Controlling Healthcare Costs through Innovative Methods - Analytics

Controlling Healthcare Costs through Innovative Methods - Analytics

2 What are we seeing? Trend is improving, but still significantly above general inflation 10% 8% 6% 9.0% 9.0% 8.5% 7.5% 6.5% 6.8% 6.2% 6.0% Wide variation in organizations actual experience 4% 2% 0% 3.2% 1.6% 2.1% 2.0% 1.5% 1.6% 1.3% 0.1% 2010 2011 2012 2013 2014 2015 2016 2017 Medical Trend CPI Inflation

3 Methods to Control Cost Historically Cost shifting to members using: Plan design changes Admin fee negotiations Increased cost sharing Vendor changes Today Data Analytics to actually reduce cost: Identify true cost drivers Actually reduce (not shift) overall cost Identify actionable cost savings opportunities Implement short term and long term strategies Monitor and adjust

4 Data Drives Decisions That Deliver Results Data Integration: Medical, Pharmacy, Eligibility and sometimes Wellness and Clinical Data. Data Validation and Structure: Clean, Standardize, and Normalize. Data Enhancement: Custom Benchmarks, Clinical Risk Groups, Health Risk Index.

5 Data Integration Viewing both medical and pharmacy claims together can identify cost saving opportunities that may not have been as obvious. Disease Category Number of Members* Percent of Total Members Disease Specific Medical Total Medical Prescription Drug Total Claims Benchmark Number of Members Benchmark Percent Asthma 250 3.8% $150,000 $1,700,000 $500,000 $2,200,000 300 4.6% Cancer 400 6.1% $4,000,000 $10,000,000 $1,500,000 $11,500,000 325 5.0% COPD 100 1.5% $100,000 $1,700,000 $700,000 $2,400,000 125 1.9% Diabetes 500 7.7% $500,000 $4,000,000 $4,000,000 $8,000,000 575 8.8% Heart Disease 225 3.5% $700,000 $4,500,000 $900,000 $5,400,000 250 3.8% Hypertension 1,300 20.0% $1,000,000 $11,000,000 $3,500,000 $14,500,000 1,450 22.3%

6 Diabetes Case Study Patients that are compliant with routine tests cost less than patients who are not compliant. The cost (PMPM) variance for compliant vs. non-compliant members started at 20% and rose to 60% over the three year analysis period. There are cost saving opportunities by encouraging patients with diabetes to perform routine tests (annual office visit, lipid panel, A1C and drug therapy). This client hired an outside vendor that specializes in identifying the best solutions to improve compliance and the savings was approximately $480,000.

7 Customized Benchmarks Benchmarks can be misleading if they are not customized. Age/Gender factor is 10% greater than BOB. Region is 5% more costly than BOB. The Actuarial Value of the benefit plan is 10% higher than BOB. Professional Variance to "Book Customized Varaince to Category Actual PMPM "Book of Business" Benchmark PMPM of Business" Benchmark Benchmark PMPM Customized Benchmark PCP Office Visits $10.00 $8.00 25.0% $10.00 0.0% SCP Office Visits $15.00 $12.00 25.0% $15.00 0.0% IP Visits $2.25 $2.00 12.5% $2.50-10.0% Preventive $4.75 $3.25 46.2% $4.06 16.9% ER Visits $2.00 $1.75 14.3% $2.19-8.6% Immunizations $5.00 $3.75 33.3% $4.69 6.7% Consultations $2.00 $1.85 8.1% $2.31-13.5% Physical Therapy $4.00 $2.50 60.0% $3.13 28.0% Mental Health $4.00 $3.50 14.3% $4.38-8.6% Substance Abuse $0.10 $0.08 25.0% $0.10 0.0% Surgeries $1.75 $1.50 16.7% $1.88-6.7% Anesthesia $18.00 $16.00 12.5% $20.00-10.0% Obstetrics $3.00 $2.75 9.1% $3.44-12.7% Lab And Pathology $6.00 $5.00 20.0% $6.25-4.0% Radiology $9.00 $6.00 50.0% $7.50 20.0% Chiropractic $0.25 $0.20 25.0% $0.25 0.0% Physician Other $9.00 $7.50 20.0% $9.38-4.0% Total $96.10 $77.63 23.8% $97.04-1.0%

8 Site-of-Care Savings There is a significant cost (PMPM) variation between Therapies received in a Hospital vs. a Free Standing Clinic. A savings of $150,000 can be achieved with 40% migration to a free standing clinic. Migration can be incented by cost sharing variances, best in class promotion, network negotiations, and other creative methods. $180 $160 $140 $120 $100 $80 $60 $40 $20 $0 Therapy $176 $161 $157 $58 $54 $54 Physical Therapy Speech Therapy Occupation Therapy Hospital Freestanding

9 Site-of-Care Savings There is a significant cost (PMPM) variation between Advanced Imaging received in a Hospital vs. a Free Standing Clinic. A savings of $200,000 can be achieved with 40% migration to a free standing clinic. Migration can be incented by cost sharing variances, best in class promotion, network negotiations, and other creative methods $3,500 $3,000 $2,500 $2,000 $1,500 $1,000 $500 $0 Advanced Imaging $3,316 $1,385 $985 $407 $581 $265 CT MRI PET Hospital Freestanding

