One Hip Replacement is Equal to 97 New Cars

Given enough information, most individuals tend to make the “right” decision.  In the case of health insurance, all things being equal, the “right” decision is to go to the highest quality and lowest cost providers.  The problem with health insurance is that rarely do the end users have enough information and therefore those who pay the majority of the bill are left with hope as the primary strategy to achieving the “right” decision.  If, however, a plan has effective medical management in place the right decision is made almost every time.

For example, consider an employer with 1000 employees and a typical commercial plan:

  • Statistically, they will average 20 hip replacements per year
  • Billed charges at the local hospital are $89,586.57 per procedure
  • The PPO network discount is 60%, lowering the cost of the procedure to $35,827.43
  • The total spent for the 20 surgeries is: $716,548.60 over the course of the year

Now, consider this employer implements a Total Control Health Plan with effective medical management.

  • 20 hip replacement surgeries requested
  • 5 denied as not medically necessary & appropriate = $0 spent
  • 8 done at Ambulatory Surgery Center for $15,499 each = $123,992
  • 7 done at inpatient hospital @ 140% of MCR which is $26,460.19 each = $192,221.32
  • Total spend for 15 surgeries $316,213.32

The total annual savings for this procedure alone is: $400,355.28

How would this translate to a smaller employer?

  • 69 ee car dealership / 166 members on the plan
  • 3 hip replacement surgeries anticipated
  • PPO Cost at local hospital is 3x $35,827.43
  • $107,482.29 total cost under traditional financial arrangement

 

  • 1 should have been denied = $0
  • 1 should have been done at Ambulatory Surgery Center = $15,499
  • 1 should have been done at hospital @ 140% MCR = $27,460.19
  • $42,959.19 is what the plan should actually spend

But what does this really mean to the employer?

  • Average new car dealer makes 1-2% on new vehicle sales
  • The average new car sale price in US is $33,560
  • To recoup $64,523 in overspend, they have to sell $3,226,155 worth of new cars
  • The most expensive new car on the planet is the Limited Edition Bugatti Veyron by Mansory Vivere.  It costs $3.4m.

You only have to sell 1 of those to recoup the overspend!

  • OR you have to sell 97 average cars to recoup the overspend
  • The average new car salesman sells 10 cars per month

If you’re the typical US auto dealership – your best salesman just worked almost 10 months selling cars in order to cover the overspend your traditional financial arrangement allowed to happen.

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