How COE Pricing Models Work for Employers

You’ve narrowed your list of COE specialty care vendors and are ready to compare costs. Then the proposals arrive, and every vendor seems to price its solution differently.

One quotes a percentage of savings. Another charges a percentage of the procedure cost. A third proposes a monthly fee based on employee count. Then, another vendor starts talking about ROI guarantees and shared savings.

Before you can determine whether a COE vendor is the right fit, you need to understand how its pricing works. That’s often easier said than done.

Different vendors package their fees in different ways. Some bundle everything together. Others separate administrative costs from clinical costs. Some tie fees directly to savings. Others charge regardless of utilization.

Fortunately, most COE pricing models boil down to a handful of approaches. Once you understand what you’re actually paying for, it becomes much easier to compare vendors on a side-by-side basis.

COE Specialty Care Vendor Costs: What Will You Pay?

To truly compare pricing models, it helps to understand the three cost components that exist in nearly every COE arrangement.

1. The Cost of Care

This is the negotiated rate for the procedure or treatment itself. It includes fees for the surgeon, facility and other clinical services involved in delivering care.

Many COE vendors negotiate bundled rates that are significantly lower than what employers typically pay through traditional carrier networks. Those negotiated rates often drive a large portion of the program’s savings.

“At Lantern, all of our providers agree to a set fee that is inclusive of the facility, the surgeon and anesthesia, so the plan sponsor can eliminate that element of variability,” says Erin Tatar, Lantern’s SVP of Consultant Relations.

2. The Vendor’s Service Fee

This fee covers the work required to operate the COE program.

COE service fees may include:

• Provider network management
• Member navigation
• Care advocacy
• Clinical review
• Scheduling and coordination
• Data reporting and analytics

Every COE vendor incurs these costs. The difference is how they choose to charge for them.

3. Ancillary Costs

These are the additional expenses that support the member experience and program administration.

Examples include:

• Travel and lodging assistance
• Program implementation
• Communications campaigns
• Ongoing administrative support

Some vendors include these costs in their core pricing. Others charge separately. Most pricing confusion happens because vendors package these three elements differently.

Understanding COE Pricing Models

This is where things start to look different from vendor to vendor. Although the terminology may vary, most COE solutions use one of four primary pricing models.

Bundled Pricing or Percentage-of-Bundle Pricing

This is one of the most common approaches in specialty care pricing.

Under this model, the procedure has a contracted bundled rate. The vendor then earns a predetermined percentage of that bundled cost as its fee.

For example, if a surgery bundle costs $25,000 and the vendor fee equals 10% of the bundle, the employer pays $27,500.

The advantage is simplicity. Every case has a predictable cost structure. Finance teams can easily forecast expenses, and benefits leaders can clearly explain how the program works.

Savings-Based Pricing

In a savings-based model, the vendor earns a percentage of the savings it generates. At first glance, this sounds straightforward. The vendor only gets paid when it saves money.

The reality is more nuanced. Benefits leaders should understand how the vendor defines savings, such as:

Hard-Dollar Savings

This approach measures savings against a benchmark cost. For example, if a procedure would have cost $80,000 through a traditional network but costs $40,000 through the COE, the vendor calculates savings based on the $40,000 difference.

The methodology is relatively easy to understand and verify.

Soft-Dollar Savings

Some vendors include additional savings estimates in their calculations. These may include:

• Avoided procedures
• Reduced complications
• Fewer readmissions
• Better long-term outcomes

These factors can certainly create value. However, they rely on projections rather than direct claims comparisons.

“Soft-dollar savings can be a lot harder to defend to your CFO, because again, it’s just an assumption-based exercise,” Tatar says.

When reviewing savings-based pricing, ask one important question: What exactly counts as savings? The answer can dramatically affect both the reported ROI and the vendor’s fee.

Per Employee Per Month (PEPM)

Under a PEPM model, employers pay a fixed monthly fee based on eligible members.

For example, a vendor may charge a set amount per employee each month regardless of utilization. The biggest advantage is predictability.

