Centers of Excellence in Healthcare: What They Are and How Multiemployer Funds Use Them

When a member of your Fund needs a hip replacement, a cancer diagnosis worked up, or cardiac care managed, where they go matters enormously. The difference between a high-performing provider and an average one is not just clinical. It shows up in readmission rates, in complication costs, in the claims your Fund pays for months after the initial procedure.

Centers of excellence (COE) programs give health plan sponsors a structured way to address that variation. For multiemployer funds and Taft-Hartley plans, they are also one of the most practical tools available for managing high-cost specialty care without restricting member choice or pulling benefits.

This article explains what centers of excellence are, how they work within a health plan, and what it takes for a fund to stand one up successfully.

What Is a Center of Excellence in Healthcare?

A healthcare center of excellence is a designated provider or facility that has been selected to deliver specialized care for a specific condition or procedure. COEs are not general hospitals or broad health systems. They are chosen because they meet defined criteria for clinical quality, experience, and outcomes in a particular area.

Common COE focus areas include:

• Total joint replacement (hip and knee)
• Cancer care
• Spine surgery
• Cardiac care
• Bariatric surgery
• Transplants

A centers of excellence program designates specific providers to deliver high-cost specialty care at pre-negotiated rates, with a focus on quality outcomes and cost predictability. For plan sponsors managing high-cost specialty claims, the appeal is straightforward: better care, fewer complications and more control over what the Fund pays.

For a COE arrangement to function, the plan needs to do more than designate a provider. It needs infrastructure: benefit design that steers members to the preferred facility, a payment arrangement that reflects the agreed value, clinical oversight to manage the care episode, and member support to make the experience navigable. That infrastructure is where a third-party administrator plays a central role.

How Center of Excellence Programs Work Within a Health Plan

A center of excellence program is not a standalone benefit. It is a feature built into a health plan’s design. The mechanics differ by arrangement but typically include several components.

Provider Selection and Contracting

The Fund or its administrator identifies a provider that meets quality thresholds for a specific procedure type. That provider agrees to deliver the full episode of care under a bundled payment arrangement. Bundled pricing replaces the usual fee-for-service billing with a single agreed amount covering the procedure and related services. This eliminates cost unpredictability and reduces the risk of surprise charges.

Benefit Design That Supports Utilization

A COE arrangement only delivers savings if members use it. Benefit design is how the plan makes that happen. Members who go to the designated facility may have lower or no cost sharing. Those who seek the same procedure elsewhere may pay significantly more. The incentive structure is built into the plan document, which the TPA administers.

Member Navigation and Support

For conditions requiring surgery or complex care, members often need help understanding their options and coordinating logistics. High-performing COE programs include concierge navigation support: someone who helps the member understand the process, coordinates pre-surgical requirements, arranges transportation if needed, and provides a point of contact throughout the episode. This is not standard in most health plans and is one of the features that separates a functioning COE program from a nominal one.

Claims Administration and Payment Integrity

The TPA administers the bundled payment, adjudicates claims within the episode, and ensures that provider billing aligns with the contracted terms. This includes tracking the start and end of the care episode and flagging any charges that fall outside the agreed scope.

Clinical Oversight

Medical management plays a supporting role. Utilization review and case management help ensure that the member’s care path is appropriate and that the COE arrangement is being used for the right cases.

Why Multiemployer Funds Are Well-Suited for Center of Excellence Programs

Multiemployer and Taft-Hartley Funds have some structural advantages that make COE arrangements particularly viable.

First, the membership base is often geographically concentrated. A union Fund serving members in a specific metro area or industry can build a COE relationship with a local health system that has genuine reach within the membership. The provider relationship is not hypothetical.

Second, the trustees have fiduciary responsibility for the Fund. That accountability creates a genuine incentive to pursue cost and quality improvements that a fully insured arrangement does not provide. A COE program is a defensible strategy for controlling high-cost specialty claims while maintaining or improving care quality.

Third, Labor Fund members tend to have high rates of the conditions most amenable to COE programs. Joint replacement, cardiac care, and cancer are consistent drivers of high-cost claims in Labor Fund populations. A COE program that addresses even one of these categories can have a measurable impact on the Fund’s loss ratio.

MagnaCare in Action

MagnaCare has direct experience standing up COE arrangements for Labor Fund clients. In partnership with Mount Sinai Health System, MagnaCare developed a center of excellence program for total joint replacement surgery, guiding eligible members to preferred facilities under a bundled payment with concierge navigation support throughout the care episode.

