How COE Programs Reduce Catastrophic Claims

Concerned HR benefits leader reviewing healthcare claims documents and employer health plan costs

For most self-insured employers, healthcare cost volatility isn’t driven by routine doctor visits. It’s driven by catastrophic claims. A single cancer diagnosis. A complex spine surgery. A premature birth requiring months of neonatal care. These events can generate seven-figure medical claims, creating major financial exposure for employers and their stop-loss insurers. And this trend is accelerating.

Recent data shows that million-dollar medical claims increased 29% in just one year and 61% over four years, driven largely by cancer, circulatory diseases, and severe neonatal cases. At the same time, the number of claims exceeding $1 million jumped nearly 74% between 2021 and 2024, highlighting how quickly catastrophic claim risk is growing for employer health plans.

For CFOs and benefits leaders, the challenge is no longer simply reacting to these events—it’s preventing them from escalating into catastrophic claims in the first place. That’s where a value-based centers of excellence (COE) program like Carrum is beginning to play a critical role.

Why catastrophic healthcare claims are increasing

Catastrophic claims represent a small number of cases but an outsized share of employer healthcare spending. In fact, high-cost claimants represent a tiny portion of insured members yet drive a disproportionate share of total healthcare costs. These claims are typically linked to conditions such as:

  • cancer
  • cardiovascular disease
  • complex orthopedic procedures
  • neonatal intensive care
  • specialty drug treatments

A recent stop-loss claims analysis also found that just 20 conditions account for over 90% of catastrophic claim reimbursements, showing how concentrated the financial risk can be. For employers operating self-insured health plans, these events can significantly disrupt annual healthcare budgets. This is why catastrophic claims management is increasingly viewed as a risk-management strategy rather than just a benefits decision.

The hidden problem: catastrophic claims often start as manageable conditions

Most catastrophic healthcare claims do not appear overnight. They often begin as conditions that could have been addressed earlier, such as:

  • undiagnosed cancer
  • untreated musculoskeletal injuries
  • poorly managed chronic diseases
  • delayed cardiac care

When these issues are detected too late or treated by providers with inconsistent outcomes, costs escalate rapidly. Traditional healthcare systems often struggle to catch these risks early because care is fragmented across multiple providers and networks.

How centers of excellence programs catch high-risk conditions earlier

A centers of excellence program connects employees to rigorously vetted healthcare providers who demonstrate superior outcomes for specific high-cost conditions. But modern COE programs do far more than simply direct patients to better hospitals.

They introduce structured clinical review and care coordination that helps identify high-risk conditions before they escalate. Key components include:

Expert clinical review

When an employee receives a surgical recommendation or serious diagnosis, the case can be reviewed by specialists within the COE network.

This review often reveals:

  • alternative treatment options
  • earlier interventions
  • unnecessary surgical recommendations

In fact, a landmark study from the RAND Corporation published in Health Affairs found that 30% of patients initially recommended for surgery were redirected to less invasive treatment options through Carrum’s Centers of Excellence program. Preventing unnecessary surgeries reduces both medical risk and catastrophic cost exposure.

Access to top-performing specialists

COE programs direct employees to providers with proven clinical outcomes.

These providers consistently demonstrate:

  • lower complication rates
  • fewer hospital readmissions
  • better long-term recovery outcomes

According to RAND research evaluating Carrum Health’s COE platform, hospital readmissions were reduced by 74–86% compared with national averages. Lower complication and readmission rates translate directly into lower catastrophic claim risk for employer health plans.

Coordinated care navigation

Another key component of a value-based COE program like Carrum is care navigation. Dedicated care navigators help employees:

  • understand treatment options
  • schedule consultations with specialists
  • coordinate treatment plans
  • manage travel logistics when necessary

By eliminating delays and improving care coordination, patients receive faster access to the right treatment, reducing the likelihood that conditions worsen into catastrophic medical events.

Why bundled payment models reduce catastrophic claim risk

Carrum’s COE program also uses bundled payment arrangements, where providers receive a single payment covering the entire episode of care. This payment structure includes:

  • pre-operative care
  • the procedure itself
  • hospital stay
  • follow-up care and recovery

Because providers share financial accountability for outcomes, they are incentivized to:

  • avoid unnecessary procedures
  • prevent complications
  • deliver successful outcomes the first time

Research from the RAND Corporation found that employers using Carrum Health’s bundled payment model achieved:

  • more than 45% savings per procedure
  • $16,144 average savings per surgery
  • 11% overall reduction in medical spending across covered procedures.

This combination of improved outcomes and predictable pricing dramatically reduces catastrophic cost volatility.

High-cost conditions where COE programs reduce risk

Certain medical conditions consistently generate the largest catastrophic claims. COE programs focus on these areas because they offer the greatest opportunity to improve outcomes and reduce costs.

Cancer care

Cancer remains one of the leading drivers of catastrophic healthcare spending for employers, with treatment costs frequently reaching hundreds of thousands of dollars. Early diagnosis and access to specialized oncology centers can significantly improve treatment outcomes and reduce overall costs.

Musculoskeletal conditions

Orthopedic procedures such as spinal fusion and joint replacement represent a major share of employer healthcare costs. COE programs ensure patients receive:

  • accurate diagnoses
  • conservative treatments when appropriate
  • surgery only when clinically necessary

Cardiovascular disease

Cardiovascular events such as heart attacks and bypass surgery are another major source of catastrophic claims. Early intervention and access to specialized cardiac centers can dramatically reduce complications.

Substance use disorders

Substance use disorders are also emerging as a major employer cost driver due to hospitalizations, accidents, and related health conditions. Comprehensive treatment programs that integrate behavioral and medical care improve recovery outcomes and reduce long-term healthcare spending.

Why catastrophic claim prevention matters to CFOs

For finance leaders, catastrophic claims are among the most unpredictable elements of healthcare spending.

Just a handful of high-cost cases can significantly affect:

  • healthcare budgets
  • stop-loss insurance thresholds
  • long-term claims projections

With the number of million-dollar claims continuing to rise, employers are increasingly focused on strategies that reduce catastrophic claim risk before it occurs. True value-based COE programs are emerging as one of the most effective solutions for achieving that goal.

How Carrum Health helps employers manage catastrophic claim risk

Carrum Health partners with self-insured employers to manage catastrophic healthcare risk through its value-based centers of excellence platform. The platform combines:

  • rigorously vetted specialty providers
  • value-based payment arrangements (e.g., bundles)
  • expert care navigation
  • advanced analytics to monitor outcomes and costs

By connecting employees to the right specialists early in their care journey, Carrum helps employers:

  • reduce unnecessary procedures
  • prevent complications
  • avoid the financial shock of catastrophic claims

For employers, this means better health outcomes, more predictable costs, and reduced catastrophic claim exposure.