Some firms save money by offering employees free surgery

Lowe’s home improvement company, like a growing number of large companies nationwide, offers its employees an eye-catching benefit: certain major surgeries at prestigious hospitals at no cost to the employee.

How do these firms do it? With “bundled payments,” a way of paying that’s gaining steam across the health care industry, and that Medicare is now adopting for hip and knee replacements in 67 metropolitan areas, including New York, Miami and Denver.

Here’s how it works: Lowe’s and other employers pay one flat rate for a particular procedure from any of a number of hospitals they’ve selected for quality, even if they are a plane ride away. And, under the agreement, the hospital handles all the treatment within a certain time frame – the surgery, the physical therapy and any complications that arise – all for that one price.

The program is optional for employees. They can still use their local surgeon, if they prefer, and pay out-of-pocket whatever their insurance doesn’t cover. But more than 700 Lowe’s employees have taken the company up on its offer, Ihrie said.

It’s a great deal for patients, he said, and for his company.

“We were able to get a bundled price, which actually enables us to save money on every single operation,” Ihrie says.

The Pacific Business Group on Health negotiates that price for Lowe’s, Wal-Mart and a number of other large employers.

Participating hospitals win, too, by attracting more patients, said Trisha Frick, who handles such negotiations on behalf of Johns Hopkins Medicine in Baltimore.

Medicare, the health insurance program for people 65 and older, started using bundled rates for hip and knee replacements last month. Medicare had some early evidence from pilot programs that “the model works well,” according to Rob Lazerow, a health care consultant with The Advisory Board Company.

Medicare’s deal is somewhat different from Lowe’s. Patients may pay something out of pocket, depending on the type of Medicare policy that insures them.

This story was originally published May 21, 2016 at 11:48 PM with the headline "Some firms save money by offering employees free surgery."