December 13, 2011

Johns Hopkins and Pepsico Partner-up for Improved Quality & Price Stability

It was announced this week (December 8, 2011) that PepsiCo has entered into an agreement with Johns Hopkins (brokered by Mercer) to allow employees and dependents (of which PepsiCo has about 250,000) to have certain cardiac and complex joint surgeries done for a specified bundled payment.  The payment would include the fees for pre-operative work-up, physician fees, hospital costs, etc.  This is expected to not only improve quality, but to reduce the potential for post-operative complications (and the resulting lost work and associated medical costs), and provide a much more predictable cost to Pepsico, which is self-insured.

It was projected by Mercer that only about 15% of eligible participants would use the service in the first year, but approximately 25-30% have actually done so, a significant increase over expectations.

This is part of a recent movement by large employers to contract directly with large health systems for specific services in an effort to do as PepsiCo has done – predict costs and improve quality.  One of the barriers, of course, is getting employees to travel away from home for a medical procedure.   The financial incentive is that PepsiCo (and other employers) are waiving all copayments, deductibles, and funding the travel expenses.  Obviously, this must make good business sense for the employers to set-up these arrangements when you factor in the new costs the employer picks up and the initial expense of analyzing data and negotiating the contracts.

PepsiCo already uses Johns Hopkins to manage some of their on-site clinics.  The evolution of on-site care just continues.

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