Episode #125: Building high-quality, cost-effective employer healthcare benefits - with David Contorno, CEO & Founder of E Powered Benefits

Creating a New Healthcare

Friends,

Our topic this week is employer-based healthcare, which accounts for nearly 50% of all the healthcare spend in the US. We’ll kick off the episode dispelling some surprising misconceptions about how healthcare insurance actually works; which explains, in large part, how the costs of care continue to rise way beyond other costs of living.

Our guest today, David Contorno is a nationally recognized expert in employee benefits. After nearly 20 years consulting to large national employers, David created E Powered Benefits: a benefits consulting firm whose mission is to deliver fully transparent, value-based benefit services. David has won numerous recognitions & awards, and has been a major contributor to the work and publications that Dave Chase has produced out of Health Rosetta, and the nationally recognized publications of Dr. Marty Makary. He mentors other benefits managers from across the country to transform their business models as well.

In this episode, we’ll discover:

• Some surprising insights into how healthcare insurance companies, insurance brokers and benefits managers are incentivized and bonused - and the conflict-of-interest that is built into the system.

• The radically different and transparent approach David Contorno takes in creating healthcare benefits programs for employers and employees.

• How his business model has produced average one-year savings of over 50%, along with substantially reduced out-of-pocket costs for employees - all while improving quality and experience of care.

• The specific approaches and tactics that David uses, targeted to decrease unnecessary healthcare costs.

• A real-life example of how David and his colleagues have reduced the costs of a 500 person company by $35 million over the past 5 years.

The complexity and lack of transparency in our employer-based healthcare payment and insurance system make it incredibly challenging to understand or do much about - even for the expert employer-based HR benefits managers, whose job is to manage the costs and quality of care for their employees.

In an attempt to provide some clarity, I’ll summarize three significant take-home messages I gleaned during this interview:
(I) the healthcare stakeholders that employers and employees rely on to manage quality & costs are not, for the most part, financially incentivized to lower costs, raise quality or improve outcomes of care.

(II) The majority of healthcare insurance costs are actually medical costs; so the way to fix rising healthcare insurance costs is to address the detailed medical costs..

(III) The specific tactics that David focuses on include:
(1) finding surgeons and surgical centers with higher quality outcomes and lower costs - centers that offer fixed-price bundled payments.
(2) finding imaging centers that deliver state-of-the-art service at a fraction of the cost of high-priced centers.
(3) purchasing medications outside of the traditional pharmacy benefits management (PBM) system - thus avoiding huge mark-ups.
(4) providing value-based ‘direct primary care’ for chronic diseases and preventive services. These models allow a physician to spend more time with their patients rather than be driven by Fee-For-Service, RVU-based, high-volume care.
(5) Employers passing the savings onto their employees rather than the more typical employer approach of pass-through cost-shifting.

What I truly admire about David Contorno is that he’s adopted a radically different approach to the way that he and his company get paid. His compensation and bonus structure are based on lowering costs while assuring high quality care. And, his revenue is completely aligned with employers’ and employees' best interests, not with those of corporate shareholders.

Healthcare insurance and medical costs are a crippling problem for a significant and growing percentage of American employees and their families. The goal here is not to lay blame on legacy stakeholders in healthcare. Rather, it’s to lay out for all to see that the fundamental payment structure and incentives in the system are misaligned and grossly maladapted for the purported purpose of healthcare - that is, of keeping employees and their families healthy. David sums it up in this way, “Every entity that an employer trusts to manage healthcare costs benefits [financially] from healthcare costs going up.” And so, as many have stated, our healthcare system isn’t broken, it’s perfectly designed to deliver the results it delivers.

Until Next Time, Be Well.

Zeev Neuwirth, MD