Cost Effectiveness of Health

How to create an employer-friendly healthcare center of excellence

December 22, 2021 3:30 pm

Kathy Najarian

Daniel J. Marino

The healthcare center of excellence (COE) model is getting a makeover to garner increased support of large employers and provide strong incentives for employees. Although the COE model has long been shown to deliver high-performing clinical services, it has not been as successful in meeting the need of employers to control their healthcare spend.

The emerging model, called the future-state COE, is poised to better address this employer need. Prompted by increasing health expenditures and the pressures of the recent pandemic, the future state COE incorporates value-based contracting and a strong incentive design into a service-line strategy to create employee health programs that benefit employers, patients and providers alike.

Future-state COE: model and the incentives

Historically, the COE model has been an attempt by payers to control their costs by creating narrow provider networks for certain highly complex procedures.

The classic example is organ transplant. Under the traditional COE model, payers hope to steer patients requiring transplants toward hospitals that exhibited the best outcomes. However, most traditional COE arrangements do not include any incentives for patients to choose to receive care at the preferred hospital. In this respect, the “center of excellence” designation is essentially a marketing tool.

In contrast, the future-state COE model is a health system direct-to-employer contracting strategy that incorporates robust financial incentives to manage the cost of care for all parties —employers, providers and employees —while delivering enhanced clinical outcomes for patients.

For employers, the model offers cost savings and cost predictability via a bundled payment for a defined episode of care. For example, an employer might contractually secure a flat rate of $30,000 for knee arthroplasty at an orthopedic surgery COE. In addition to reduced costs, the employer enjoys the potential benefit of faster return to work for employees.

For providers, the future-state COE model secures additional patient volume via contractual provisions that deliver a degree of exclusive access to the employee population. Providers may also be able to earn incentive payments for meeting contractually defined quality indicators.

For employees, going to a COE provider means their out-of-pocket costs are fixed. Also, by enjoying access to a provider that performs services at or above clinical best-in-class standards and that tracks clinical quality outcomes, employees are assured of having the best opportunity to recover as quickly and fully as possible.

Essential commitments from employers, providers and employees

The future-state COE model uses shared savings mechanisms to offer tangible benefits to employers, providers and employees/patients. In return, all parties need to make some clear commitments.

Employers must commit to steering benefit design, which should include the following elements:

  • Employee financial incentives. Typically, these incentives will be in the form of reduced or completely waived out-of-pocket costs for employees who receive care at the partner COE.
  • Medical travel benefits. If the contract is between a national employer and a local provider — or between a local employer and a high-profile center in another region — the employer also must cover travel expenses for both the employee and a companion.
  • Second-opinion coverage. To provide further steerage, the employer could also cover second opinions at the partner COE. These second-opinion services would be free to the employee and could be mandated for beneficiaries.  

Providers must commit to executing any future-state COE contract as a value-based initiative. As such, the contract should incorporate the following areas of focus:

  • Patient-centered care. Clinical program design should incorporate dedicated patient navigators to coordinate all testing, appointments and imaging services, plus travel arrangements. This type of concierge service not only ensures an excellent patient experience but also improves patient outcomes.
  • Performance measurement. Tracking key metrics is critical to achieving optimal clinical outcomes while ensuring the COE contract is financially sustainable. A full-spectrum performance measurement program is needed to track a range of metrics regarding clinical processes, patient outcomes, patient experience, and financial and operational performance.
  • Risk mitigation. Because providers assume financial risk in a future-state COE, it is important that they build guardrails into the contract. For example, a COE contract focused on elective joint replacement might include exclusions for high-risk comorbidities such as obesity and tobacco use. These and other risk management features are essential to ensuring financial sustainability and managing employer expectations.

Employees as patients must commit to engaging with the COE care team and complying with care protocols. To foster employee compliance, the contract design should include provisions regarding the following:

  • Coordinated care management. Under a future-state COE arrangement, patients are assigned a care manager or clinical navigator to guide them through the clinical service. The patient must engage with the navigator and cooperate with efforts to coordinate the continuum of care.
  • In-network compliance. Patients participating in a COE service bundle must see a certified COE provider and subscribe to the clinical protocol and care pathway. Variation could result in higher costs for the patient and have adverse financial implications for the participating providers.

How to get started

Hospitals and health systems that are interested in a COE approach to direct-to-employer contracting should begin by tracking clinical outcomes and costs for key procedures and services. They also should track their organization’s performance against national metrics.

The goal should be to find the organization’s “sweet spot” — the procedures and episodes of care for which it is best positioned to promise excellent outcomes at a lower cost.

These services also should be matched to employer needs, with an understanding that large employers tend to be most concerned about high-volume, high-cost conditions and services such as diabetes, joint replacement, heart failure and kidney disease.

Finally, the healthcare organization should design a bundled payment offer that addresses employer needs around a key employee health issue. When making the case for its future-state COE to area employers, the organization should emphasize its fundamental purpose: to provide an opportunity to control and predict medical spending while ensuring the best care for employees.



googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text1' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text2' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text3' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text4' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text5' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text6' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-text7' ); } );
googletag.cmd.push( function () { googletag.display( 'hfma-gpt-leaderboard' ); } );