How Fully Insured Health Plans Are Rethinking Surgery Through Independent Centers of Excellence 

Fully Insured Health Plans Show Growing Interest in Independent COEs

Surgery is one of the biggest drivers of financial risk for fully insured health plans. A small number of high-cost procedures can significantly impact claims performance, pricing accuracy and margin stability across an entire book of business.

A key challenge is cost variation. Two members receiving the same procedure can generate dramatically different claims depending on who performed it and where. In broad networks, those differences are often invisible, leaving plans to absorb the variance without the ability to manage it.

This volatility creates a difficult environment for fully insured carriers. Expensive surgical claims can materially impact medical loss ratio (MLR) performance because a handful of cases may drive a disproportionate share of annual spend.

At the same time, employers’ expectations are evolving. They’re looking to health plans to take a more active role in managing high-cost care with stronger quality oversight, better member support and more predictable healthcare costs.

That’s driving a growing interest in independent Centers of Excellence (COEs). By focusing on surgeon quality, site-of-care optimization and care navigation, independent COEs offer health plans a more deliberate way to manage surgical risk and improve cost predictability.

The Shift Toward Modern Independent Centers of Excellence

The COE concept isn’t new. Health plans have offered access to Centers of Excellence for decades. What has changed is the model.

Traditional programs lean on hospital brand and academic reputation as proxies for quality. That assumption falls apart when you look at the data.

Grant Zarzour, MD, a high-volume, fellowship-trained orthopedic surgeon and Lantern medical board advisor, puts it plainly:

“The average orthopedic surgeon does 28 joint replacements a year, whereas I do 650. Orthopedic surgeons are no different than any other category of humans. We’re not all the same. You’ve got great ones and you’ve got subpar ones. Let’s direct the care to the great ones.”

Modern independent COEs evaluate quality at the surgeon level using outcomes data, complication rates, procedure volume and patient-reported results, regardless of health system affiliation. The best surgeon at a community hospital beats a mediocre one at a major academic center every time.

The model also raises the bar in three specific areas:

• Surgeon-level quality standards: Credentialing focuses on individual performance, not institutional reputation. High-volume specialists with proven outcomes are prioritized.
• Appropriate site of care: Many procedures that once defaulted to inpatient hospitals can safely be performed in ambulatory surgery centers at significantly lower cost, often with improved quality and a better member experience.
• Transparency around outcomes and cost: Employers and plans get clear visibility into complication rates, total episode costs and surgical outcomes, not just claims data after the fact.

The appeal cuts both ways. Employers gain financial predictability and confidence that their members are getting high-quality care. Plans gain a deliberate mechanism to manage surgical variation and support long-term cost control without overhauling their existing network.

Access Without Network Disruption

One of the first questions health plan leaders ask about COE programs is whether they’ll disrupt existing networks:

Will they create tension with provider contracts?

Will members push back if they are encouraged to see a different surgeon?

In most cases, well-designed independent COE programs work alongside existing networks, not against them.

The approach relies on voluntary steerage rather than forced narrow networks. Members who need a planned procedure can choose to work with a vetted COE surgeon while still maintaining access to their broader network. That flexibility matters from both a member experience and regulatory perspective.

In practice, the model tends to expand access rather than restrict it:

Broader surgeon reach: Individual credentialing across a wide geographic footprint means members often find a high-performing surgeon closer to home than expected.

Faster scheduling: Dedicated navigation and scheduling support cuts wait times — members get to the right surgeon sooner.

No contract renegotiation required: The COE layer activates selectively for high-value plannable procedures, leaving existing network agreements intact.

For health plans, the result is a more flexible surgical strategy that strengthens access and quality while preserving network stability.

Why Access and Site of Care Matter More Than Ever

Access to surgical care directly affects utilization and cost. When members face long wait times, limited provider options or major travel burdens, many delay treatment. Those delays can lead to more complex procedures and higher claims costs.

Site of care also matters. Many procedures still take place in hospital inpatient settings when they can be performed safely in ambulatory surgery centers or outpatient facilities at a much lower cost.

Independent COE programs help plans manage both challenges. They guide members toward high-quality surgeons, faster access to care and clinically appropriate sites of care.

For health plans, the impact is meaningful:

• Lower inpatient facility costs
• Fewer delays in treatment
• Reduced variation in surgical spend
• More predictable claims performance

Together, those improvements help plans control surgical trends while maintaining quality and expanding member access.

Why Surgeon-Level Quality Is Central to the Modern COE Model

Hospital reputation can signal quality, but it doesn’t tell the full story. The more meaningful question is who is doing the surgery, how often they do it and what their outcomes look like.

Higher-volume surgeons tend to deliver better surgical outcomes, especially for procedures such as joint replacements and spine surgery. Repetition builds technical expertise, stronger care protocols and better decision-making.

Dr. Zarzour ties that experience directly to accountability:

“Your brand and your reputation is on the line with each outcome. I take every single person’s outcome personally,” Dr. Zarzour says. “A high-volume surgeon with the right approach evaluates every case and only recommends surgery when conservative treatment has been exhausted.”