Finance leaders know exactly what they’ll spend each year. Budgeting becomes straightforward, and costs don’t fluctuate based on procedure volume.

PEPM arrangements often appeal to employers that want stable expenses and broad access to specialty care services. The tradeoff is that employers continue paying the fee, regardless of utilization with the COE.

“Typically, if we see low utilization, it’s because the employer chose not to communicate the benefit, or they didn’t implement the right incentives,” Tatar says. “They ultimately hold that risk on utilization in a PEPM model, but it’s very predictable.”

Percentage-of-Spend Pricing

This model sometimes gets confused with bundled pricing, but they are very different.

With percentage-of-spend pricing, the vendor charges a markup on claims spending. The fee rises as spending rises.

A bundled arrangement, by contrast, starts with a fixed negotiated procedure cost and applies a defined fee structure around that bundle.

Think of it this way:

• Bundled pricing centers on a predetermined procedure price.
• Percentage-of-spend pricing grows alongside claims costs.

Understanding this distinction can help employers avoid inaccurate vendor comparisons.

Accountability: How Do You Know You’re Getting Value from a COE Program?

Pricing is only part of the conversation. Benefits leaders also need confidence that the program will deliver measurable results.

Many COE vendors address this concern through accountability mechanisms such as:

• ROI guarantees
• Performance guarantees
• Utilization-based fees
• Engagement-based pricing
• Shared savings arrangements

These approaches attempt to align vendor compensation with outcomes. But regardless of the model, buyers should always dig into the methodology behind the numbers.

Ask questions such as:

1. How are savings calculated?
2. What benchmark is being used?
3. Can results be independently validated?
4. What assumptions are included?
5. How often are savings reported?

“For Lantern, many times our fees and our performance guarantees are contingent on clients agreeing to best practices around communicating and promoting the program and having the right plan design incentives in place, as well as a strong understanding of what their access to care looks like relative to our network,” Tatar says.

A pricing model is only as trustworthy as the methodology supporting it.

COE Solution Fees Benefits Leaders Forget to Ask About

Even sophisticated buyers sometimes focus entirely on vendor fees and overlook other expenses. During the evaluation process, ask about:

Travel Costs: Some COE solution costs include travel and lodging benefits to encourage utilization and improve access. Make sure to ask whether these expenses are included or billed separately.

Administrative Fees: Implementation, integration, reporting and account management may carry additional costs. Ask for a complete fee schedule early in the process to ensure full transparency.

Communication and Engagement Costs: Many vendors manage and provide member communications to drive COE utilization. Campaign development, enrollment support and outreach programs may appear as separate line items. These services often serve a valuable purpose. Just make sure you understand whether they’re included in the base fee.

How to Evaluate COE Pricing Without Getting Lost

The best way to compare vendors is to normalize everything onto a comparable basis.

“Most importantly, make sure that when somebody quotes their fees, they’ve defined the numerator and the denominator and you compare that on an apples-to-apples basis,” Tatar says.

Ask each vendor to show:

• Total expected employer cost
• Expected utilization
• Projected savings
• All included and excluded fees
• The methodology behind savings calculations

From there, evaluate how each model fits your population.

Factors that can influence value include:

• Procedure volume
• Geographic distribution of employees
• Existing carrier contracts
• Current specialty care spend
• Employee willingness to travel

A pricing model that works well for one employer may not work as well for another.

Also, watch for arrangements that appear inexpensive upfront but shift costs elsewhere through administrative fees, travel expenses or aggressive savings assumptions.

Focus on Employee Outcomes, Not Just the Pricing Structure

There isn’t a universally “best” COE pricing model. The right choice depends on your goals.

Some employers prioritize budget predictability and prefer PEPM arrangements. Others want a pay-for-performance structure that ties fees directly to results. Some value the simplicity of bundled pricing.

What matters most is understanding exactly what you’re paying for, how savings are measured and whether the pricing model aligns with your organization’s priorities.

When you can clearly separate the cost of care, vendor fees and ancillary expenses, comparing COE vendors becomes much easier, and you’ll be better equipped to select a solution that delivers both financial value and high-quality specialty care for your members.