Read the full release →

What to Look for in a Center of Excellence Partner

Not all TPA arrangements are built to support COE programs. If your Fund is evaluating this strategy, these are the operational capabilities that matter most.

Existing Provider Relationships

A TPA with established relationships with health systems in your service area can move faster and negotiate from a stronger position. Building a COE relationship from scratch takes time. A TPA that has already stood up these programs brings a proven framework.

Bundled Payment Administration

Administering a bundled payment is more complex than standard fee-for-service claims processing. The TPA needs to track the episode, adjudicate multiple claim types under the bundled structure, and reconcile any charges outside the agreed scope. Not all claims systems are built for this.

Member Navigation Capability

Steerage only works if members understand the program and find it easy to use. Ask whether the TPA or the health system provides navigation support and what that looks like in practice.

Clinical Integration

Utilization review and case management should be coordinated with the COE arrangement, not operating in parallel to it. In-house medical management is a meaningful advantage over outsourced clinical services.

Benefit Design Flexibility

The TPA must be able to configure the differential cost sharing that makes the COE incentive work. If the plan document and claims system cannot support tiered cost sharing by facility, the program cannot function as designed.

Is a Center of Excellence Program Right for Your Fund?

Center of excellence programs are not right for every fund. They require a minimum membership size to justify the provider relationship, a membership population with meaningful utilization of the target condition, and a TPA equipped to administer the arrangement.

Funds that are seeing recurring high-cost claims in areas like joint replacement, cancer, or cardiac care are the strongest candidates. If your Fund’s claims data shows consistent spend in these categories, a COE arrangement is worth evaluating.

The analysis starts with data: what are your top cost drivers by condition, how much variation exists in provider performance, and where is the membership geographically concentrated? A TPA with strong medical management and reporting capabilities can help answer those questions.

Frequently Asked Questions

What claims data should we look at before pursuing a Center of Excellence program?

Start with your top 20 to 25 highest-cost claims by condition category over the past two to three years. If you are seeing recurring high-dollar episodes in joint replacement, cancer, cardiac care, or spine surgery, those are the categories most likely to respond well to a COE arrangement. Your TPA should be able to pull this analysis from your claims history and identify both the volume and the cost variance across providers for each category. Variance is the key signal — if your members are receiving the same procedure at wildly different price points and outcome rates, a COE program has a clear value case.

How long does it take to stand up a Center of Excellence program?

It depends on whether your TPA has existing provider relationships in your service area. If a COE arrangement is already in place with a health system that serves your membership, implementation can move in a matter of months — primarily involving plan document amendments, member communication, and benefit design configuration. Building a new COE relationship from scratch takes longer, typically six months to a year, depending on provider negotiations and contracting complexity.

How do we communicate a Center of Excellence program to members without it feeling like a restriction?

Framing matters significantly. COE programs are most successful when communicated as an enhanced benefit rather than a limitation. Members are gaining access to a vetted, high-quality provider with concierge navigation support and predictable out-of-pocket costs, not being told where they have to go. The differential cost sharing creates an incentive rather than a mandate. Most members, when given a clear explanation of the quality difference and the financial advantage, choose the COE facility.

What happens if a member needs care at the Center of Excellence facility but has complications afterward?

This is one of the structural advantages of a well-designed COE arrangement. Providers in a bundled payment program typically take on some financial responsibility for complications and readmissions within a defined window after the procedure. That accountability incentivizes the provider to deliver complete, high-quality care through the full episode rather than treating the initial procedure as the finish line. Your TPA and the provider should define this window clearly in the contracting phase.

Can a Center of Excellence arrangement coexist with our existing network?

Yes. A COE program does not replace your broader provider network. Members retain access to other in-network providers for the covered procedure. The COE arrangement creates a preferred tier within the existing network structure, with stronger financial incentives for members who use the designated facility. The plan document and benefit design handle the distinction, which the TPA configures and administers.

Ready to Chat About Your Fund?

MagnaCare works with multiemployer health and welfare Funds to design and administer health plans that control costs without cutting benefits. If your Fund is managing high-cost specialty claims and looking for a more structured approach to specialty care, we can help you evaluate whether a centers of excellence program fits your population.

Schedule a call with our team to learn more.