jay himes, cae, executive director, pasbo...health insurance for schools symposium december 12, 2017...

Health Insurance for Schools Symposium December 12, 2017

PASBO Offices

Agenda

8:30 am Continental Breakfast

9:00 am Welcome and Introductions

- Jay Himes, CAE, Executive Director, PASBO

9:05 am Session 1: Choosing the Right Health Insurance Program

- Charles E. Peterson, Jr, SFO, PRSBA, Chief Financial Officer, Central

Susquehanna Intermediate Unit #16

- Jonathan A. Sapochak, FSA, Conrad Siegel Actuaries

Choosing the Right Program

o Fully Insured Health Insurance Programs

o Self-Insured Group Health Programs

o High Deductible Plans

o Prescription Drug Carve-Out Programs

o Stop Loss Programs

Evaluating Consortiums/Trusts

o What are Your Options?

10:30 am Break

10:40 am Session 2: Controlling Pharmacy Costs and the Impact of the Hospital Consolidation

- Ned Laubacher, Innovu

- Debbie Partsch, Innovu

How to Control Pharmacy Costs

What is the Impact of Hospital Consolidation?

How to Identify Problems with Your Plan or Your Members

12:00 pm Lunch

12:30 pm Session 3: How to Save Money in Healthcare without Shifting Cost to Employees

Janice Klein, Director of Business, Mt. Lebanon School District

Mike Garofalo, Vice President, Aon Consulting

1:30 pm Session 4: Plan Design Needs for the Next Five Years

- Dr. Timothy Shrom, Business Manager, Solanco School District

- R. Scott Labrecque, VP Client Services, Stoudt Advisors

2:30 pm Session 5: Dialogue with the Experts

- Charles E. Peterson, Jr, PRSBA, Chief Financial Officer, Central

Susquehanna Intermediate Unit #16

- Jonathan A. Sapochak, FSA, Conrad Siegel Actuaries

- Ned Laubacher, Innovu

- Debbie Partsch, Innovu

- Janice Klein, Director of Business, Mt. Lebanon School District

- Mike Garofalo, Vice President, Aon Consulting

- Dr. Timothy Shrom, Business Manager, Solanco School District

- R. Scott Labrecque, VP Client Services, Stoudt Advisors

3:00 pm Wrap-Up and Questions – Dr. Wayne McCullough

1

Working to develop and support leaders in school business operations

CHOOSING THE RIGHT HEALTHCARE

BENEFIT PROGRAMCHARLES E PETERSON, JR, MBA, SFO, PRSBA

JONATHAN A SAPOCHAK, FSA, MAAA

www.pasbo.orgWorking to develop and support leaders in school business operations

TODAY’S PRESENTATION

Considerations in Choosing the “Right” Benefit Program

Funding Arrangements

Plan Design Options

Eligibility – Spousal Rule & Opt-Out

Prescription Drug Carve-Out

Stop Loss Considerations

Consortium/Trust Considerations

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2


THREE-LEGGED STOOL

Imperfect metaphor

Emphasis on the bottom of the pyramid

Three legs

Plan design

Eligibility

Employee premium cost-sharing

3


4

PERFORMANCE

OF HEALTH PLAN

AMOUNT

OF DATA

NEEDED

MARGINAL VALUE

OF HEALTH PLAN

DESIGN

ELEMENTS

Plan Design (copays, deductibles,

coinsurance)

Plan Funding (fully-insured, actuarial review, risk

analysis, self-funding, hybrid)

Carrier/TPA Negotiations (admin fees)

Eligibility Management (spousal

restrictions, dependent audits)

Health Risk Awareness (participation based programs)

Medical Rx Claims Management (prior authorization step therapy)

Pharmacy Contracting

Population Health Management

Limited Network Plans

ACOs / PCMHWellness Programs (results/intervention

based programs)

High-Performance

Network Management

Reference-

based Pricing

Initiatives

3

FUNDING ARRANGEMENTS

5


6

Illustration

is not drawn

to scale!

4


FUNDING ARRANGEMENTS

Fully-insured

Annual cost “certain” (but

renewal cost is not)

Expected to be more costly

than self-funding

Market mispricing or

competition MAY result in

favorable short-term pricing

Self-funding

Annual costs uncertain –

primary variance is claim cost

Expected to be less costly

than being insured, but

greater risk

Requires risk tolerance,

reserves

7

PLAN DESIGN OPTIONS

8

5


PLAN DESIGN OPTIONS

• To generate significant savings through plan design, must focus on major

areas that impact how participants share in the cost of healthcare

• These changes are not only intended as savings through participants

paying for a larger share of the cost, but having so-called “skin-in-the-

game” is intended to limit the over-utilization of benefits and create

more efficient consumers

9


PLAN DESIGN OPTIONS

• Demise of Traditional plan designs

• Increased deductibles

• Changes to prescription drug plans (later in presentation)

• QHDHP with

Health Savings Accounts (HSA)

Health Reimbursement Arrangement (HRA)

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6


HIGH-DEDUCTIBLE HEALTH PLANS (HDHP)

• Generally PPO plans with very large deductible level (at least $1,000

per individual or higher)

• Often paired with an account structure to cover part of the

deductible

Health Savings Account (HSA)

Health Reimbursement Arrangement (HRA)

• Also referred to as “Consumer-Driven Health Plans”; theory being

that the more the participants have financial responsibility for

healthcare expenses, the more efficiently they will utilize healthcare

services.

11


HIGH-DEDUCTIBLE HEALTH PLANS (HDHP)

• In order to have a Health Savings Account (HSA), it must be paired

with a “Qualified” High-Deductible Health Plan

• HSAs can be funded by either the employer or the employee

• Qualified Plans are subject to specific IRS rules that determine the

eligibility, funding limits, and tax implications of these HSA accounts.

• HRAs do NOT require a “qualified” HDHP, but an HRA can ONLY be

funded by the employer (NO employee $)

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7


WHAT ARE QUALIFIED HIGH-DEDUCTIBLE

HEALTH PLANS (QHDHP)?

A QHDHP is a health insurance plan that meets certain requirements:

2018 minimum deductible:

$1,350 for self-only coverage

$2,700 for family coverage

2018 maximum out-of-pocket (OOP):

$6,650 for self-only coverage

$13,300 for family coverage

$7,350 “embedded” maximum per individual in a family (healthcare reform requirement)

In general, the deductible must apply to all medical expenses (including prescription drugs) covered by the plan.

