A Novel Plan for Health Care: Cutting Costs, Not Raising Them

As employees know all too well, health insurance companies have one surefire way to lower costs: Ask their customers to pay more.

Intermountain Healthcare, a nonprofit health system in Salt Lake City, is trying something virtually unheard-of: promising to sharply cut costs rather than pass them on.

Its new health plan, SelectHealth Share, is guaranteeing to hold yearly rate increases to one-third to one-half less than what many employers across the country typically face.

To help keep the rate increases roughly in line with a rise in consumer prices, Intermountain, which operates 22 hospitals and employs 1,400 doctors, says it will produce savings of $2 billion over the next five years.

Health systems and insurers are closely watching Intermountain’s rollout. It has established itself as a leading health system by tracking and analyzing costs and the quality of patient care, allowing it to improve treatments and reduce unnecessary expenses.

Intermountain’s plan is “the first innovative thing we’ve seen in a long time,” said Dave Jackson, managing partner for FirstWest Benefit Solutions in Orem, Utah. “Share has got everybody at the table — everybody’s got accountability and got things to do.”

Intermountain has already saved money by renegotiating the cost of surgical staplers, pitting a cheaper manufacturer against another and saving $235,000 a year. It saved $639,000 a year by ensuring that heart attack patients get into the catheterization lab within 90 minutes of emergency room contact, thereby helping patients recover faster.

Some systems might be more likely to reduce services or shrink their money-losing operations if they tried to guarantee a long-term lock on price increases.

But a few are heading in a similar direction to Intermountain’s, experimenting with ways that avoid the traditional piecemeal approach of fee-for-service care. The idea of locking in rate increases — Intermountain’s Share program sets the increase at approximately 4 percent — is particularly attractive to employers because coverage then becomes a predictable expense.