Centers of Excellence: Directing High-Cost Cases to Top Performers

The Clinical and Financial Case for COEs

The evidence for Centers of Excellence is compelling on both clinical and financial dimensions. For complex procedures — spine surgery, joint replacement, cardiac surgery, bariatric surgery, cancer treatment — outcomes vary dramatically based on provider volume and specialization. High-volume centers that perform hundreds of a specific procedure annually have lower complication rates, shorter lengths of stay, and better long-term outcomes than community hospitals performing the same procedure occasionally.

• Complication reduction: Fewer complications mean fewer readmissions, fewer revision surgeries, and faster return to work — all of which reduce total episode cost.
• Direct contracting: COE programs typically involve direct contracts with the designated centers — bypassing the traditional network and negotiating bundled episode payments that are significantly below PPO rates.
• Unnecessary surgery reduction: COE programs that include a second opinion component identify cases where surgery is not clinically indicated — reducing unnecessary procedures entirely.
• Warranty provisions: Some COE contracts include warranty provisions — if a complication occurs within 90 days of the procedure, the COE covers the cost of treatment. This aligns the center's financial incentives with quality outcomes.

Common COE Program Categories

COE programs are most commonly deployed for the highest-cost, highest-variation procedure categories:

Travel Surgery Programs

For employers whose local hospital market lacks high-quality COE options, travel surgery programs send members to designated centers of excellence in other cities — with the employer covering all travel costs. The economics are counterintuitive but well-documented: travel costs are more than offset by the reduction in complications, revisions, and total episode cost.

• Typical travel benefit: Round-trip airfare and lodging for the member and one companion, plus a per diem for meals and incidentals. Total travel cost is typically $2,000 to $5,000 per case.
• Episode cost comparison: A spine surgery at a local community hospital may cost $80,000 with a 15% complication rate. The same procedure at a COE may cost $55,000 with a 5% complication rate — a $25,000 savings before accounting for the reduced complication cost.
• Walmart's COE program: Walmart's Centers of Excellence program — one of the most studied employer COE programs — found that 30% of members referred to COEs for spine surgery were found to not need surgery at all. The program saved an estimated $2,500 per case in unnecessary surgery costs alone.
• Member experience: Members who use travel surgery programs report high satisfaction — they receive concierge-level navigation support, access to world-class specialists, and often faster scheduling than at local hospitals.

Steerage and Incentive Design

COE programs only generate savings if members actually use them. Steerage incentives are essential — members must have a compelling financial reason to choose the COE over their local hospital.

• Waived cost-sharing: The most powerful steerage incentive is waiving the member's deductible and coinsurance for procedures performed at a COE. A member facing a $3,000 deductible has a strong incentive to use the COE.
• Travel benefit: Covering travel costs removes the logistical barrier to using an out-of-area COE.
• Higher cost-sharing at non-COE providers: Some programs apply a surcharge or higher cost-sharing for covered procedures performed at non-COE providers — creating a financial penalty for bypassing the COE.
• Navigation support: A dedicated care navigator who contacts the member when a COE-eligible procedure is identified, explains the program, and handles all scheduling and travel logistics dramatically increases COE utilization.
• Second opinion requirement: Requiring a second opinion from a COE specialist before approving elective surgery both improves clinical appropriateness and introduces the member to the COE — increasing the likelihood they will choose the COE for the procedure.

Implementing a COE Program

COE programs can be implemented through three channels:

• Vendor-managed COE networks: Companies like Carrum Health, Included Health, and Accolade maintain networks of credentialed COEs and handle all navigation, contracting, and member support. This is the fastest path to implementation.
• Direct employer-COE contracts: Large employers can negotiate direct bundled payment contracts with specific academic medical centers — bypassing both the commercial network and COE vendors. Requires significant volume and contracting expertise.
• TPA-integrated programs: Some TPAs offer COE programs as part of their service suite — integrating COE identification, navigation, and claims adjudication within the existing plan administration.