Plans can pay for “preventive care” services on a first-dollar basis.

13


QUALIFIED HIGH-DEDUCTIBLE HEALTH PLANS

(QHDHP)

QHDHP deductible does not operate like a “standard” PPO deductible:

• Non-single coverage tiers must meet the family deductible before the health plan

begins to pay expenses.

• NOTE: the deductible does not apply to expenses for preventive care.

• The family deductible must be satisfied even if only one member is

incurring expenses.

• Stated differently, one member of a family can satisfy the entire family

deductible.

• Most expenses are applied to the deductible before the plan pays, including

prescription drugs and most office visits

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8


HEALTH SAVINGS ACCOUNTS (HSA)

A Health Savings Account (HSA) is a tax-advantaged

account created for the purpose of paying medical

expenses.

You must be an eligible individual to create an HSA.

An HSA is offered in conjunction with a Qualified High

Deductible Health Plan (QHDHP).

“Triple-tax advantage”

15

ELIGIBILITY

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9


WHAT IS A SPOUSAL RULE?

• Spousal rule is an eligibility restriction or premium cost-sharing

adjustment used to discourage spousal enrollment in the employer’s

health plan

• Can take many forms

• Spouses are not allowed on the plan (coverage tiers S, PC, PCn)

• Spouses with access to other employer coverage are not allowed on the

plan.

• Alternately, spouses with access to other employer coverage are required

to pay a surcharge ($100/month, for example)

17


SPOUSAL RULE CONSIDERATIONS

• How restrictive – the “hard rule” (no spouses allowed) is uncommon,

but a very weak rule may have little impact

• Self-funded plans need to consider the actual cost of spouse claims

• May be driving “good” risks off the plan if spousal rule targets spouses

with access to other employer coverage (since the spouse is actively at

work)

• Self-funded plans need to consider the anticipated claim savings (not the

“premium” savings)

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10


OPT-OUT BENEFITS

• Benefit paid to employees that do NOT elect coverage

• Mixed reception by plan sponsors – sometimes viewed very

negatively, loathe to increase

• Need to consider what incentive an employee has to seek coverage

elsewhere – premium share, opt-out benefit, spousal coverage option

• As opt-out benefit increases, in theory more individuals opt-out BUT

• There will be an inflection point where increasing the opt-out benefit

costs more than it saves

19

PRESCRIPTION DRUG CARVE-OUT

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11


CARVE-IN VS CARVE-OUT

• Traditional model is to have carved-in prescription drug benefits –

prescription drug benefit and contracting is provided by the medical

insurer/administrator (i.e. Highmark, Capital BlueCross, Aetna, etc.)

• Last 15 years it has become increasingly common for plan sponsors

to carve-out the prescription benefit – contracting directly with

pharmacy benefit managers (PBMs – Express Scripts, CVS, Optum,

etc.) or by joining large collectives that hold their own PBM

agreement

21



Advantages of a Carve-In Arrangement

Theoretically leveraging the purchasing power of a large insurance carrier

Administrative Simplicity (One contracted vendor)

Potential for Improved Coordination of Care (Case & Disease Management)

Coordination of Plan Design Administration (ex. HSA, TMOOP)

Coordination of Stop Loss Coverage

Disadvantages of a Carve-In Arrangement

Another Layer of Administration, Adds Cost

Less Plan Design Flexibility

Less Direct Focus on Rx Claims Management Programs

“Black-Box” Contract Terms

Limited Transparency and Data Availability

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12



Advantages of a Carve-Out Arrangement

Flexible Plan Design and Clinical Management Programs

Direct Contracting, Eliminates Layer of Admin

Increased Data Access and Transparency

Ability to Negotiate Aggressive Contract Terms (discounts, rebates, admin fees, audit rights, performance guarantees, market check provisions)

Disadvantages of a Carve-Out Arrangement

Increase Administrative Burden (Expertise Needed for PBM Contracting)

Multiple Customer Service Points of Contact

Non-integrated Medical & Rx, Potential Gaps in Care Coordination

Potential Increases in Medical Admin Fees

Difficulties Coordinating Plan Limit Accumulators

23


24

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25

Source: Health Affairs Blog, 6/13/2017


MAJOR ISSUES IN PHARMACY CONTRACTING

Rebate Definitions & Guarantees

Are you getting 100% pass-through on rebates?

Are you getting minimum guarantees, and are they competitive?

Is guarantee basis per script, per brand script, or per member?

Discount Guarantees by Channel

Are discounts guaranteed at settlement?

Are gains in one channel allowed to offset losses in another?

Are certain drugs excluded? (OTC, Biosimilar, 340b, $0 claims)

Pass-Through vs. Traditional Spread Pricing

Is PBM making money on the pricing “spread” and retained rebates, or via an explicit administrative fee?

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Definition of “Generic” Drugs

Are single-source generic drugs settled with the generic or brand category?

How are MAC lists being used or manipulated?

Definition of “Specialty” Drugs

Are discount and rebate guarantees carved-out exclusively for specialty?

Can claims re-pricing help evaluate differences in categorization?

Performance Formularies

Are vendor re-pricing and contract guarantees being compared apples-to-

apples with regard to the formulary assumptions?

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15



Clinical Replacement Programs

Are vendors matching the clinical programs currently in force, and are there additional fees for each program?

Does the program allow for grandfathering of treatments already in process, and is the fee affected?

How can you evaluate the effectiveness of proposed clinical management programs?

Do programs have extra fees and/or performance guarantees related to ROI?

Manufacturer “Couponing”

Does the vendor have programs to take advantage of manufacturer discounts and coupons?

29



Package-Size Pricing

Are discount guarantees based on package-size dispensed, or a fixed package-

size definition (ex. package size 100 units)?

Drug Channel Management

Are enhanced discounts available for limited network options?

Are 90-day at retail options pricing using the same discounts and guarantees

as mail order?

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16

PRESCRIPTION DRUG MANAGEMENT

31


32

Source: CVS Health Insights, 3/15/17

17


33

Source: CVS Health Insights, 3/15/17


34Source: CVS Health Insights, 3/15/17

18


RX MANAGEMENT PROGRAMS

Important Rx Management Programs:

Mandatory Generic

Drug Quantity Limits

Step Therapy

Prior Authorizations

Plan Design Considerations:

Incentive/Preferred Formularies

Coinsurance vs. Copays

Qualified High-Deductible Plans

Value-Based Plan Designs

35


RX MANAGEMENT PROGRAMS

Drug Channel Management:

Mandatory Mail Order

Retail Network Management

90-Day at Retail Programs (Not All Created Equal …)

Exclusive Specialty Pharmacy

Site of Care Management (Hospital Administered Rx)

Special Management/Clinical Programs:

Opioids, Hepatitis C, Diabetes, Cholesterol, Oncology, MS, Pulmonary, Inflammatory

Maximizing Manufacturer Assistance/“Couponing”

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19

STOP LOSS

37


WHY PURCHASE STOP LOSS INSURANCE?

