Rachel Woods: What I want to talk to you two about is the connection between employers and value-based care because, in theory, value-based care could create an opportunity. It could be one of those experiments for employers, but I'm not sure that our audience necessarily knows the role that employers play in value-based care. It's not that intuitive. So what can employers actually do to advance value-based care?

Sophia Hurr: Employers have a really big role in shaping their benefits offerings to align with value-based care. So picking the right solutions to offer to their employees that really get at the core tenants of VBC, which are improved healthcare outcomes and decreased costs. So many lives are covered under employer-sponsored insurance. There's a lot of potential there to really push the rest of the industry towards risk.

Daniel Kuzmanovich: Completely agree. Everything Sophia just said comes to a word you used, Rae, and that is activation. Employers have the opportunity to look at value-based care as an element or a part of their strategy for being more active in responding to that affordability challenge.

Woods: But my understanding is that while there's a lot of potential, that potential remains largely untapped. Is that right?

Hurr: Yeah, definitely.

Woods: Why?

Hurr: Okay, so two reasons here. First, the industry really underestimates employers because they're not a traditional player in the healthcare industry. When you think of healthcare, I don't think of employers, at least.

And second, employers really underestimate their own power just because there's a lot of barriers to entry for employers when it comes to value-based care, so with all those barriers, employers aren't really fully embracing or understanding their potential. So there's a general lack of knowledge from employers on the healthcare industry, especially HR staff or companies that don't have anything to do with healthcare. We all know how complex healthcare is, and it's our job to be smart in this space. Imagine it for people whose specialty isn't healthcare.

Woods: Which is, I think, why employers rely a lot on brokers, which was a big part of our conversation last week.

Hurr: Yeah, because employers don't know a lot about healthcare, they're talking to brokers. They're using these broker channels, and there's a lot of trust between employer and broker because those relationships are cultivated over years.

And we spoke with a few employers actually who mentioned that they don't talk to providers, plans, vendors. They don't talk to anyone in the healthcare industry. They rely on brokers to kind of bridge that communication gap.

Kuzmanovich: I'll throw another one out — this is hard, right? This is really hard. It is incredibly administratively complex. I actually go a slightly different word. You all used underestimated, right? People underestimate the employer. I'll be a little bit bolder and say I think we often overlook them. We completely forget that they are at the table.

It reminds me of the film Moneyball when everybody kind of wrote off the Oakland A's because they had just lost all of their best players. We overlook the role that the employers can play in healthcare, but they actually have a humongous amount of potential depending on certain factors.

Woods: But can we look at all employers the same way? Are all employers ready to be activated and take on this really proactive role in value-based care? Or do we need to kind of segment things out?

Kuzmanovich: We absolutely can't look at this monolithically. I think we have to break it down into smaller components of types of employers.

Hurr: And there are some factors that employers kind of have to have before they can even think about value-based care. So the first one is size. You have to have scale. You have to have lives to be able to influence value-based care.

And secondly, employers have to be self-insured because fully insured employers rely on their plan to really decide those strategies and benefits. Self-insured employers have that influence that they can really make a difference.

Kuzmanovich: These are a lot like your Monopoly moment. "Do not pass go. Do not collect $200." To Sophia's point, if you are not big and big enough to have scale, and if you are not self-insured and self-insured enough to have influence, then as an employer, it's probably better to be prioritizing your healthcare efforts elsewhere to get your bang versus your buck.

Woods: So I'm already kind of honing in on a subgroup of employers. I'm thinking the large self-insured employers, but even then, we still have a lot of variety, different industries, different geographies, different cultures, different ways to approach something as large as value-based care. So what factors do you want employers themselves to consider to determine what's their next move?

Hurr: Yeah, there are a lot of factors here, but we've really identified two as the most important ones in determining VBC strategies and potential for success. So employee turnover, retaining your employees year after year really optimizes financial risk, and having a longer timeline is better for seeing that return on investment. That's so important for VBC.

And then second, the geographic concentration of employees. So that will determine market influence, which is important for employers when it comes to partnership and scale.

Kuzmanovich: Which is, I think, really powerful. It's not the industry, it's not the type of industry the employer works in, it's not some of these other things like where they are located, it's not their type of culture as an institution. It really comes down to those two. How concentrated are they, and how much turnover do they deal with? Those are the determining factors.

Woods: Alright, I want to break down the market by talking about those two factors, turnover, and concentration. So let's imagine some examples here, and maybe you'll actually give me some real examples. What about an employer that has really low turnover? These are loyal employees who are going to be with that company for a long time, and they have the benefit of high market concentration. What kind of employer are we talking about, and what's their value-based care strategy?

