How Employers Can Lead the Way on Changing Healthcare Incentives

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Self-insured employers pay more for a range of medical procedures compared with fully insured employers and haven’t traditionally had the same bargaining power with providers. 

So how can employers get more leverage? We asked Zeke Emanuel, MD, an oncologist and world leader in health policy and bioethics, about his ideas for how self-insured employers can start seeing some of the savings that traditional health plans negotiate—and how these approaches can lead to better quality care, too. 


Even large employers don’t have the bargaining power to negotiate with providers because their employee populations are too spread out, an analysis of Walmart’s negotiating power found. Dr. Emanuel envisions employers banding together at a regional level to negotiate better contracts and incentives with providers. 

One area he sees this being particularly important for is cancer, now the top cost driver for many employers, due in part to the rapidly rising cost of cancer drugs and an increase in diagnoses, especially among younger employees.  

Drug pricing was already opaque, but you might be surprised to learn that oncologists are financially incentivized to use pricy drugs. 

“As can oncologist, what’s my incentive? The most expensive drug I can find. I get 6% of the price. A $100 drug gets the same results as a $10,000 drug? I’m uninterested. You have to make me interested,” he said. 

In this example, an employer group would negotiate a program in which the doctor gets a similar payment when he uses a lower-cost drug that has the same effectiveness as a pricier drug. So instead of the payer covering $10,000, it would pay a doctor $600 or $1,000 for using the lower-priced drug.

“You have to find a way to make them whole,” said Dr. Emanuel. 

Working with a cancer navigation program like Cancer Care Direct that addresses other cost areas, such as side effects that lead to ER visits, can also make a significant impact on costs.  

Orthopedic surgery 

Dr. Emanuel shared that at scale, bundling costs for orthopedic surgery does drive behavior change at hospitals that decreases costs—and that he’s seen it in action. 

“At the University of Pennsylvania hospital, we have enough bundled payments that the chair of orthopedic surgery called me and said, ‘We need to decrease our costs for doing the surgery in the hospital,’” Emanuel said. “’You come and help me and provide incentives to our surgeons to lower costs.’ Some examples were starting on time, faster operations, fewer trays, less blood transfusion, etc.” 

Of course, the best way to reduce surgical costs is to avoid surgery altogether. One issue with traditional value-based care is that it doesn’t necessarily reward avoiding unnecessary procedures altogether, notes Dr. Emanuel. One way to help is to implement a second-opinion service and other mechanisms to avoid surgery when possible. 

At EDH, we see surgical avoidance as so crucial that we factor a surgeon’s rate of avoidance into how we assess surgeons in our network. 

Primary Care 

Improving primary care can be one of the most effective mechanisms to improve overall health and lower costs in the long run.  

Dr. Emanuel recommends contracting with PCPs that will come directly to your place of business and put incentives in place for your people to use it—waive deductibles and co-pays, put capitated payments in place for outside providers and give your people the tools to better manage their chronic conditions. “Make it really attractive for your people to use it,” he said. 

He also recommends making sure your PCPs are reporting on the health outcomes you care most about, such as hypertension and diabetes risk. “Tell them you expect results,” he said. 

Healthcare policy can help drive change, too 

Self-insured employers haven’t traditionally had as much leverage at the table as fully insured employers. Dr. Emanuel recommends demanding a seat at the table to drive policy change at the state level. 

Dr. Emanuel notes that California, Ohio, and Missouri are making some good strides with policy changes to cap the allowable price increases year over year. We need more of this, but no individual company can do this alone, he said. 

“Employers have to band together and be the change agents,” he said. “Help your elected officials learn the positive changes that are happening elsewhere and how they can apply them in your state.” 

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