The decision to purchase stop loss insurance (and at what level) is based on an

organization’s risk tolerance

Medical and prescription drug claims are volatile – costs can vary substantially from one

year to the next

Changes in medical technology and practice offer life-altering (or saving) improvements –

sometimes at staggering cost

The sponsor of a health plan bears the claim risk – the risk that claims exceed

contributions

Stop loss insurance is intended to provide protection for plan sponsors from events that

are catastrophic in nature

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20


TYPES OF STOP LOSS INSURANCE

Specific stop loss

Caps losses on a single individual

Protects against catastrophic losses on a single individual

Aggregate reinsurance

Caps losses on ALL individuals

Protects against catastrophic losses on the entire plan cost

Generally must have specific reinsurance to have aggregate reinsurance

(aggregate covers losses up to the specific attachment point)

39


CHOOSING AN ATTACHMENT POINT

There is no “right” attachment point – this is a question of risk tolerance (and ability to absorb catastrophic losses)

The higher the attachment point, the lower the premium (and the greater the risk to the plan sponsor)

Typically, a “small” group will choose a low attachment point and a larger group will choose a higher attachment point

Should look at multiple attachment point options and assess the premium savings relative to the risk

Example: what if moving from a $150,000 attachment point to $200,000 saves $300,000 in premium? Is this a “good” value?

What is the likelihood of claims between $150,000 and $200,000 being greater than $300,000?

Historical “look-back” analysis

Actuarial factors

40

21



Over time, plan sponsors should anticipate increasing the attachment point or facing substantial increases in stop loss premiums

Why: stop loss claims (and as a result, premiums) are subject to “trend leveraging”

Example: A $300,000 attachment point and a $500,000 claim in 2016

Assume 10% medical trend – the claim (or similar claim) is expected to cost $550,000 in 2017.

Stop loss premium would increase by much more than trend

For the reinsurer

2016 loss = $500,000 - $300,000 = $200,000

2017 loss = $550,000 - $300,000 = $250,000

Increase: $250k/$200k -1 = 25% - much greater than 10% trend

41



What if the deductible had increased with trend?

Example: A $300,000 attachment point and a $500,000 claim in 2016

Assume 10% medical trend – the claim (or similar claim) is expected to cost $550,000 in 2017.

Assume attachment point increases 10% - $330,000

For the reinsurer

2016 loss = $500,000 - $300,000 = $200,000

2017 loss = $550,000 - $330,000 = $220,000

Increase: $220k/$200k -1 = 10%

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22


AGGREGATING SPECIFIC DEDUCTIBLES

$150,000 Attachment Point

No Aggregating Specific Deductible

3 Claimants

$200,000

$250,000

$300,000

Stop loss reimbursement:

$50,000+$100,000+$150,000 = $300,000

$150,000 Attachment Point

$100,000 Aggregating Specific Deductible

3 Claimants

$200,000

$250,000

$300,000

Stop loss reimbursement:

$50,000+$100,000+$150,000 = $300,000

$300,000 - $100,000 = $200,000

43


EVALUATING AGGREGATING SPECIFIC

DEDUCTIBLES

An aggregating specific deductible reduces the premium in exchange for the plan sponsor having to pay a deductible before receiving reimbursement (see prior example)

In theory, if the aggregating specific deductible reduced the premium on a dollar-for-dollar basis, it should always be elected

Example: $1.2M in premium, $200,000 aggregating specific reduces premium to $1M

If no losses occur, district would pay $1M in premium vs $1.2M – district gain

Worst case scenario – district receives stop loss reimbursements, less $200k –effectively pays $1.2M. The worst case is cost-neutral

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23


EVALUATING AGGREGATING SPECIFIC

DEDUCTIBLES

Again in theory, an arrangement should never be so one-

sided (but pricing errors do occur and may benefit the

consumer)

Typically an aggregating specific deductible will not create a

dollar-for-dollar reduction. However, the district should

assess the positive versus negative risk:

Example: if a $100,000 aggregating specific reduces premiums

$80,000, the district stands to gain $80,000 at the risk of losing

$20,000

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TRUST / CONSORTIUM

CONSIDERATIONS

46

24


VALUE PROPOSITION OF TRUSTS

Increased economy of scale and bargaining leverage

Minimize administrative costs

Greater purchasing power (prescription drug contracting, stop loss, ancillary benefits, etc.)

Enhanced member support (dedicated staff)

(May) Reduce district compliance burden

Professional advisory services

Member to member collaboration

47


TYPES OF TRUSTS/CONSORTIUMS

Main differentiator around risk:

Pooled trusts – Entities pay “premiums”, risk is shared among

members. Typically no DISTRICT surplus or deficit

Segregated trusts – Entities ultimately responsible for their specific

claims and expenses. Districts typically have their own account

balances

Purchasing coalition – organization purchases based on collective size

but assets are not held together; similar to a segregated trust, but

with no common holding of assets (the Trust part)

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25


CONSIDERATIONS IN EVALUATING/JOINING

TRUSTS AND CONSORTIA

Exit provision – how can you get out (and at what cost)?

Entry provision – is there any buy-in?

Risk – are you ULTIMATELY responsible for premiums or claims?

Rating – how are annual rates determined?

Plan design – standard menu or district can customize?

Stop Loss basis (transition impact)

Rx management programs

49


QUESTIONS?

26


CONTROLLING PHARMACY COSTS

INCREASED PRESCRIPTION

DRUG TRANSPARENCY WITH

DATA ANALYTICS

DEBBIE PARTSCH, PHARM.D.

CHIEF PHARMACY OFFICER, INNOVU


OBJECTIVES

Provide an overview of the distribution and reimbursement model for

prescription drugs.

Describe Innovu’s role as the data analytics vendor to integrate, evaluate and

validate the PBMs/TPAs pharmacy program.

Overview of the pharmacy data in the platform.

Description of how the data in the platform can be used to evaluate their pharmacy costs

Understand what data should be captured to monitor the program performance and validate the

contractual pricing.

