National Accounts Customer Forum. Myth Busters February 23, Understanding Network Discounts. Common Medical Myths

Transcription

1 Avoiding Pitfalls in Pharmacy Purchasing Understanding Network Discounts Common Medical Myths National Accounts Customer Forum Myth Busters February 23,

2 Myths from the Medical Side Avoiding Pitfalls in Pharmacy Purchasing National Accounts Customer Forum Myth Busters Understanding Network Discounts 2

3 Is your total medical cost picture missing something? The most common pitfall of carrier/vendor selection Overweighting a discount analysis in cost comparison and underweighting other critical cost factors 2010 Aetna Inc. 3

4 The whole picture: Discounts are only one small part of what determines your costs Total medical costs follow a simple equation: Your Your Your Utilization X Unit Cost = Total Medical Claims Costs Includes: Medical and demand management Provider networks and quality Steerage to the right facilities; high performance networks Includes: Contracted rates (discounts) Provider cost, efficiency, and cost advantages (such as eprescribing) Volume (local market density) Understand your unique total cost picture with each carrier, not just one component Aetna Inc. 4

5 Understand these four key components of cost to help avoid the pitfall Network discounts Site of service steerage Provider cost, quality and efficiency Medical management Understand how these components impact your costs and know the right questions to ask Aetna Inc. 5

6 Where do typical discount comparisons fall short? Discounts used in comparisons are historic, yet most that impact your actual costs are forwardlooking Differences in methodology used to calculate discounts can vary the outcome significantly Your organization s unique provider mix and network makeup can also vary the discounts significantly Discounts don t account for the effects of other cost controls, such as medical management and other cost/quality initiatives 2010 Aetna Inc. 6

7 Utilization mix by provider for your organization Sample Plan Sponsor Results with Hospital A: You can experience substantially different discounts from the same provider simply as a result of changing utilization mix Utilization Discount Utilization Discount Utilization Discount Intensive Care % % % Med/Surg % % % Nursery % % % Obstetrics % % % Pediatric % % % Overall Discount % % % 2010 Aetna Inc. 7

8 Disruption and how it impacts discounts due to provider mix Common example: Customer switches to another carrier expecting the lower costs associated with a better network discount; disruption patterns change the cost picture. Carrier A Actual Carrier B Expected Carrier B Actual Discounts Utilization Discounts Utilization Discounts Utilization St. Elsewhere 50% half 20% 20% quarter Memorial Hospital 55% half 60% half 60% half Mercy Hospital 20% 58% half 58% quarter Consultant s database 53% 59% 49% 2010 Aetna Inc. 8 Actual discount customer achieves with Carrier B is much lower than expected because of the unanticipated disruption impacts

9 Historic discounts don t necessarily add up ANALYSIS Discount analysis data used for 1/1/2011 effective date Discount Years 2008, 2009 ACTUAL Actual discounts applied in a 3-year contract beginning 1/1/ , 2012, Does your utilization pattern change from year to year? 2. Have you made any plan design or contribution changes lately? 3. Do you expect those to change employee behavior? 4. Have there been changes in the hospital network? 2010 Aetna Inc. 9

10 When it comes to site of service steerage, are you getting the guidance you need? Proactive and effective steerage drives utilization toward the more cost effective and higher quality facilities Aetna Inc. 10

11 Site of service steerage initiatives can have a significant impact on your costs One example: Ambulatory surgery endoscopy Facility Submitted Charges Allowed Charges Resulting Discount Facility B $892 $639 28% Facility AA $2,544 $1,145 55% Achieving lower costs is your real objective. Discounts shouldn t be the only focus when reducing costs is the ultimate goal Aetna Inc. 11

12 Site of service steerage initiatives: Ambulatory surgery endoscopy $3,000 $639 $650 $650 $618 $811 $860 $660 $633 $783 $1,826 $1,826 $1,145 $892 $1,000 $1,000 $1,500 $1,802 $1,912 $1,640 $1,782 $1,398 $2,371 $2,371 $2,544 $2,500 Select Facilities: 47% Discount Avg. Contracted rate = $693 Non-Select Facilities: 49% Discount Avg. Contracted rate =$1304 $2,000 $1,500 $1,000 Average Billed / Unit $500 $0 B C D H J K T U P Y Z AA Average Billed / Unit Allowed/Unit 2010 Aetna Inc. 12

