Amid the pandemic, cost control becomes hospitals’ top benefits-related focus, survey finds

• Health system personnel leaders are emphasizing cost control in response to the pandemic.
• Efforts to steer employees and beneficiaries to the system’s providers remains a leading approach.
• Some health systems appear to be taking advantage of their own value-based payment capabilities.

New survey results show that the COVID-19 pandemic shifted hospitals’ labor-benefits focus to cost control as opposed to attracting and retaining talent, which was the priority in 2019.

The annual Aon benefits survey, conducted during the spring with responses from 130 health systems spanning more than 1,000 hospitals, identified mitigation of rising employer costs as the top concern.

The 2019 priority reflected the record-low unemployment rates in healthcare, said Sheena Singh, vice president of the national healthcare vertical practice for Aon.

The 2020 control-control focus “is really the result of having to deal with the pandemic this year. That changed the way the healthcare industry — HR executives in particular — are looking at, ‘Where do we put more of our effort to support the overall objectives of the health system,”’ Singh said in an interview.

The cost concerns came amid an estimated $202.6 billion in hospital losses from March to June, stemming from the effects of the pandemic and associated restrictions, according to a report by the American Hospital Association. The losses are projected to continue through December and total $323.1 billion in 2020.

Health systems have aimed to address those costs through initiatives that include:

• Steering employees to obtain care from the system’s own providers
• Using group purchasing for pharmaceuticals
• Using in-house pharmacies
• Improving employee health outcomes

Among those efforts, specialty drugs have attracted increased health system attention as a way to control costs, with the share of pharmacy spending on those drugs rising from 45% in 2019 to 50% in 2020.

In response, 45% of Aon survey respondents have joined purchasing collectives, seeking to manage costs by leveraging volume.

“Versus if you have a direct contract with a [pharmacy benefit manager], you’re not going to be able to leverage the same terms and financial and rebate guarantees,” Singh said. “It’s a way for groups to leverage that group pricing without having to use plan design or clinical exclusions and guidelines as a mechanism.”

The Aon survey followed other queries about hospitals’ labor cost focus.

A May Sullivan Cotter survey of hospitals found 46% were considering or had implemented furloughs, layoffs or both as part of their market response to COVID-19.

Another May survey by Definitive Healthcare found 57% of acute care hospitals had furloughed “non-essential” staff, and 15% had laid off non-essential staff.

Steerage efforts appear popular

More than half of the responding health systems’ health plans offered relatively low deductibles and included provisions to steer employees and dependents to the system’s own providers, Aon found.

Year-to-year changes in health system steerage efforts were mixed as indicated in the 2020 Aon survey results, with:

• 59% using steerage in low-deductible plans, versus 55% in 2019
• 13% using steerage in high deductible plans, versus 14% in 2019
• 2% using “domestic-only” plans, versus 4% in 2019
• 20% offering non-steerage plans with low deductibles, versus 18% in 2019
• 2% offering non-steerage high-deductible plans, versus 9% in 2019

Singh said the results likely don’t indicate changes in health system use of steerage, since the responding organizations differed.

But the figures continue to identify the dominant approach as offering low-deductible steerage plans and charging much higher cost sharing for services obtained outside the health system.

“They at least have the benefits here to steer back to their own [facilities] because it provides that continuity of care and ultimately a cost management opportunity,” Singh said.   

Survey finds fluctuations in value-based payment

The survey found that in 2020, 44% of health systems were in a value-based contract with a health plan. But the share using a partnership with physicians to achieve care-quality and market objectives fell to 57% from 77% in 2019.

Health systems’ specific involvement in value-based payment (VBP) models for employees included:

• 50% with accountable care organization (ACO), versus 65% in 2019
•  29% with a physician-hospital organization, versus 23% in 2019
• 59% with a clinically integrated network, versus 60% in 2019

“It’s not two [surveys] of the same cohort, so it’s not necessarily like we’re seeing groups dropping having an ACO, Singh said.

The fluctuations may stem in part from a lack of awareness by surveyed executives of their organizations’ VBP use.

But Singh said some hospitals don’t know how to leverage their own VBP systems to drive employee-plan design.

“Not every health system is going to be set up to do that or have the right governance structure in place to support that and move that forward,” Singh said. “They would need the right support behind them, like physician leadership and other healthcare executives within the organization, to say, ‘This is a directive that we want you to push forward.’”