52

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53

Pharmacy

Manufacturer

Drug Wholesaler

Product Movement

Financial Flow

Contract Relationship

Pharmacy Benefit

Manager

Third-Party Payer

Patient

Formulary Rebates

Pass Through of Rebate

Payer Reimbursement to PBM

Prescription Reimbursement

Copayment or Coinsurance

Pharmacy Payment for Product

Wholesaler Payment for Product

Chart illustrates flows for patient-administered, outpatient drugs. Please note that this chart is illustrative. It is not intended to be a complete representation of every type of financial, product flow, or contractual relationship in the marketplace. Source: Fein, Adam. J., The 2016 Economic Report on Retail, Mail and Specialty Pharmacies, Drug Channels Institute, January 2016. (Available at http://drugchannelsinstitute.com/products/industry_report/pharmacy/)

The U.S. Pharmacy Distribution and Reimbursement System for Patient-Administered, Outpatient Prescription Drugs

Service and Data Fees (specialty)

Network Participation

Formulary Agreement

Product Shipment

Product Shipment

Services Contract

Prime Vendor Agreement

Services Agreement

Dispense Prescription


FACTORS WITH DRUG SPENDING

Unit costs—the payer’s net cost per unit of therapy. Unit costs vary with:

the rate of inflation or deflation in drug prices

shifts to different drug options within a therapeutic class

a shift in mix of therapeutic classes

the substitution of generic drugs for brand-name drugs

Utilization—the total quantity of drugs obtained by a payer’s beneficiaries.

number of people on drug therapy

degree to which people adhere to their drug therapy

average number of days of treatment.

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HOW MUCH DOES YOUR PHARMACY BENEFIT

COST?

Administrative Fees

Prescription Claim Costs

Rebates

Value-Added Programs

Utilization review

Medication adherence

Patient healthcare management

55


PBM PRICING MODELS

- Pass-through pricing refers to the PBM invoicing the client exactly what the dispensing pharmacy is paid, passing all rebates in exchange for a defined administrative fee.

- Lock-in pricing refers to negotiated price invoiced to the client for each prescription dispensed which may differ from what the pharmacy is paid by the PBM.

- The spread (difference between invoiced and paid) is a source of revenue. Spread pricing can be a retention of rebates or dispensing discounts on each prescription.

56

Which model is best for you?

29


BENCHMARKING UNIT COSTS

EDUCATIONAL COHORT

• What other financial metrics

may impact the unit cost

with high cost / brand drugs,

(i.e. rebates)?

• Do the contractual

provisions align the PBM

incentives with the plan’s

fiduciary goals?

57


BRAND VS. GENERIC USE

EDUCATIONAL COHORT

• What is the best approach to evaluate unit costs for generic medications?

• How do the unit costs compare against regional and national benchmarks?

• What other contractual provisions may impact the unit cost?

• What PBM programs encourage generic utilization?58

30


BRAND UNIT COST COMPARISON

SCHOOL DISTRICT CLIENT

• Client’s average annual cost for brand drugs consistently below the national benchmark

• Client paying 60% more than the regional benchmark for brand drugs per day supply.

59

*

* 2016 national data trended 8.6% for brand inflation


GENERIC UNIT COST COMPARISON


• Client average annual cost for generic drugs consistently below the national benchmark

• Client paying 90% more than the regional benchmark for generic drugs per day supply.

60

31


MEDICAL PHARMACY


61

$877 ThousandClient cost for

Infliximab 2017 YTD

$132,000

Potential Savings with

Regional Price


POTENTIAL LANDMARK ACQUISITION CVS - AETNA

62

Will this reduce

cost for the

consumer?

Why would these

profitable

companies

consider merging?

32


POTENTIAL ROLE FOR AMAZON?

Amazon has wholesale licenses in 12 states to sell medical devices and supplies

11/28/17: Regulators were informed by Amazon that they will not use state

licenses to sell prescription drugs.

Drug retailers fear the possibility of them distributing pharmaceutical products.

63

QUESTIONS?

64

33


PROVIDER CONSOLIDATION:

WHY … AND WHAT CAN WE EXPECT?NED LAUBACHER

VICE PRESIDENT, STRATEGY


OPENING CONTEXT

“ We operate 3 businesses.

1. We are in the Safety business.

2. We are in the business of buying Healthcare.

3. We are in the Delivery business.

I know all about my Safety and Delivery businesses, and am committed to knowing everything about my Healthcare purchasing

business.”

- CEO, 2,800-employee Trucking Company

66

34


DIFFERING VIEWS OF THE WORLD

You Are Both an Employer and a Major Purchaser of

Healthcare.

You are a Desired Payer from the Provider’s viewpoint.

You are a Desired Premium from the Health Plan & PBM

viewpoint.

67


DIFFERING VIEWS OF THE WORLD

The Why of Provider Consolidation

History of Healthcare

The 2 Main Ingredients

Still Ignoring Employers

Provider Have’s and Have Not’s

Now, What to Expect from Provider Consolidation

How do Providers View the Employer?

How do Health Plans and PBM’s View the Employer?

How do I prepare to react?

68

35

69

HEALTHCARE’S TIMELINE

Cash & Charity

WWI & Flu

Epidemic

1930’s

Social Security

1965 Medicare & Medicaid

Twin 1: 1950’s Employer Benefits

1940’s WWII

Pre-paid Hospital Care

Twin 2: 1946-64 Baby Boom

2010

ACA

1967 – Publicly-traded Hospital Systems

1980 – Non-profit Health Systems


THE 2 INGREDIENTS

70

• Payment based on volume of services provided

(“fee for service”)

• Clinical quality between providers is undefined

2. Providers - Delivery of Care to Patients

1. Payers - Payment for Care Delivered to Patients

36


THE 2 INGREDIENTS

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM

(Fully-insured Employer Benefits)

Self-Insured Employers

Patient Pockets

Providers - Delivery of Care

Hospital – Inpatient

Hospital - Outpatient

Physicians

Pharmacy

Independent Outpatient

Lab

Imaging

Walk-in, Urgent Care

Worksite Clinic

Rehab

… 71


HOW TO MIX THE INGREDIENTS

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM



Patient Pockets

Providers - Delivery of Care

Hospital-owned

Physicians

Pharmacy

Independently-owned

Lab

Imaging

Walk-in, Urgent Care

Worksite Clinic

Rehab

72

Network

Agreement

37


PAYER OF RECORD

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM

(Fully-insured Employer

Benefits)


Patient Pockets

Who Sets Price to be Paid?