13 When it comes to provider cost, quality and efficiency, is something missing? Providers vary significantly when it comes to cost, quality and efficiency measures. How do carriers work actively with providers to get results? 2010 Aetna Inc. 13

14 Provider cost, quality and efficiency within the network Providers vary significantly when it comes to cost, quality and efficiency measures Providing feedback to providers is critical to affect change in their behavior Provider access to member PHR information Member-specific health improvement alerts Provider payment estimator High performance networks Performance-based networks 2010 Aetna Inc. 14

15 Provider cost, quality and efficiency within the network Increasing member engagement is also key to driving compliance and ultimately impacting quality and costs Personal Health Record Health improvement alerts Value-based plan designs Consumer-directed health plans Member transparency tools 2010 Aetna Inc. 15

16 The bottom line managing total costs is the key to real savings Focusing on only network discounts misses the big picture of managing your total costs An effective trend management strategy should also actively account for the carrier s approach to: Provider efficiency & quality Medical management Site of service steerage 2010 Aetna Inc. 16

17 National Accounts Customer Forum Myth Busters Common Medical Myths Understanding Network Discount Avoiding Pitfalls in Pharmacy Purchasing 17

18 Industry Lingo: Drug Types National Drug Code (NDC) Brand Single Source Multi-Source Generic Single Source Multi-Source Specialty Drug * Aetna Health Connections Disease Management Performance Summary Aetna Health Analytics Study, March 2008 ** Aetna Health Analytics Study, 4th Quarter Aetna Inc. 18

19 Retail Discounts: generic or brand? Retail Discounts When is a Brand a Brand? Definitions read the fine print (maybe as defined by MediSpan or FirstDataBank, etc) When is a Generic a Generic? Single source generic or multi-source generic. Where is the discount guaranteed Why is this important? Is it included in the guarantee? Savings from SSG s might be insignificant 2010 Aetna Inc. 19

20 Retail Discounts: What is really discounted? Retail Discounts MAC list and retail MAC often does not include single source generics, multi-source brands or other savings opportunities Can be unclear which MAC list is being utilized Multiple MAC lists Zero Balance Claims, the inflated truth $4 generics Adjudication of ZBC allows for credit for AWP-100% Inflates generic discounts 2010 Aetna Inc. 20

21 Rebates and Mail Discounts Mail order rebates and discounts Minimum days supply requirement to qualify for discounts 45 day supply minimum If minimum day Rx is not met then adjudicated at retail rate with retail rebate guarantee Package size considerations 1000 vs. 100 providing deeper discounts Is repackaging being used to inflate discounts? Minimum copay or reimbursement Are your members going to pay more? 2010 Aetna Inc. 21

22 Other Hidden Exceptions and Fees That May Exist Rebate guarantees Days Supply requirements to qualify Average day supply 30/90 Closed formularies Contingent on Step Therapeutic and Therapeutic Interchange Brand only rebate guarantees Brands include all Rxs produced by 2 or less manufactures, excluding specialty Aetna Inc. 22

23 Other Hidden Exceptions and Fees That May Exist Mandatory Mail Conditions Implementation fees Per household letter fee General Financial Guarantees Carry over for over performance Based on coalition level and not individual level Data Sharing Feeds to Medical Vendors Fees for clinical programs beyond the most basic interventions 2010 Aetna Inc. 23

24 Pharmaceutical Price Increases & Medical-RX Interdependence 2010 Aetna Inc. 24

25 Pharmaceutical Pricing Increases Brand name drug manufacturers are escalating prices to increase earnings Industry is experiencing a price increase of 14.5% higher than prior years 1 Brand name drugs are becoming too costly to cover Offsetting the value of discounts and rebates Lehman Brothers Drug Price Survey for top 100 drugs 2010 Aetna Inc. 25