Independent COE programs reinforce that standard in several ways:

• Clinical appropriateness reviews help confirm surgery is truly necessary before it is scheduled
• Conservative treatment options are evaluated first
• Post-operative care protocols receive close scrutiny alongside surgical skill
• Pain management, opioid reduction and early mobility all factor into recovery outcomes

“It’s been proven over and over again that the surgeons who do the most volume in a specialty tend to get the best results,” says Dr. Stephen Lucey, an Orthopedic Surgeon in Greensboro, North Carolina. “It’s no different than if you go to your mechanic and you have someone that specializes in working on carburetors or mufflers, they’re going to be the fastest and probably less expensive. And so that holds true in medicine.”

A Better Surgical Experience for Members

Today, most members navigate surgery largely on their own, piecing together referrals, researching providers online and making high-stakes decisions with almost no visibility into quality. The process is opaque by design, and members bear the burden of figuring it out.

Independent COE programs flip that dynamic and create a more guided experience for members by providing:

• Access to vetted, high-quality surgeons
• A dedicated Care Advocate for personalized support
• Help coordinating scheduling and medical records
• Guidance through pre-surgical preparation and recovery

It shifts the navigation burden from the member to a highly experienced support team. The difference shows up in how members talk about the experience. Kim, a patient who went through a knee replacement in 2025, highlights the ease of working with an independent COE.

“They had a Care Advocate assigned to me, and they checked in every week,” she says. “The physician was exceptional. The facility was great. I loved everything about it.”

Another member, Cecily, had delayed gastric sleeve surgery for years because she couldn’t afford it. After learning the procedure was covered through her employer’s COE benefit, she moved forward with support from a dedicated Care Advocate throughout the process.

“I wouldn’t have been able to have this surgery without Lantern, and it was honestly a lifesaver. I’ve never been happier.”

Experiences like these matter for health plans and employer groups alike. Strong surgical support can improve member satisfaction, strengthen engagement and reinforce the value of the health plan relationship.

Financial Implications for Fully Insured Plans

The financial case for independent COEs is straightforward. Hard-dollar unit cost savings, fewer unnecessary procedures, lower complication rates and smarter site-of-care decisions reduce claims cost. The question for fully insured plans is whether the savings materialize in a way that’s predictable and attributable.

Lantern, for example, publishes savings and outcomes data showing:

55%+ unit cost savings below broad network rates, driven by direct provider contracting at ~100-130% of Medicare, combined with aligned incentives and proven utilization that convert savings into measurable trend reduction.

300+ appropriateness and outcomes measures to deliver best-in-class complication rates compared to national benchmarks, exceptional patient-reported functional improvements, and industry-leading, specialist-driven surgical avoidance rates.

Fewer downstream claims via readmissions, revision surgeries, and extended disability periods that rarely show up in surgical trend analysis but represent real and recurring cost.

For underwriting teams, the downstream piece matters most. Complications don’t just increase the cost of a single episode. They generate months of follow-up claims. Reducing complication rates at the point of surgery is one of the most effective levers plans have for controlling total surgical spend.

For MLR-sensitive lines, the math compounds. Modest improvements in surgical cost and quality sustained across a book of business produce a stronger pricing story and better margin protection through the renewal cycle.

Plans managing surgical spend deliberately are better positioned to hold margins. Those absorbing it passively are leaving money on the table.

What This Means for Employer Relationships

Employers purchasing fully insured coverage are under real financial pressure. Premium increases outpace wage growth. CFOs are scrutinizing every line of benefits dollars. Benefits leaders are being asked to demonstrate value, not just administer programs.

Independent COEs give health plans:

• A clearer story for renewals and RFPs
• A stronger differentiator in competitive markets
• A practical tool to help employers remain fully insured longer

The COE story also addresses one of the most persistent threats to fully insured retention: employer migration to self-funding.

When plans demonstrate deliberate trend management in high-cost care, the case for staying fully insured gets stronger. Employers who trust their plan to manage complex risk don’t need to self-fund to feel in control.

For sales and account management teams, COE programs become a differentiator, both in winning new business and in protecting existing accounts during renewal.

Independent COEs as a Strategic Advantage for Modern Plans

Independent COEs offer a practical, scalable strategy for managing surgical risk. As employer expectations around quality, cost control and member experience continue to rise, health plans need more deliberate approaches to high-cost care.

Plans that adopt thoughtful COE partnerships can:

• Improve surgical outcomes
• Strengthen employer trust and retention
• Create more predictable claims performance
• Protect margins across the fully insured book

“I see a lot of direct-to-employer relationships expanding and more companies considering this based on the needs in the marketplace and seeing better outcomes, better care and lower cost,” Dr. Zarzour says. “I think the marketplace is going to grow tremendously over the next 10 years and you’re going to see better outcomes as a result. You’re going to see more care being directed to the best surgeons.”

Health plans don’t necessarily need to build those capabilities alone. Platforms like Lantern help plans operationalize independent COE strategies through surgeon networks, care advocacy and outcomes-based program support.

For fully insured health plans, the opportunity is increasingly difficult to ignore. The clinical rationale is strong, the financial impact is measurable and employer demand continues to grow.