1. Medicare Fee For Service

2. Medicare through Health

Plans & PBMs

73

Network

Agreement


PAYER OF RECORD

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM



Patient Pockets


1. Medicaid Fee For Service

2. Medicaid through Health

Plans & PBMs

74

Network

Agreement

38


PAYER OF RECORD

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM


Benefits)


Patient Pockets


Health Plan & PBM

Fee for Service

75

Network

Agreement


PAYER OF RECORD

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM


Benefits)


Patient Pockets


Health Plan & PBM

Fee for Service

76

Network

Agreement

39


PAYER OF RECORD

Payment for Care

Medicare

Medicaid / CHIP

Health Plans & PBM


Benefits)


Patient Pockets


Health Plan & PBM

Fee for Service

77

Network

Agreement

78

BABIES GOES BOOM

40


HOSPITAL PAYMENT-TO-COST RATIOS

Source: Analysis of American Hospital Association Annual Survey data, 2014, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.(2) Includes Medicare Disproportionate Share payments.

70%

80%

90%

100%

110%

120%

130%

140%

150%

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Private Pay

Medicaid(1)

Medicare(2)


HOSPITALS EXPOSED TO NEGATIVE MARGIN

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

40.0%

45.0%

Medicare Medicaid Private Pay

1980 2000 201480

41

81

Medicare payment innovations flow through health plans within ~ 3 years.

Shared Savings Programs (ACO, Bundled Payments)

Reduce Pay for Avoidable Events (re-admissions, infections)

Pay for Quality (defining is a huge problem)

Pay for Health Outcomes (defining is a huger problem)

These Innovations translate into declining revenue for Providers.

MEDICARE IS MOMMY DUCK


WHEW!

OK, why is all of this important to Provider Consolidation?

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A SINGLE DAY’S HEADLINES 1

Healthcare Bankruptcies More Than Triple in 2017

Moody's: Outlook negative for nonprofit hospital sector

S&P: Credit downgrades rival 9/11 fall-out for hospital sector

7 latest hospital, health system executive resignations

11 hospital partnerships & acquisitions

Advocate, Aurora Health Care plan mega-merger $11B health system

CVS Health to acquire Aetna for $69B

Why the CVS-Aetna deal could push Walmart to buy Humana

83

1 One day of headlines, Becker’s Healthcare Review, December 5, 2017.


DISEASE OR POWER?

Disease for Some Means

Power to Select Few

1. Volume for Private Pay

2. Payer Contract Rates

3. Access to Cash (Capital)

4. Alternative Revenue Sources

Lesson: Revenue Cures All Ills

Symptoms of Disease

Healthcare Bankruptcies More Than Triple in 2017

Moody's: Outlook negative for nonprofit hospital sector

7 latest hospital, health system executive resignations

11 hospital partnerships & acquisitions

Advocate, Aurora Health Care plan mega-merger $11B health system

CVS Health to acquire Aetna for $69B

Why the CVS-Aetna deal could push Walmart to buy Humana

84

43


WE ARE IN THE HEALTHCARE BUSINESS

To Address the Why

History of Healthcare

The 2 Main Ingredients

Still Ignoring Employers

Provider Have’s and Have Not’s

Now, What to Expect

How Do Providers View the Employer?

How do Health Plans and PBM’s View the Employer?

How Should This Question Really be Phrased?

85


WE ARE IN THE HEALTHCARE BUSINESS

How Do Providers View the Employer?

As a Desired Revenue Source

86

44


87

You Are Both an Employer and a Major Purchaser of

Healthcare.

You are a Desired Payer from the Provider’s

viewpoint.

You are a Desired Premium from the Health Plan &

PBM viewpoint.


I SPEAK HEALTHCARE

Provider Sound Bytes Translator

“We are increasing access by building

new outpatient centers, expanding

lab/imaging hours, lowering wait times in

the ER, …”

“We want to capture all of your volume

in our hospital”

This is your highest-cost location vs

physician office, home health, urgent care,

freestanding lab/imaging, …

88

45


I SPEAK HEALTHCARE


“We are partnering with (name of local

hospital/system) to continue the strong

tradition of providing quality care to

your community”

“We bought this hospital/system to

leverage higher rates from the health

plan.”

This means higher costs to you.

89


I SPEAK HEALTHCARE


“We are partnering with (name of local

hospital/system) to offer our health plan

to its employees and your trusted

physicians to continue the strong

tradition of providing quality care to

your community”

“Increasing our health plan provider

network to the “partnering” hospital and

physicians means that we can exclude our

competitor’s providers.”

And you have to try to reduce your costs

in a market where power is being

concentrated?

90

46


PROVIDERS’ CONTEXT

These Actions Make Absolute Sense in Light of…

91


HOSPITAL PAYMENT-TO-COST RATIOS

Source: Analysis of American Hospital Association Annual Survey data, 2014, for community hospitals. (1) Includes Medicaid Disproportionate Share payments.(2) Includes Medicare Disproportionate Share payments.

70%

80%

90%

100%

110%

120%

130%

140%

150%

94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14

Private Pay

Medicaid(1)

Medicare(2)

47


BUT THE EMPLOYERS’ VIEWPOINT CANNOT BE

IGNORED!

93


HERE’S YOUR BURNING PLATFORM

94

• 85% of US < $10,000 savings

• 69% of US < $1,000 savings

• #1 reason for personal bankruptcy

since 2010 is Healthcare costs

Average Annual Health Insurance Premiums and Worker Contributions for Family Coverage

Kaiser Family Foundation, 2003 - 2013

48

www.pasbo.orgWorking to develop and support leaders in school business operations95

YOU ARE BOTH AN EMPLOYER AND A MAJOR

PURCHASER OF HEALTHCARE.

AND YOU ARE A DESIRED PAYER FROM THE

PROVIDER’S VIEWPOINT.

AND YOU ARE A DESIRED PREMIUM FROM THE

HEALTH PLAN & PBM VIEWPOINT.


