The Beginner’s Guide to

Healthcare Cost
Containment

A guide
for benefits
managers
 Chances are you’ve heard the
term “cost containment”
before. It’s what every benefits
manager (and their CFO) wants:
to reduce healthcare costs
without cutting benefits.

Healthcare costs continue to

rise — national health spending
was at $3.3 trillion in 2016 and
it’s projected to hit $5.7 trillion
by 2026 — so it’s crucial you
think about where you can
make a difference.

Good cost But there are so many

confusing and convoluted

containment issues surrounding healthcare

spending… it’s overwhelming.
goes beyond Where can you start?

cost cutting. In this guide, learn why

healthcare cost containment is
By Isabella Gravano so important, five areas where
employees tend to overspend,
and a checklist for cost
containment that you can start
implementing today.
 In this guide

1 Introduction to healthcare cost containment

2 Five areas where employees tend to overspend

3 Tactical checklist for cost containment

 1
Introduction to
healthcare cost
containment
INTRODUCTION

Cost containment has never been more

important — or more challenging.

“Cost containment” is the latest that your company’s annual

and greatest buzzword in
employee healthcare benefits
management, but what does it
really mean?
Perhaps you’ve tried cost
cutting measures like switching
to an HDHP or implementing
reference based pricing. These
are great options — but they
aren’t enough.
healthcare spend is not
exactly… ideal. The average
employer spends 5% more on
healthcare year after year. If you
don’t feel pressure to make
changes yet, your CFO will
surely be on it soon. You’ll want
to be ready with an effective
cost containment strategy to
suggest.

Even with these cost cutting

strategies in place, it’s likely

5%
the amount the average employer’s healthcare
spending increases each year
INTRODUCTION

We conducted a claims than $18 million in 2017.

analysis in early 2018 for a large
So, if you’re wondering how
employer with nearly 10,000
much money your company
employees across the country
could really be wasting on
(we have chosen to keep the
healthcare… it can be a lot.
employer anonymous for client
(Possibly in the millions, if
confidentiality). By comparing
you’re self-insured.) This is why
their actual costs to those
it’s so important to take a
incurred by “cost-conscious”
holistic approach to cost
Aetna members (25th
containment — and go beyond
percentile of all Aetna
short-term cost cutting
members), we found that this
measures.
employer overspent by more

Claims analysis for a large, self-insured employer revealed

$18 million overspent on healthcare in 2017
Cost difference between their average employee and “cost-conscious”
members of their same insurance network (the 25th percentile of all members)

Cost distribution
for employer
$18 million overspend
Cost distribution
for entire Aetna
network

Healthcare costs for the Healthcare costs for

25th percentile of Aetna their average employee
members

See the full analysis for this employer —›

 2
Five key areas
where employees
tend to overspend
 FIVE KEY AREAS
To effectively contain costs, you have to
understand your biggest cost drivers.
Healthcare costs are so vast and
complicated that coming up with
a cost containment strategy can
often feel like grasping at straws.
Where do you start?
To narrow your plan of attack,
you have to identify your top cost
drivers — the procedures that are
driving your costs up more than
anything else.
We’ve identified five categories
of care where employees often
overspend: primary care,
pregnancy and childbirth,
P R I M A R Y CA R E PREGNANCY &
CHILDBIRTH
medical imaging, outpatient
procedures, and ER overuse. In
these five areas, your intervention
can actually make a difference.
In the next few sections, we’ll
dive deep on each one and
explain why employees tend to
overspend in these areas, how
that drives up your costs, and
what you can do to change
behavior and reduce costs.
M E D I CA L O U T PAT I E N T ER OVERUSE
I M AG I N G PROCEDURES
Primary care
P R I M A R Y CA R E
Employees often
go to out-of-network
doctors by mistake.
One of the main issues when it
comes to primary care (and any
time you go to the doctor) is
making sure that your physician
is in your healthcare network.
This might seem like a simple
task, but it’s actually very difficult
for employees to figure out
which doctors are in-network
and which aren’t. Accidentally
going to an out-of-network
physician is common — more
than 40% of patients have gone
to one by mistake.
40%
of patients have gone to an
out-of-network doctor by mistake
Without a tool that shows
employees each doctor’s in-
network status, they might end
up with an expensive out-of-
network “balance” bill. Even if
only a small percentage of your
employees are going to
out-of-network doctors,
it will drive your costs up.
In fact, 52% of patients
who went to an out-of-network
doctor by accident
were not given transparent
information about how much
it would cost.
Make it easy for your employees
to stay in-network — it’s an
important part of any cost
containment strategy.
Pregnancy
& childbirth
PREGNANCY & CHILDBIRTH
Employees often
don’t consider cost
or quality when
choosing a provider
to deliver their baby.
Many employees don’t consider
C-section rates or facility costs
when choosing their doctor or
hospital — but it matters a lot,
mainly because of the exorbitant
cost variation of pregnancy and
childbirth in the US.
From 2004 to 2010, the prices
that insurers paid for childbirth
rose 49% for vaginal births and
41% for Caesarean sections.
$50,000
the average cost of a C-section
delivery in the United States
Given that the average price of
a C-section in the US is $50,000,
it’s important that you guide
employees away from doctors
with high C-section rates.
Not only will this save them
money, added health risks,
and recovery time — it will
help reduce your company’s
total healthcare spend as well.
But C-section rates aren’t the
only important factor. Hospital
safety and average cost is
important, too.
In Los Angeles, for example, our
data shows that average hospital
cost varies by 372% — and the
PREGNANCY & CHILDBIRTH