26 What are the factors that influence drug price increase? Manufacturer drug pipeline less robust than prior years Changes in life-cycle management Market economics Increased pressure on manufacturers to deliver promised earnings to shareholders HCR! 2010 Aetna Inc. 26

27 Price Protection Strategy Price Predictability Creates a provision in the rebate agreement that caps the percentage of price increase that is allowed on an annual basis. Approximately 50% of negotiated contracts for 2009 include Price Protection or incremental rebates % of brand drug spend is price-protected (25% of rebates) % of brand drug spend will be price-protected (38% of rebates) To date, we ve met with 31 manufacturers to discuss price predictability as a solution 2010 Aetna Inc. 27

28 Questionable prescribing. FDA calls for limits on asthma drugs The agency's guidance affects Serevent, Advair, Symbicort and Foradil. Manufacturers will be required to include warnings on their labels. February 19 th, Aetna Inc. 28

29 Gaps in care Over 50% of all related to drug use! Drug-Drug Interaction Food-Drug Interaction Vaccination 5.8% 5.8% 19.6% Add/Intensify Medical Therapy Diagnostic Workup 0.1% 14.3% 1.7% 4.1% Alternative Medicine Interaction Condition Screening Condition/Drug Monitoring 18.0% 0.9% 29.8% Stop/Modify Drug Modify Lifestyle 2010 Aetna Inc. 29

30 Questions and Answers 2010 Aetna Inc. 30

31 Avoiding Pitfalls in Pharmacy Purchasing Understanding Network Discount National Accounts Customer Forum Myth Busters Common Medical Myths 31

32 Myth #1 Wellness programs are not cost effective Researchers at the University of Michigan Health Management research center indicate that as employee risks go up or down, the change in costs to a company follow in the same direction* ROI Employer Studies PacBell: $3.10/$1 Wisconsin School District Insurance Group: $4.47/$1 Prudential Insurance: $2.90/$1 General Mills: $3.50/$1 NASA found 12.5% improvement in productivity in exercising office workers The DuPont Corporation had a 14% decline in disability days vs. 5.8% decline for controls (there were a total of 11,726 fewer net disability days) General Mills found a 19% reduction in disability days GE reported a 45% decrease in absenteeism. *The Ultimate 20th Century Cost Benefit Analysis and Report, University of Michigan Health Management Research Center, March Aetna Inc. 32

33 Myth #1 Wellness programs are not cost effective Participants in Aetna s Wellness Counseling program were: 46 percent more likely to reduce their body mass index 67 percent more likely to reduce their health assessment modifiable risk score 48 percent less likely to have the risk of inadequate exercise 46 percent less likely to have the risk of high fat consumption 2010 Aetna Inc. 33

34 Wellness Programs Best Practices Develop a corporate culture of health with C-suite commitment Link wellness to business objectives Communicate frequently and by multimedia Tie Incentives or disincentives to participation Use Health Risk Assessments to understand population risk and drive wellness engagement Measure results by engagement, risk reduction, direct and indirect costs 2010 Aetna Inc. 34

35 Myth #2 Higher Cost = Higher Quality Higher volume of care does not produce better outcomes Higher-spending regions Have more hospital beds (especially ICU) Have more physicians overall, and more specialists per capita Are hospitalized more frequently Spend more time in the ICU See physicians more frequently Get more diagnostic tests than identical patients in lower-spending regions 2010 Aetna Inc. 35

36 Myth #2 Higher Cost = Higher Quality Higher unit cost does not produce better outcomes Lower back MRI without dye using Aetna Navigator cost of care tool Free standing radiology facility = $400 Hospital radiology = $1675-$2010 Uncomplicated caesarian section using Aetna Navigator cost of care tool Hospital #1 = $8,691 - $10,099 Hospital #2 = $11,489 - $13,760 Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ, Lucas FL, Pinder EL. The implications of regional variations in Medicare spending. Part 1: the content, quality, and accessibility of care. Ann Intern Med 2003;138:273-87; Baicker K, Chandra A. Medicare Spending, The Physician Workforce, And Beneficiaries Quality Of Care. Health Aff (Millwood) 2004; Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ. Variations in the longitudinal efficiency of academic medical centers. Health Aff (Millwood) 2004;Suppl Web Exclusive:VAR19-32;. Fisher ES, Wennberg DE, Stukel TA, Gottlieb DJ, Lucas FL, Pinder EL. The implications of regional variations in Medicare spending. Part 2: health outcomes and satisfaction with care. Ann Intern Med 2003;138: Aetna Inc. 36

