Center of Excellence Considerations for Employers

Centers of excellence (COEs) are one strategy for steering employees to health care providers who practice efficiently, at a high quality, for reasonable and predictable prices.


February 04, 2020

Centers of excellence (COEs) are one strategy for steering employees to health care providers who practice efficiently, at a high quality, for reasonable and predictable prices.

Quality and cost variation are pervasive and plague the U.S. health care delivery system. Centers of excellence (COEs) are one strategy for steering employees to health care providers who practice efficiently, at a high quality, for reasonable and predictable prices. Employers, and health plans on their behalf, have contracted with COE providers for 20 or more years, but the scope of conditions and procedures offered via those COEs has evolved and expanded from low-volume, high- cost procedures like transplants to far more common conditions like joint replacements and mental health. For many COEs, quality and cost outcomes are compelling. Therefore, employers should evaluate their benefit strategy for opportunities to steer employees to high-performing COEs.

What is a Center of Excellence?

There is no standardized definition of a COE, putting the onus on employers to do their due diligence in analyzing whether a COE is truly excellent. COEs are groups of providers who are selected to perform certain specialized services because of their expertise, outcomes and favorable financial arrangements. According to the Business Group’s 2020 Health Care Strategy and Plan Design Survey, the vast majority of large employers offer access to at least one type of COE in 2019; most rely on their carriers to set up these contracts (see Figure 1).

Key Questions Employers Should Ask Their Carriers About COE Strategies

  • What conditions or procedures are currently part of your COE offerings, if any? How do these COEs perform compared to non-COE providers on employee population outcomes, readmission rates, time back to work, appropriate utilization, patient experience and other metrics of interest?
  • Which high- cost conditions appear frequently in your employee population for which the company does not currently offer a COE? Are there significant quality, outcomes or cost variations among providers for these conditions that would warrant a COE strategy?
  • Which quality metrics are of greatest importance to your company? Will you rely on health plan inclusion criteria or create your own custom COE network? How often will you reevaluate inclusion criteria and provider eligibility?
  • Are you willing to create travel programs and benefits if only a handful of provider groups meet your standards? What exception criteria will you implement for those unable to travel to a provider within a given geographic distance?

Key Takeaways

  • “Excellence” varies across COEs. Employers should assess their data to see if their current COE criteria are getting desired results.
  • Most employers offer COEs for at least one condition or procedure, but using value-based benefit designs to incentivize their use is less common. Mandating use of COEs achieves the highest utilization, but risks employee frustration with hard steerage.
  • COE contracts should include a second opinion review prior to conducting procedures. Significant value is created by avoiding unnecessary surgery.
  • Conditions covered by COEs are expanding from low-volume, complex cases like transplants to higher- volume conditions like maternity and mental health.
  • COEs are one part of a broader value-based care strategy, including accountable care organizations (ACOs), high-performance networks and on-site/near-site clinics. Careful integration of these models is a must.
  • How aggressively will you steer patients toward COEs – and therefore away from their community providers – with plan design incentives, penalties or requirements? What level of utilization of the COE would you consider a success?
  • Would a COE that does virtual second opinions to confirm diagnoses and care plans be more appropriate for your population based on your geography and willingness to alter patient care?
  • How will you communicate your COE offerings? How will you work with your vendors to coordinate messaging and increase utilization of COEs? How does your COE strategy integrate with advocacy or navigator services?
  • How will steerage to COEs affect contracts you may have with local ACOs or HMOs that are responsible for patient outcomes and cost management? How does the COE ensure coordination of care for patients as they transition back to community providers and their homes?

Which Conditions or Procedures are Covered by COEs?

COEs have traditionally covered procedures that are high cost for individual patients, complex and episodic (see Figure 1). For these conditions, like transplants or heart surgery, patients are more willing to change providers and/or travel for the high- quality outcomes, whereas chronic conditions like diabetes or hypertension can be adequately treated by providers in the community without patient disruption. Time-limited procedures are more easily reimbursed via bundled payments, which are incorporated into many COE contracts to ensure appropriate coordination of care back in the community and increase predictability of costs (see Figure 1).

Emerging Conditions or Procedures Covered by COEs

  • Maternity: With the continued challenge of inappropriately high C-section rates in several hospitals, as well as unacceptably high rates of maternal mortality, particularly for African American women, there are opportunities for improving outcomes and reducing overall cost. The challenge for this type of COE is that patients often have a well-established relationship with an OB/GYN prior to conception and birth, which may make steering to hospitals or partnering with providers outside of their OB/GYN’s normal practice patterns more difficult.
  • Mental health: COEs for mental health, including substance use disorder (SUD), are a challenge, but a huge opportunity given the focus and need for high-quality services in this area. Quality measurement is relatively new compared to physical health, and the traditional model of extremely high success rates for COEs isn’t possible for conditions like SUD, where even the best rates of “success” are closer to 50%. Even so, employers and carriers are developing mental health COEs that will be implemented in 2020/2021.

Expanding COE Approaches

While most COEs are procedural- or condition-focused, there are new approaches emerging, including:

Second opinion and diagnosis confirmation: These COEs do not perform procedures, but review diagnoses and treatment plans developed by community physicians. This can be done virtually or in-person. COEs that perform diagnosis confirmation help patients who experience “wandering diagnosis,” or “diagnostic odysseys,” where community providers are unable to make a clear diagnosis or care plan based on symptoms and test results. Through a COE, patients can connect with experts who can help them determine their diagnosis and treatment plan. This approach may be especially helpful for complex and rare cases.

Radiology: One vendor has created a network of high-performing radiologists to help prevent misdiagnosis or poor treatment plans that are often referred to and fixed by COE providers. Imaging is traditionally understood to be a “commodity” service with little variation, but high rates of misinterpretation that are reversed by COE providers suggest that differences in quality of imaging machines and interpretation of scans warrant a deeper focus, potentially via a COE strategy.

For more information on steps that employers should consider for identifying high-performing COEs and promoting them for eligible plan members, see section II.

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  • 1 | Sinaiko A, Landrum MB, Chernew M. Enrollment in a health plan with a tiered provider network decreased medical spending by 5 percent. Health Affairs. May 2017; 36(5): 870-875.
More in Benefits Strategy


  1. What is a Center of Excellence?
  2. Key Questions Employers Should Ask Their Carriers About COE Strategies
  3. Which Conditions or Procedures are Covered by COEs?
  4. Emerging Conditions or Procedures Covered by COEs
  5. Expanding COE Approaches