10 Site-of-Care Savings The average hip or knee replacement cost $28,000, however, there are wide variations in cost depending on the provider. There are cost saving opportunities by encouraging utilization of lower cost alternatives through programs that offer incentives or lower cost sharing for preferred providers. Estimated savings for the client was $350,000. A Best in Class facility existed five miles away from the client. Knee and Hip Replacement $8,000 5.0 x $40,000

11 Chronic Conditions Over half the members with large claims have chronic conditions. On the Data Integration page six chronic conditions were listed and Cancer exceeded benchmark. Healthy / Minor Acute Large Claims Chronic

12 Cancer Management Source of picture: Advance Medical Cancer treatment is personal and treatment options are specific to the cancer type. The cost savings opportunity for the client analyzed was $375,000 through 2 nd Opinions to achieve the correct diagnosis and treatment.

13 Health Risk Index (HRI) This clients HRI is relatively high and is partially due to a higher percent of Chronic Claimants. Cost (PMPM) analyses should include HRI adjustments to eliminate member selection. Clinical Category Number of Claimants % of Claimants Health Risk Index Actual Benchmark Retrospective Prospective Non-Claimant 600 8.8% 10.0% 0.00 0.20 Healthy Claimant 2,400 35.3% 35.0% 0.27 0.40 Acute Claimant 300 4.4% 5.0% 0.76 0.75 Chronic Claimant 3,500 51.5% 50.0% 2.54 2.40 Total 6,800 100% 100% 1.46 1.43

14 Pharmacy Management One example of pharmacy management is generic substitution. Other opportunities include: Medication Therapy Management and Therapeutic Interchange. Current Pharmacy Expereince Type Scripts Percent of Scripts Allowed Amount Average Allowed Copay Amount Average Copay Paid Amount Average Paid Generic 95,000 86.0% $2,700,000 $28.42 $800,000 $8.42 $1,900,000 $20.00 Brand 15,000 13.1% $4,700,000 $313.33 $600,000 $40.00 $4,100,000 $273.33 Specialty 1,000 0.9% $3,200,000 $3,200.00 $50,000 $50.00 $3,150,000 $3,150.00 Total 111,000 100.0% $10,600,000 $95.50 $1,450,000 $13.06 $9,150,000 $82.43 1% Additional Generic Substitution Type Scripts Percent of Scripts Allowed Amount Average Allowed Copay Amount Average Copay Paid Amount Average Paid Generic 96,562 87.0% $2,744,388 $28.42 $813,152 $8.42 $1,931,236 $20.00 Brand 13,449 12.1% $4,214,058 $313.33 $537,965 $40.00 $3,676,093 $273.33 Specialty 1,000 0.9% $3,200,000 $3,200.00 $50,000 $50.00 $3,150,000 $3,150.00 Total 111,000 100.0% $10,158,446 $91.52 $1,401,117 $12.62 $8,757,329 $78.89 Client Savings $392,671 Employee Savings $48,883

15 Patient Misuse - Opioids An Opioid days supply > 365 and multiple prescribing physicians and multiple pharmacies should all necessitate deeper analysis. Count of Different Pharmacies Count of Prescribing Physicians Member ID Member Type Age Group Gender Opioid Scripts Opioid Days Supply Patient 1 Spouse 75-79 M 24 720 3 3 $8,500 Patient 2 Employee 55-59 F 13 367 1 2 $13,000 Patient 3 Employee 55-59 F 12 360 1 1 $3,500 Patient 4 Employee 50-54 F 11 330 1 1 $500 Patient 5 Employee 55-59 F 3 270 1 2 $1,500 Patient 6 Employee 35-39 F 9 243 1 2 $4,000 Patient 7 Employee 30-34 M 14 215 2 3 $5,500 Patient 8 Employee 55-59 F 18 202 2 1 $1,500 Patient 9 Employee 55-59 F 8 200 5 2 $7,000 Patient 10 Employee 55-59 F 10 150 2 1 $3,000 Total Amount Paid For All Services

16 Patient Misuse Ineligible Claimants Ineligible claims are claims paid outside the member s eligibility date range. Example: paid claim with date of service prior to the member becoming eligible or paid claims after the member s eligibility ended. A Dependent Eligibility Audit can produce savings. Medical - 7/1/2015-6/30/2016 Number of Unique Claimants 160 Total Charged Amount $1,000,000 Number of Claimants (Paid > $0) 155 Total Paid $425,000 Estimated Overpayment $425,000

17 Patient Misuse - ESRD Medicare become primary after 30 months. Four members have received > 30 months of ESRD services. Member Patients with End Stage Renal Disease Paid (All Years) First Procedure Last Procedure Months with ESRD Member 1 $25,000 2012 2016 42.00 Member 2 $190,000 2012 2016 41.00 Member 3 $25,000 2012 2015 35.00 Member 4 $190,000 2012 2015 34.00

18 Summary Be proactive. Set a multi-year action plan with short term and long term strategies. Understand your health benefit plan performance, and the underlying drivers of that performance. Move to a plan design platform that will enable a range of costcontainment strategies and tactics. Consumerism Shared decision-making Case- and condition- management Network and place-of-service management Take a total quality/continuous improvement approach to managing this process.

Thank You! 19