Self-insured employers are bending the cost of care with Carrum Health

A nascent ecosystem offers self-insured employers scalable options to impact all elements of the triple aim of care (reducing the cost of care, improving health outcomes, and enhancing the experience of care). These options will connect employers directly with healthcare providers (HCPs, including clinicians, health systems, and hospitals), reducing the cost of care by eliminating administrative overhead and contracting for employees’ health outcomes instead of services as Carrum Health’s model has been driving since it was founded in 2014.

Value-based care in a commercial construct is gaining attention and scale

Legacy model replacements in Exhibit 1 are evolving rapidly into new outcome-based models for self-insured employers, enabling more control over clinical care options, reducing care-related costs, and significantly improving health outcomes.

The model is steeped in the idea of contracting directly with HCPs through various contract vehicles such as fixed fees, capitation (per employee per month), subscription, or outcome-based. This path eliminates administrative burdens like benefits and eligibility, claims, and billing, which add to costs while sub-optimizing experience.

Carrum Health makes a case to convert the possibilities into reality

We spent some time with a couple of Carrum Health leaders. Carrum, a platform and service-based disrupter, is scaling a regional approach for self-insured employers to offer center of excellence (COE) care for common surgeries like hip and knee replacements and cancer care at little to zero cost to employees.

Acute care spending for employers ranges from 35% to 50% of their total healthcare costs, based on multiple estimates. So, it’s no surprise that Carrum Health chose to address acute care spending to make a meaningful dent in the employer’s healthcare bill.

Exhibit 1: Legacy models were optimized for fee-for-service, but newer models align incentives and payments to health outcomes

Source: HFS Research, 2023

The principles of value-based care drive Carrum’s approach. Exhibit 2 includes dimensions of their solution that resonated with us.

The real-world evidence that Carrum Health is giving control back to self-insured employers is that it is increasing the predictability of healthcare. The outcomes have real value for employees’ health and financial well-being; employees don’t have to pay out-of-pocket costs such as co-pays, co-insurance, or deductibles though for high deductible health plans (HDHP), they have to collect the federal minimum requirement.

Exhibit 2: A disciplined approach to reducing the cost of care and improving outcomes

The Bottom Line: There are viable models aligning incentives to outcomes that ensure a positive impact on all stakeholders—employers, employees, and HCPs.

More than 90% of large employers (500 or more employees) are self-insured; they underwrite their employees’ medical risk. Yet about 60% to 70% regress to the model of buying fee-for-service healthcare from health plans, diluting the value of taking on medical risk. However, more self-insured employers are exploring new models that will let them take more control, reduce costs, and improve their health outcomes. Carrum Health is right smack in that low-key revolution pursuing the next best healthcare model that addresses the triple aim of care.