prescription $10 $15
Out-of-pocket max $4,500 $5,500

This article was originally published by The Dallas Morning News and FWD>DFW had no influence on the content created.

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