Hurr: So we're calling these employers the market-dominant innovators. These are the ones with the most potential for success in VBC, and this is because they have that market influence and that long time horizon, again, for a return on investment.

And a good example of this archetype is Boeing, who we've been talking to for a while. Boeing has traditionally engaged in a lot of direct-to-employer contracts. So they're working directly with providers in certain markets to build out products for their employees.

They're now expanding their approach to include advanced primary care and full capitation. They're piloting something in Phoenix right now, and their goal is to improve the efficiency of care delivery and cost savings through full capitation, which they haven't traditionally been able to do with those direct contracts.

Kuzmanovich: Boeing was doing very interesting things in healthcare in 2014. In 2014, they were doing a direct contracting deal with Providence. It didn't pan out, but they have continued to embrace value-based care as an employer strategy for responding to that affordability mandate.

And because of their type of employees, low turnover, and their high concentration, whether it's in South Carolina, whether it's in the D.C. area, whether it's in the Pacific Northwest, they have the concentration and the turnover to really be this dominant market innovator as an archetype or classic entity.

Woods: And I feel like Boeing can get away with a lot of experimentation. Hence, you talking about their different strategy in 2014 versus in 2023. But most employers don't have the best of both worlds. Let's talk about someone that maybe still has low turnover, so those loyal employees but are not concentrated in a particular market or markets, in the case of Boeing.

Kuzmanovich: We're referring to these kinds of entities as our national delegators. They, like the market-dominant innovators, have a long time to see the ROI that would come from a value-based care strategy as an employee, but they don't have the concentration. They're not dominant enough in one particular area to be able to try some of those same strategies.

Hurr: So an example of a national delegator would be an airline. They have that time to see ROI, but they don't necessarily have the same level of concentration that a company like Boeing would.

For employers in this bucket, they don't have those same kinds of relationships with local providers. So we're seeing these organizations work more with third parties that do have that national scale, so health plans or TPAs for network steerage and nationwide ACO contracting, those types of strategies.

Kuzmanovich: A great example here might be UnitedHealthcare's NexusACO plan, which has generated a ton of savings in recent years.

Woods: I don't know about the two of you, but I'm a lot more concerned about the turnover problem than the concentration problem. I'm thinking back to conversations that I had with you, Daniel, on this podcast about commercial risk and if it's actually viable. And the turnover that we see in the employer marketplace is a big challenge because it's hard to have enough of a time horizon to get that savings compared to something like the Medicare population. So what about employers who are maybe concentrated in a market but have high employee turnover?

Kuzmanovich: You're so right, Rae. I think one of the things that is a humongous challenge when it comes to value-based care, in general, is you need a longer contract. You need a longer time horizon. In Medicare risk, we typically see that contracts are five, 10 years versus your usual three-year contract that you might see in a more fee-for-service population.

When you're dealing with high turnover rates from an employer, you don't have three years or even five years or 10 years to see those kinds of returns, so you've got to try something different. You've got to have a faster strategy.

Woods: And what is that strategy?

Hurr: For these organizations that aren't holding onto their employees for long? They're going to be looking at those specific high-cost episodes. Centers of Excellence is a good option for employers that fall into this bucket. So they can either do this through partnerships with high-value providers or they can work with third-party vendors like Carrum Health.

So an example here would be Prudential has worked with Carrum to build out oncology Centers of Excellence bundles, which has allowed them to see an average of 11% per treatment episode in a really high-spend area for them. Employers in this bucket can also look to onsite or near-site clinics to really shift those sites of care and prevent really expensive ER visits. And then network steerage is also a strategy for employers.

Kuzmanovich: One of my favorite examples here is what we've seen Walmart doing from Atlanta to its relationship with Cleveland Clinic. Walmart, high concentration in that region but also high turnover. So what have they done? They've created a direct contracting relationship on a short-term basis with Cleveland Clinic for knees, for hips, for spine. They're doing fast procedural stuff while those beneficiaries, those employees, are all in that concentrated area.

Woods: And they find that it's literally cheaper to send their employees to Ohio for their spinal procedures or spinal care, whether it's a surgery or not than necessarily go to any other place. That's the Center of Excellence.

Employers are a critical stakeholder to engage on the path toward industry-wide commercial risk. But not every employer can, or should, pursue value-based care. Additionally, value-based care isn’t a one-size-fits-all solution. Download our Market Insights report to find out how different value-based care strategies are best suited for different employer archetypes.