How Centers of Excellence Can Reduce Costs and Improve Outcomes for Your Employee Benefits Program

One of the most challenging aspects of running an employee benefits program is finding a balance between quality and cost control. Oftentimes, the two seem to be at odds. However, with the right strategy in place, employers can offer cost-effective solutions without compromising on quality.

The cost of employer-sponsored health benefits continues to escalate, putting greater financial pressure on employers. Annual family premiums for employer-sponsored coverage rose 6% in 2025 over the previous year, according to KFF.

But simply raising premiums may not be the most sustainable solution. Sixty percent of employees rate benefits as a very important contributor to job satisfaction, one survey shows. Shifting more costs onto employees can lead to lower rates of employee satisfaction. In today’s competitive labor market, keeping talent engaged is more important than ever.

A Targeted Approach for Specialized Care

Navigating these factors is complicated. One strategy to consider is using centers of excellence (COE) programs, which can be effective at containing costs and helping members achieve better health outcomes.

1% of spenders account for more than one-fourth of healthcare costs.

Members have many different healthcare needs, but a small number of conditions, including cancer, cardiovascular care and musculoskeletal care, typically make up the bulk of employers’ healthcare costs. Some studies have shown that the top 1% of healthcare spenders account for more than one-fourth of overall healthcare costs.

Instead of trying to address all the health issues associated with their health plan, employers can use COE programs to take a targeted approach that focuses on the problems responsible for the highest costs. This strategy can lead to greater savings and a bigger impact.

A COE program is a specialized program that provides comprehensive, high-quality care for a specific procedure or condition. COEs may be offered through health plans, health systems or facilities.

Thirty-four percent of large employers (1,000 or more employees) reported sponsoring COE programs, according to KFF’s 2023 Employer Health Benefits Survey.

COE programs can help employers and members by:

• Leveraging alternative payment models (bundled payments, pay-for-performance arrangements, etc.) that incentivize clinicians to provide high-quality, cost-effective care. Unlike the traditional fee-for-service model, alternative payment models reward providers based on patient outcomes rather than the number of services rendered.
• Deploying best practices and evidence-based strategies at every stage of a member’s care journey, reducing the likelihood of complications or readmissions later on.

Many COE programs are designed to target areas driving significant healthcare spending, such as cancer or musculoskeletal care. One study found that employers saved an average of $16,144 per procedure when a COE program built around a bundled payment model was implemented.

By focusing on delivering appropriate care, COEs can also reduce unnecessary procedures, which are not only expensive but can also negatively impact a member’s quality of life.

One study found that up to 30% of patients who undergo total knee arthroplasty are dissatisfied with the results. Further, all medical procedures come with their own set of risks, such as hemorrhage or infection. For some members, the risks associated with surgery may be greater than the potential benefits.

Selecting a Center of Excellence Partner

Successfully integrating a COE program into an organization’s benefits strategy requires a data-driven approach. Employers should first evaluate their claims data to determine what conditions are driving the highest costs. This will allow them to devise a tailored strategy to maximize impact on healthcare spending and outcomes.

From there, employers can begin evaluating potential COE partners. Here are a few considerations to keep in mind:

• Clear metrics/reporting: Can the partner provide metrics, such as readmission rates and patient satisfaction outcomes? A high-quality COE partner should offer clear data demonstrating the value of their services.
• Value-based contracts: Negotiating the right contract is crucial to getting the most value out of COE. A value-based arrangement should offer cost predictability and incentivize providers based on the quality of outcomes rather than the number of services provided.
• Employee engagement: Is the COE tied to a specific geographic location? If so, how accessible is it to employees? Employers should consider travel and scheduling logistics. They should also think about how they will educate their employee population about the COE to foster engagement and maximize utilization.

As healthcare costs continue to rise, employers need creative solutions that help protect their bottom line while keeping employees satisfied with their benefit offerings.

A COE program allows employers to address the leading drivers of their healthcare spending and give members access to an integrated care experience that delivers strong outcomes.

As the upcoming renewal cycle approaches, solutions like COEs could offer your organization an opportunity for significant cost savings without reducing the quality of your benefits. Our experienced team is here to help you find the right solutions for your needs.