most expensive hospital actually employees that there is no

has the lowest safety rating. You correlation between cost and
can see in the chart below that quality, and help guide them to
when it comes to hospitals, cost safe, cost-effective providers and
is not always a signal of quality. hospitals to deliver their babies.

This kind of cost and quality
information is difficult for
employees to find on their own.
A good cost containment
strategy will help educate
Not only will this help employees
start their family without financial
stress, it will take a huge burden
off your budget, too.

The most and least expensive hospitals in Los Angeles

Most expensive hospitals Facility cost rating Safety grade

Olympia Medical Center $ $ $$ $$ $ $ 327% above avg F

Palmdale Regional Medical Center $ $ $$ $$ $ $ 267% above avg C

Valley Presbyterian Hospital $ $ $$ $$ $ $ 213% above avg D

Least expensive hospitals Facility cost rating Safety grade

Garfield Medical Center $ $ $$ $$ $ $ 45% below avg C

Harbor UCLA Medical Center $ $ $$ $$ $ $ 45% below avg C

Alhambra Hospital Medical Center $ $ $$ $$ $ $ 45% below avg B

See all of Amino’s hospital cost reports —›

Medical imaging
M E D I C A L I M AG I N G

Employees get a ton In fact, utilization increased

of imaging — often
without knowing
the cost.
Over the last 15 years, use of
imaging procedures like
ultrasounds, MRIs, and CT scans
has increased significantly. From
1996 to 2010, the use of CT scans
increased by 7.8% per year and
MRIs increased by 10% per year.
across all age groups — so even if
your employees skew young, this
trend has probably affected you.
In the diagram below, you can
see that the top four cost drivers
for a large employer were all
imaging procedures. Even if each
of your employees just has one
chest X-ray ($300-$400) or limb
MRI ($500-$1,500) each year, the
cost adds up quickly.

Top cost drivers for a large, self-insured employer in 2017

Procedure Percent of total spend

MRI 13.2%

Ultrasound 9.5%

CT Scan 9.0%

X-ray 6.6%

Physical therapy 2.6%

Preventive care 2.4%

Sedation 1.5%

Colonoscopy 1.2%

Head and neck surgery 1.2%

Abdominal surgery 1.1%

See the full analysis for this employer —›

M E D I C A L I M AG I N G

Most employes don’t realize that
you don’t have to go to a hospital
to get an X-ray, MRI, or CT scan.
You can go to a much more
affordable freestanding imaging
center instead. The majority of
these facilities have no affiliation
to a large healthcare network, so
there are fewer hidden costs to
hike up the price of your visit.
In the chart below, you can see
the range in average cost of limb
MRIs in 14 different states at
hospitals and freestanding
imaging centers. In Michigan and
Alaska, $2,000 could be saved if
an employee chooses to have an
MRI at a freestanding imaging
center instead of a hospital.