HIGH COST CLAIM AND CLAIMANT ANALYSIS

Phase 1 Criteria ThresholdMed + Rx

ClaimsMed + Rx Cost 5% Recovery

Single claim > $75,000 357 $48M $2.4M

Claimant - 1 month > = $100,000 308 $55M $2.8M

Claimant - 2 months > = $150,000 314 $84M $4.2M

Claimant - 3 months > = $225,000 234 $88M $4.4M

What ROI could a compliance billing review

return to your company?Futu

re

Act

ion

49


SITE CONVERSION FOR INJECTABLE

DRUGS

Total Specialty Rx cost for 12-month period in PBGH cohort = $83.6M

41%

59%

Med Benefit Rx Benefit

Medical Rx -

Injectable

Common Use # Members Employer Paid

Infliximab RA, Crohn’s 117 $4.3M

Becacizumab Cancer 118 $2.2M

Natalizumab MS 37 $2.0M

Rituximab Cancer 52 $1.7M

Pegfilgrastim Therapy with

Chemo

68 $1.6M


Medical Rx -

InjectableCommon Use # Members Employer Paid






Chemo

68 $1.6M

Hospital Outpatient Physician Office

$200 per unit $106 per unit


DRUGS

50


Savings generated if 50% of Infliximab Injections were moved to a

Physician office?

$860,000

Futu

re

Act

ion

Medical Rx -

Injectable

Common Use # Members Employer Paid






Chemo

68 $1.6M


DRUGS


C-SECTION DELIVERY WITHOUT COMPLICATIONS, BY

HOSPITAL

Provider Cost Comparison

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Hospital 1 Hospital 2 Hospital 3 Hospital 4 Hospital 5 Hospital 6

Pittsburgh Region

2015 2016 2017

51


C-SECTION DELIVERY WITHOUT COMPLICATIONS, BY HOSPITAL

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Hospital 1 Hospital 2 Hospital 3 Hospital 4 Hospital 5 Hospital 6

Pittsburgh Region

2015 2016 2017

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

Hospital 7 Hospital 8 Hospital 9

State of Indiana Hospitals w/ PBGH

Utilization

2015 2016 2017

Provider Cost Comparison


EXPOSURE TO NON-ADHERENT DIABETICS

Approximately 10% of every workforce has Diabetes

Source: CDC, 2014

$176B in Employer Medical Cost of Diagnosed Diabetes

Source: ADA, 2012

Non-Adherent

Rates in Last 12

Months

27% No HbA1c

21% No Nephropathy Treatment or Assessment

2.4% No Medical or Drug Claims

52


$22,500Incremental Cost of 1 avoidable hospital admission for a

diabetic in the PBGH region

Non-Adherent

Rates in Last

12 Months

27% No HbA1c 21% No Nephropathy Treatment / Assessment 2.4% No Medical or Drug Claims

EXPOSURE TO NON-ADHERENT DIABETICS


TO KNOW EVERYTHING ABOUT YOUR

HEALTHCARE PURCHASING BUSINESS …

104

53


LOWER HEALTHCARE COST WITHOUT

SHIFTING THEM TO YOUR EMPLOYEES

PASBO HEALTHCARE SYMPOSIUM

DECEMBER 12, 2017


SPEAKERS

Jan Klein, Director of Business, Mt. Lebanon School District

[email protected]

Mike Garofalo, AON, Vice President

[email protected]

106

54


INTRODUCTION

Self Insured Insurance Consortium

18,000 members, 43,000 belly buttons

24 trustees – equal parts labor and management

$243 Million in annual claims ($241 Million in 2014)

No stop loss insurance

Control over our benefit grid

Funded by tax dollars

107


WHY WE BEGAN THE JOURNEY

Battle between largest Hospital provider and largest Insurer

No contract between the two (except for some fragile users)

All people in the community are caught between these two warring giants

108

55


109

MARKETPLACE IMPACTS


110

Provider Consolidation

Reduces competition

Gives large hospital systems greater

negotiating power

Higher prices for services

Increased costs for patients

Hospital System Mergers

Creation of monopolies

Fewer choices for getting care

Higher prices for services

Little to no improvement in quality of care

Denying of access to competing systems

TRANSPARENCY WAS A NEED

56


WHY THE BATTLE?

111


WHAT ARE CHOICES?

What is Important to Us?

Increase Deductibles

Shift cost to the employees Risk decrease of utilization

Ignore Rising Cost

Cost of service Older population

112

57


The pathway to addressing “quality” had to begin with…

• Education of Trustees

• Attended PBGH Forum on quality rankings of hospitals

• Build a level of understanding on the importance of quality

• Hospital Data Retrieval

• Research availability of third party data in our area

• Gain access to quality information when identified

• Validation of Information

• Confirmation that the information was not influenced by any bias

• Selection of Credible Resource

• Determine who is a more credible partner/vendor

BEGINNING OF OUR JOURNEY

113


Quantros data (www.carechex.com)

Imagine Health tiered product (http://imaginehealth.com/)

Innovu Data Warehouse

(www.Innovu.com)

New Tiered Products

New Products to Control Costs?

DISCUSSIONS WITH TRENDSETTERS

114

http://www.carechex.com/

http://imaginehealth.com/

58


115

DATA DRIVEN DECISION-MAKING


Quality Measures on Third Party Sites

Availability of Tiered Products

Tiered Product Tied to Quality

Regional Ease of Access

Cost of Quality (Is more really more?)

Educating Membership

Addressing Concerns: Will this save money?

TRUSTEE DIRECTION

116

59


• 33,352 Services

• 293 Admits

• $4,941,146 in total costs

# 1 Hospital in our region (highest

quality rating!)

• 31,047 Services

• 362 Admits

• $15,089,972 in total costs

#23 Hospital in our region (low quality rating!)

BEFORE: (OCT 2013-SEPT 2014)

Shock Claims for the Year are about $6 million at all hospitals including Children’s Hospital

117


Tiered ProductEnhanced tier has NO

deductible - pays at 100%

Standard tier has deductible - pays at

80%

Out of Network has larger deductible - pays

at 50%

Lower cost, higher quality as determined

by third party, independent benchmarks

NEW PLAN STRUCTURE

118

60


• 40,046 Services

• 328 Admits

• $7,170,357 in total costs (Up 45%)

Same # 1 Hospital in our region (highest quality

rating!)

• 6,620 Services

• 113 Admits

• $5,548,832 in total costs (Down 63%)

Same #32 Hospital in our region (low

quality rating!)

AFTER: (OCT 2015-SEPT 2016)

We were able to shift services to hospitals with higher quality results.

119


120

Profitability 2014-15: $7.0 million profit (Budgeted for a deficit of $4-5 million)

Premium increase 5.75%

2015-16: $13.3 million profit (Budgeted for a deficit of $1-2 million)


2016-17: $8.8 million profit (Budgeted for a deficit of $2-3 million)


Reduction in total Medical and Pharmacy Cost 2013-14: $240,863,436

2014-15: $231,744,453 (down 3.8%!)

