More than half of Americans receive health insurance through their employers, but it can be difficult for companies to comprehend their actual healthcare expenditures. This challenge arises from a lack of transparency and standardized methods for determining savings. To address this, Lantern, a specialty care platform, has publicly released its methodology for calculating surgical cost savings.
Lantern provides services to employers, offering a distinguished network for surgery, cancer care, and infusions. The company utilizes this methodology to demonstrate the financial benefits it provides to its employer clients. By making it public, Lantern hopes that other benefits leaders will be able to adapt it for their own work.
The methodology includes seven key steps:
- Clean up missing or inaccurately transformed claims data after it passes through intermediaries
- Allow six months to a year of claims lag
- “Precisely” define episodes of care
- Account for differences in site of care and geography
- Individually review claims outliers before dropping extremes
- Don’t rely on machine-readable files
- Include implant (devices or tissues put in the body) costs for accuracy
“We describe how Lantern benchmarks costs, how we treat outliers, and our approach to consistently defining episodes of care and accounting for missing claims data,” said John Zutter, Lantern’s CEO, in an email. “Without a standard approach, decision makers may think they’re making apples-to-apples comparisons when, in reality, the real numbers tell a very different story. This shouldn’t be in a black box — it’s something we should all discuss publicly.”
Lantern spent the last two years validating this methodology with input from employers, consultants, health plans, actuaries, and academic researchers, Zutter added. Additionally, the company received feedback from Ellen Kelsay, president and CEO of the Business Group on Health, and Caroline Pearson, executive director of the Peterson Health Technology Institute (PHTI). Business Group on Health advocates for large employers, while PHTI independently evaluates healthcare technologies.
Zutter explained why employers need more effective ways to calculate savings. He cited the example of a 1,000-person manufacturing company. “You’re going to pay $16 million per year to provide healthcare for your people and their families,” he said. “So, your sales leader has to sell $16 million in contracts just to break even on healthcare, let alone generate any profit or cover payroll. How can you ask an employer to do that when it’s not even clear how the stuff in there is priced? You can’t. Benefits leaders have one of the hardest jobs in this country – we owe it to them to give them better insights so they can make better decisions about how they steward the healthcare dollars for more than half of this country.”
By releasing this methodology, Lantern aims to provide employers with a clearer understanding of healthcare costs and encourage other organizations to take similar steps. “More than anything, we want to start a conversation and move to a more consistent standard so we’re all talking the same language,” Zutter stated. “We invite healthcare experts, actuaries and benefits leaders to read our methodology, challenge it and help us make it better.”