Median network rate estimates for a limb MRI, taken at

freestanding imaging centers and hospitals

Type of imaging center: Freestanding Hospital

$0 $1,000 $2,000 $3,000 $4,000

Michigan

Alaska

South Carolina

Oklahoma

Ohio

Oregon

Wisconsin

Washington

Texas

Connecticut

Florida

Virginia

Idaho

Tennessee
Outpatient surgery
O U T PAT I E N T S U R G E R Y
Employees often
aren’t aware that
outpatient surgery
can be done at an
affordable ASC.
When it comes to outpatient
surgery, the biggest problem is
that employees simply don’t
know that many minor
procedures can be done at a
facility that isn’t a hospital.
Hospitals are notoriously
expensive — ER overhead costs,
facility fees, and the cost of
keeping them running 24/7 are all
passed on to patients.
$5 billion
was saved by 400,000 individuals who
had minor procedures at ASCs instead
of in hospitals
For many minor procedures,
ambulatory surgery centers
(ASCs) are a more affordable
choice. ASCs are facilities where
minor procedures like catarat
surgery, endoscopies, and
various anthroscopies can be
done at a lower total cost — and
without the chaos and added
overhead of a hospital.
A study done by SHRM found
that out of 400,000 individuals,
out-of-pocket costs were
reduced by $5 billion by
choosing ASCs over hospitals for
minor procedures.
In fact, only 48% of procedures
that could be done in an ASC
actually are — and if the
remaining 52% did go to one, $41
billion could be saved annually.
ER overuse
ER OVERUSE
Employees often
make unnecessary,
expensive visits to
the ER.
If an employee is sick or injured
late at night or on a weekend,
it’s easy to understand why they
might head to the nearest
emergency room (ER) — it’s what
we’ve been trained to do.
But one ER visit could trigger an
expensive hospital bill, causing
unnecessary stress for them, and
ultimately driving up your
company’s healthcare costs, too.
This dilemma is far too common.
In fact, unnecessary hospital
15-30%
of ER visits are unnecessary and could be
treated elsewhere, like at an urgent care center
visits are one of the top cost
drivers in healthcare. 141 million
people visited the ER in 2017,
compared to 119 million in 2006
and 67 million in 1996. ER fees
accounted for more than $7.3
billion in 2015.
It’s estimated that between
15-30% of all ER visits could
be treated at an alternate
site, like an urgent care center.
If an employee needs care
immediately but it’s not a life-
threatening emergency, an
urgent care center is best
equipped to help them.
The best feature of urgent care?
It’s less expensive! If all
unnecessary ER visits could be
diverted to urgent care, $4.4
billion would be saved annually.
ER OVERUSE

An employee could go to the ER, But why do people choose the

get treated within an hour with
medication/treatment that costs
$4, and still receive a bill upwards
of $3,000 due to “facility fees.”
At an urgent care center, this
kind of overhead doesn’t exist
because it isn’t meant for
gunshot wounds and extreme
triage cases — it’s meant for
things like diagnosing a flu.
ER when urgent care costs less?
The simple answer is that most
employees just don’t know that
it’s an option. A good cost
containment strategy should
include a way to direct
employees to nearby urgent care
centers when the ER just isn’t
necessary.

64% of flu diagnoses for millennials come from the ER

Percent of patients diagnosed with influenza by emergency room doctors,
by age (data from Amino)

100%

75%
64% 62%
59%
55%
49% 50%
48%
50%
39%
33%

25%

0%

0-9 10-19 20-29 30-39 40-49 50-59 60-69 70-79 80+

Age of patient
 3
Tactical checklist
for cost containment
C O S T C O N TA I N M E N T TAC T I C S
You don’t have to choose between containing
costs and keeping employees happy.
As a benefits manager, you’re in
a unique position. You have to
listen to employee needs and
wants while also considering
what is financially feasible.
With the current status quo,
57% of millennials say their
insurance portal lacks
information on healthcare costs
— but research shows that
having access to this
information can make a huge
difference. The Robert Wood
Johnson Foundation found that
57%
of millennials say their insurance portal
lacks information on healthcare costs
employees who used a shared
decision-making tool opted for
less invasive and less costly
procedures, including a 25%
decrease in surgical
treatments. Similarly, 18 large
employers found that
employees who used a cost
estimation tool reduced their
total healthcare spend by 14%
for lab tests and 13% for
imaging services.
Employees do have the
capacity to change their
behavior and reduce their
spending — but they need
guidance to make smarter
choices.
C O S T C O N TA I N M E N T TAC T I C S

Your cost containment checklist

Key overspend area Cost containment tactic How can help

Primary care Make sure employees know Amino guides employees

which doctors are in-network, to in-network doctors.
and help them avoid out-of-
network doctors.

Pregnancy & childbirth Educate employees about Amino shows employees

variation in C-section rates C-section rates and
and cost, and help them hospital cost ratings.
choose good providers and
hospitals.

Medical imaging Nudge employees to get their Amino guides employees

imaging done at freestanding to freestanding imaging
imaging centers instead of centers.
expensive hospitals.

Outpatient surgery Educate employees about the Amino guide employees

advantages of ambulatory to ASCs for small
surgical centers (ASCs), and procedures.
help them find the best ASCs
for certain outpatient
procedures.

ER overuse Guide employees to urgent Amino guides employees

care centers for minor injuries to urgent care for minor
and illnesses, instead of ERs. injuries.

See how Amino helps companies Learn more

reduce their costs by as much as 10%.
Amino is
an employee
benefit that
puts these cost
containment
tactics into
action and can
reduce your
organization’s
healthcare
costs by as
much as 10%.

Learn more