Cost Containment Examples: Could This Be the Solution You Need?

Unreasonable prices have gradually become accepted as an ordinary, if unpleasant, part of company healthcare expenditures. In turn, these bloated charges contribute to the escalation of overall healthcare costs nationwide. This blog post defines cost containment strategies and provides examples detailing how they can benefit you and your employees.

The Price Is Wrong

If an employee’s medical coverage is so expensive that they avoid accessing even basic healthcare, they become, in effect, functionally uninsured. This status produces troubling implications. 

For example, as the California Health Care Foundation’s annual statewide survey reports, more than half of the state’s residents cut back on healthcare. Of those who cut back or delayed care because of the cost, 41% saw their conditions worsen. 

While the unrelenting rise of healthcare prices cannot be attributed to a single factor, some of the influential forces encouraging this endless escalation can be boiled down to two highly questionable—if not completely unethical—business practices: price gouging, which is facilitated by a lack of transparency in billing. 

For example, a 2020 report by the Rand Corporation reveals the list price for insulin in the United States is eight times higher than 32 other comparably developed nations—combined. In addition to this normalization of wildly overpriced drugs, a 2019 study published by the Quarterly Journal of Economics details how some hospitals routinely charge multiple times what others in their region do for similar services; pricing can also vary substantially within an individual hospital, even for such routine procedures as ultrasounds. 

Fortunately, implementing some of these cost containment examples can help you achieve some measure of balance in your healthcare coverage expenditures, and potentially tilt the scales in your favor.

What is Cost Containment?

Similar to the way some people use a “smart thermostat” to help contain the cost of their electric bills, cost containment in healthcare includes a selection of alternative strategies employers use to reduce their overhead costs. Typical cost containment examples include alternative reimbursement models, changing corporate cultural norms, and accessing care providers outside traditional insurance networks. Given such a variety of options, employers often use more than one tactic for optimal savings. 

Cost containment is important not just because of rising healthcare costs, but also because access to healthcare keeps employees happy and healthy. As your company’s most valuable resource, happy employees translate into better company performance and a higher ROI. 

The Best Cost Containment Examples

Truly addressing healthcare prices with a cost containment solution requires a sound approach. Below are two of the best cost-containment examples:

Reference-based Pricing

Reference-based Pricing (RBP) is a cost-containment method that involves determining an allowable payment to healthcare providers by utilizing a database of aggregate prices for services rendered. This reference point for prices allows the negotiation of payments from a position of knowledge to come to a more reasonable price than what most hospitals charge. This pre-payment method provides cost containment by ensuring lower spending before members ever receive a bill. 

RBP scrutinizes the billed price of a service armed with the knowledge of what those services cost the hospital. This allows all parties to reach a reasonable reimbursement amount and also promotes payment integrity through increased transparency of billed charges.

For example, if a hospital charges a patient with traditional insurance $4,000 for an MRI but the procedure only costs them $900 to perform, we can see the huge upcharge in the billed price. However, if we knew that Medicare pays only $1,500 for the same service, a better price could be negotiated with the hospital from a position of knowledge.

Clean Claim Reviews

Clean claim reviews offer another pre-payment method that involves an extended review of billed charges. With this process, a clinical review evaluates every line of items billed to find and remove anomalies and questionable charges. 

This is a highly effective method because errors and duplicate charges on hospital bills are extremely common, affecting about 80% of all billing. Because clean claim reviews highlight errors that would have otherwise been paid, they introduce payment integrity by making the reimbursement process more transparent. 

These cost-containment examples bring you healthcare savings and transparency that typical industry practices work to obscure. Many seemingly ridiculous items often appear on hospital bills, but once identified they are easily removed. 

Hospitals and practices have been known to charge patients simply for holding their newborn baby. But overpriced services and outrageous charges don’t stop there. Hospitals use patients’ ignorance of the overly complicated billing process to add charges for items such as:

• $15 for a single Tylenol pill
• $53 for a pair of nonsterile gloves
• $7 to have a nurse hand you pills 
• $93 for use of headlights 

As small as some of these charges seem, they can add up, especially during extended stays or complicated procedures that require special tools and equipment. Even for less extensive procedures, unreasonable upcharges can cost patients thousands of dollars. 

6 Degrees Health Brings Balance to Cost Containment

The core mission of 6 Degrees Health is to innovate healthcare cost containment through integrity and transparency. Our reference-based pricing models and clean claim reviews use sophisticated proprietary technology and leading industry expertise to negotiate with providers from a position of knowledge to bring patients lower, more reasonable healthcare costs.

6 Degrees Health is not an insurance company. Instead, we work directly with third-party administrators (TPAs) and brokers to help replace services and provide access to transparent plans for employers and their employees. We cut through traditional healthcare coverage models–and questionable practices—to tip the scales of coverage back into a position of fairness and balance. 

Interested in learning more about healthcare cost containment examples? Speak to a representative today to find out how our reference-based pricing model can help you realize the true benefits of healthcare.