In 2001, Foundation Coal Holdings Inc. and Peabody Energy Corp. asked retired surgeon Derrell Crowder to help reduce their health care expenditures.
Crowder set out to negotiate price reductions with local providers in Wyoming, where most employees lived. He figured the providers would listen to a pitch from two companies that employed nearly 20% of the population in their towns.
Crowder was unfazed. “Even if I got a discount” he told Bloomberg, “Bad care at a discount is still bad care and it’ll be more expensive in the long run” due to costs associated with avoidable complications, unnecessary tests and longer hospital stays.
Crowder then prepared a list of the top hospitals based on national quality indicators and determined how they stacked up on costs. He found among other things that the Mayo Clinic received very high quality ratings and charged approximately $67,000 for coronary bypass surgery, whereas the coal companies’ local hospital received low ratings and charged $98,000 for the same.
Now mine workers at the two companies can choose to undergo certain elective procedures at a national center of excellence. Their employers pay all travel and lodging costs, and reduce co-payments as well.
In the 3 years since the mining companies instituted Crowder’s plan, their health care costs have dropped 5% per year. Nationally, corporate spending on health rose 7% per year during the same period.