2015-16: $232,805,467 (Added a school with $2.8 million in premiums)

2016-17: $243,579,138 (Added a school with $9 million in premiums)

Increase in use of highest quality ranked hospital in area

Better quality care at lower cost for our members

FINANCIAL RESULTS 2017

61


Premium increase of 1.9% (Average increase over 12 years 3.6%)

Enhanced tier has NO Deductibles (100% Plan Pay)

PCP visit has NO Copay

Specialist visit has $10 Copay

EAP Provider is included in Cost

Second Opinion Provider is included in Cost

Fund Balance of $48 Million

PLANNING INTO 2017-18

121


COMPARE OUR CURRENT RATES TO YOURS

Individual $ 575.42

Parent and Child $1,227.88

Parent and Children $1,350.64

Employee Spouse $1,487.12

Family $1,546.29

All rates are per month and include all fees, EAP, second opinion services, wellness program and pharmacy costs

122

62

THIS IS A

JOURNEY TO

WHICH OUR

ENTIRE

CONSORTIUM IS

PASSIONATELY

COMMITTED

We love questions!

123


PLAN DESIGN NEEDS FOR THE NEXT

FIVE YEARS

TIM SHROM

SCOTT LABRECQUE

63


SIT---READ---THINK---THINK AGAIN---IMPROVE

Session Objective;

To have you think about some things you may not normally think about with regard to health care

Provide some headlines, examples and discussion to understand why you cannot afford ‘do nothing’ in health care----

Provide some examples and discussion about why doing nothing does not serve your employees’ well nor provide them with improved opportunities for improved health outcomes

Pull back the curtain just a bit (scratch the surface) on some real world complexities in the health care arena within which you must provide health care to your employees and families---

125


DOING NOTHING WITH HEALTH CARE-----IS DOING

SOMETHING----& DOUBT YOU’LL LIKE THE RESULT

Definition of Insanity---Generally attributed to Albert Einstein:

Doing the same thing over and over again and expecting different results.

Considering his intellectual stature in the scientific universe, this makes some perfect, funny, and perhaps some ironic sense.

That said---in the messy uncontrolled universe, which we call the real world----it is submitted that to do what you have always done...or worse, to choose to do nothing....will guarantee that you will get different results----as the rest of the world changes around you.

Health care is too Important to stay the same....and it won’t.126

64


HEADLINE NEWS IN HEALTH CARE...AND

OTHER NEWS, NOT SO MUCH

CVS Aetna Deal to beget more consolidation (12/4/17)

$69 B CVS deal roils health care (12/4/17)

Combines CVS’ PBM and 10,000 retail pharmacy locations withAetna’s treasure trove of data (WSJ)

What will Amazon do? (i.e. Meaning...what will they do inthe pharmacy business?)

Amazon and Cerner talks are rumored (CVS is with Epic)

FDA plans to allow quicker approval of some cancer therapydrugs (12/1/17)

127


MORE HEADLINES (2)

FDA Approves (10/21/17) first chimeric antigen receptor T-cell---or CAR-T---therapy for certain types of lymphoma

It is personalized (to the patient) modified gene therapy

It enlists your own body’s cells (within the immune system) to fight the cancer....

At $373K per treatment...

Side-bar & Take away Note----to know eligibility is to know reinsurance.......or.........no eligibility is to no reinsurance.

Gilead leads this effort

128

65


MORE HEADLINES --- DRUGS (3)

Since 2000 (last 17 years for the math challenged) biopharmaceutical companies have invented more than 550 FDA approved medications ......

About 33 per year....these are not in your CBA

As of (10/10/17) more than 800 experimental cancer drugs are under development---from tiny bio-tech startups to the giant multi-nationals---$ billion's being invested...

History says---most of these do not make it out of the lab let alone to clinical trials-----and only 12% are brought to market---again...not to be found in a CBA

129


HEALTH CARE FINANCE HEADLINES(4)

Artificial intelligence (AI) and cognitive computing

Diagnostics, complex cases, pattern discernment, multiple data source

alignment---all to assist physicians with diagnoses leads and current

information on therapy treatment.

84% of Health care executives polled believe AI on-track to

disrupt and revolutionize many aspects of health care

CB Insights reports health care AI start ups are beating out

companies in every other industry in terms of completed deals

(2011 thru 2016)....i.e. follow the money...

Hospital AI market is $19B in 2016---forecast is $50B+by 2023

130

66


NOT SO HEAD LINE NEWS

50 most popular hospital inpatient EHR systems in the US

Fifty...really?

Epic (private sector) and Cerner (public sector) continue to dominate

McKessen, Medhost, Siemens, Allscripts, Meditech, et.al.

Multi-millions and billion dollar contracts---Mayo Clinic $1.5 B contract with Epic

Very very expensive---and that is just part of the IT----think mergers---think multi-hospital, provider, carrier system mergers---think, where will that ‘fixed cost’ money come from?

131


132

PARTNERS

67


BLOCKCHAIN----IS COMING---OR RATHER, IT IS HERE

ALREADY

11/3/17- Blockchain is a major focus for IBM as a whole....Watson Health sees it to have a major impact in health care

It offers enhanced security and data integrity.....and opportunities for patients to have more control over access to their data

Almost all of the nations largest Health plans are implementing or actively planning for Blockchain solutions in some form

...And....not quite ready---- quantum computers are coming

Quantum (qubits) vs Classical computers (bits)

300 bit chip is about the power of a good calculator today

300 qubits is the computing power of the number two, followed by 90 zeros (2,000,000,000,000,000,000,000,000,000,000,000,000,000,000,000.................90 of these zero’s)

D-Wave computing - Optimum routes to the airport while minimizing traffic congestion using data from10,000 Beijing taxi’s--- calc took less than ½ of a second

133


HEALTH CARE DOES NOT STOP MOVING-----EMPLOYERS CANNOT DO

NOTHING---AND MUST LEARN TO ACT WHEN DISCOVERY SHOWS

OPPORTUNITY

You need the best data you can get (and own it) for your employer and /or consortia.....over time it needs to be able to combine all the silos’ of related health information...you need to be able to access it for analytics, alerts, improved understanding, appropriate sharing...and decision making

Most decision making in employer health care plan design is blind without this—

Market turmoil and ‘roil’ will only grow.....knowing your data will better serve employee needs....and provide critical...critical insights into decision making with regard network, provider, and carrier opportunities churning on the horizon

Employers DO NOT have to ‘do’ this....but employers must find partners who truly represent their interests .....and guide and help them make informed decisions on an on-going basis in a rapidly changing market place.