37 Cost/Quality Best Practices Plan design that promotes efficient utilization Consumer directed (Aetna Health Fund) High performance networks (Aexcel) mandatory or with incentives Promote use of Aetna Navigator tools Communication 2010 Aetna Inc. 37

38 Myth #3 Nature Trumps Nurture in Disease Development Diseases purely due to genetic factors: Cystic Fibrosis Hemophilia Sickle Cell Anemia Diseases with genetic predisposition Diabetes Cardiovascular disease Cancer 2010 Aetna Inc. 38

39 Myth #3 Nature Trumps Nurture in Disease Development Noninherited factors play a greater role in increasing a person's susceptibility to cancer than inherited factors environmental factors' are the primary determinants of most cases of cancer such as tobacco use, diet and exercise habits, reproductive characteristics, infectious agents and medication use. New England Journal of Medicine July, 12, Aetna Inc. 39

40 Myth #3 Nature Trumps Nurture in Disease Development Cardiovascular Disease Non-Modifiable Risk Factors Age Gender Family History Lifestyle Factors Smoking: 2x-4x risk of nonsmokers Cholesterol: higher cholesterols=higher risk Blood pressure: higher BP=higher risk Others: obesity, diabetes, physical inactivity, heavy alcohol use, reaction to stress 2010 Aetna Inc. 40

41 Myth #3 Nature Trumps Nurture in Disease Development Participants in Aetna s Wellness Counseling program were: 46% more likely to reduce their body mass index 67% more likely to reduce their health assessment modifiable risk score 48% less likely to have the risk of inadequate exercise 46% less likely to have the risk of high fat consumption 2010 Aetna Inc. 41

42 Nature Trumps Nurture in Disease Development Best Practices Incent Health Risk Completion Informational Drives engagement in Wellness (traditional and online) and Condition Management programs Worksite initiatives Communication Biometric screening Wellness challenges Aetna Navigator 2010 Aetna Inc. 42

43 Myth #3 Nature Trumps Nurture in Disease Development Are You At Risk Of Breast Cancer? Family History Genes Estrogen Reproductive History Weight Environmental Factors Alcohol Aetna Smartsource. Medical Content Reviewed by the faculty of Harvard Medical School 2010 Aetna Inc. 43

44 Myth #4 Primary Care is Passé? Definition - Basic or general health care usually provided by general practitioners, family practitioners, internists and pediatricians Primary care is a term used for the activity of a health care provider who acts as a first point of consultation for all patients. Continuity of care is also a key characteristic of primary care The level of care that encompasses routine care of individuals with common health problems and chronic illnesses that can be managed on an outpatient basis 2010 Aetna Inc. 44

45 Value of Primary Care Evidence for Effectiveness: People live longer and fewer die due to heart and lung disease Less ER and hospital use Fewer tests Better preventive care Reduced health disparities Lower medication use Less care related costs Higher patient satisfaction Greenfield S, et al JAMA 1992;267: Forrest CB. Starfield B. JFP:. 1996;43(1):40-8. Macinko J. Starfield B. Shi L. HSR. 2003;38(3): Aetna Inc. 45

46 Patient Centered Medical Home The patient centered medical home is a model for care provided by physician practices that seeks to strengthen the physician patient relationship by replacing episodic care based on illnesses and patient complaints with coordinated care and a long term healing relationship* Aetna Pilots in PCMH Program Elements 11 pilot partnership with physician practices in 9 states >350,000 members 3 year demonstration project Managing and coordinating patient care Patient care coordinator in practice Reimbursement for additional services Accreditation and quality improvement measures of success *As defined by NCQA 2010 Aetna Inc. 46

47 Myth #5 Cellphone Radiation is harmful WSJ reports that cellphone radiation actually may protect or reverse Alzheimer's in mice Aetna Inc. 47