Medical and Pharmaceutical advances may be ‘rocket science’...but getting control of your own data....is not.

134

68


20% SPENDING YOUR 80%----WITH NO PO?

....INFORMED DATA, ADHERENCE, & QUALITY OF LIFE

MATTERS

Mr. Scott Labrecque, Stoudt Advisors

135


THE CURRENT PROBLEM

136

Health costs for employees are rising at 4x the rate of

earnings – a steady trend for 15+ years

For employers – overall premiums are rising near 5x the

rate of inflation over same period

In 2015, average cost for family coverage ($17,545) was 36%

of average pre-tax wages ($48,098)

69


137*Data sources: 2016 Kaiser Health Study, 2015 DOL statistics


NOT ALL COMPONENTS OF HEALTHCARE

SPEND HAVE THE SAME IMPACT ON EB COSTS

138

30% 30% 29%

20% 18%

18% 19%

15% 16%

12% 4% 4%

Figure 5: Pharmacy and outpatient costs will likely take up a larger portion of employer health spending in

2018 than they did in 2008

35%

30%

25%

20%

15%

10%

5%

0%

Pharmacy

1%

Inpatient

Outpatient

16% 35%

Physician

Other

2008 share (Milliman) 2018 share (PwC projection) Percent change since 2008

Source: Milliman Medical Index for 2008 and PwC Health Research Institute projections of 2018 medical spending based on the 2017 Milliman Medical Index. http://us.milliman.com/17

Shar

e of e

mploy

er he

alth b

enefi

ts

70


THE NEW NORMAL

Explore new contracting arrangements with providers

Direct contracting/Networks within networks/Site of Care

Healthcare providers taking on additional risk and work with employers directly as well as improving care management and optimizing use of physician extenders and non clinical staff

Healthcare insurers

Work to steer patients to most effective treatments

Accelerate pricing transparency

Pay for Value Models

Drug Companies (PBM’s)

139


140

Case Study 1: “Low Hanging Fruit”Manufacturing Company

~2500 Enrolled Employees

Northeast HQ, Multi-Site

PEPM Rx cost took a huge jump in September of 2015, and after a few

months, it was clear that this was not an aberration, but the new “normal.”

71


141




P1 = 9-14 thru 8-15

P2 = 9-15 thru 8-

16

The spike was so profound, that year over year Rx costs more than doubled, to the tune of an

additional $2.8M dollars. The claims revealed that one drug, being used by three members of

a family, was accounting for the entirety of the additional spend.


142




Multiple strategies were explored that fit the Employer’s culture, did not

materially harm the members, and would meet the goal of mitigating the

spend on this specific drug. This strategy was implemented at renewal

(1/1/17) with the immediate impact of driving Rx spend down to the lowest

levels in three years. Projected savings (claims only) is ~$2.6M.

New Strategy

Implemented

72


143

Case Study 2: “White Bag It”Healthcare Company



Group with a low ($75k) ISL absorbed a Stop-Loss claim in the first month

of the plan year. The member was receiving IVIG treatment at a hospital on

a monthly basis for their condition.

The allowed amount was roughly $110k per month based on the hospital’s

contract with the plan network, which called for a discount of billed charges

by ~50%. The contract had no language as to the basis of the billed charge.


144




Medical

• J1459

Pharmacy

• 44206-043*Ship to Dr.

Plan language was immediately modified to exclude the CPT/HCPCs codes

for the offending medication as a covered service.

TPA was notified to deny pre-auth and steer the medication procurement

through the specialty pharmacy with the appropriate NDC number instead.

Specialty pharmacy would mail the medication to the Dr. so the member

would be able to receive the same medication and treatment from the same

provider, with no disruption to care or service.

73


145




Net impact was to mitigate $110k per

month in claims to $17k per month in

claims.

Net Savings were ~$1.1M annually, not

including savings of stop-loss premium and

the mitigation of a significant laser


146

Case Study 3: “Well Worth It”Tech Company


Southeast HQ

White collar company had implemented on on-site clinic and was working

with a wellness vendor on a “Healthy Heart” program, but seeing little

impacts on claims year over year.

The logic was based on the fact that

summary reports indicated Congestive

Heart Failure (CHF) and Coronary Artery

Disease (CAD) were high cost drivers

within the plan, and spend PMPY for those

conditions was above benchmarking.

74


147



Southeast HQ

Compliance Scores

CHF: 100%

CAD: 66.3%

Compliance Scores

Diabetes (II): 50.8%

Further analysis showed that members with heart conditions, while costly, were

among the most compliant with regards to evidence based medicine adherence

and gaps in care. However, members with Type II Diabetes were amongst the

least compliant.


148



Southeast HQ

Further analysis of just the diabetic population revealed that diabetics with

comorbidities of CAD and CHF had much higher hospitalization rates than

the rest of the diabetic population, and the claims spend per year on those

comorbid members was also significantly higher. Thus, the focus shifted from

Heart Health, to Diabetes.

75


149



Southeast HQ

X=2000y+6847

We performed a retrograde

analysis on our book of business to

determine the relationship

between the annual claims cost of a

diabetic versus their overall

compliance to the diabetes

standards of care. With that, we

could predict what the financial

implications would be for closing

the gaps in care within the client’s

diabetic member population.

The “Wellness” program shifted attention from heart health to a more clinical approach

and managing diabetes. Members were incented to get things like routine bloodwork

done, the plan design removed cost sharing for these services, and the onsite clinic was

encouraged to promote these services to the members. The net result was a lower

wellness spend for the plan in addition to the impacts on the claims.


150



Southeast HQ

Over a two year period, with a strong focus on closing Diabetes gaps in care, the claims

began to reflect the impacts, such that comparing costs two years later showed that the

average cost for Diabetics and members with CAD had been cut in half annually, while the

cost of CHF had be reduced by nearly two thirds.

Conservative estimates indicate that the aggregate savings to the plan over this two year

period were nearly $4M as a result in the data-driven shift in strategy.

Prevalence of these conditions

remained relatively unchanged, as

the goal was not preventive in

nature, but simply more effective

management.

jay himes, cae, executive director, pasbo...health insurance for schools symposium december 12, 2017...

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