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Blind Faith: Self-Funded Health Plan Management and Hospital Billings November 16, 2012

Posted by medvision in Chronic Disease, Employee Wellness, health data, Healthcare Costs, Healthcare Reform, Insurance Plans, Risk Management, Rx Costs, Uncategorized.
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Blind Faith: Self-Funded Health Plan Management and Hospital Billings

 Health CostsMany things concerning our current healthcare situation leave me in amazement. For example, today an article featured in “The Hill” highlighted a 4-5% decrease in healthcare inflation, which is a positive sounding reduction. http://tinyurl.com/czmmdz4  The national consultant attributed this to America’s adoption of high deductible health plan programs. This would seem logical if our national problems were based upon members utilizing too many $100 doctor visits. In other words, make patients 100% responsible for funding doctor visits, prescription medications and other high-value, low-cost health services. This sounds terrific until one discovers an excess of 75% of our national healthcare expenditures go to mitigate/control existing chronic disease. So is the logic “prevent the low-cost services to inflate high cost chronic disease services”?

 Unfortunately, the above can only make sense to plan managers who have no independent, actionable data. One simple exhibit, the expense distribution analysis, would show plan managers that a very small number of their members account for huge expenditures of claim dollars. Let’s assume a plan provides health benefits for 10,000 members (employees, spouses and children). If together the plan sustains $36 million in annual claims, a typical report would note a per-member-per-year, PMPY, expenses equaling $3600.  If the real expense distribution analysis was available, one would see:

-Top 1% (100 members) incur annual average claims of $90,000 each;

-Next 4% (400 members) incur $35,000 each;

-Next 25% (2500 members) incur $3000 each;

-Next 20% (2000 members) incur $1500 each; and

-Bottom 50% (5000 members) incur $500 each.

Notice the above does not include member paid coinsurance or monthly payroll deductions for coverage. Now, the plan manager is  advised to increase the deductible to $2000 per member before any plan benefits are payable. Why? Give members skin in the game! Immediately, it’s easy to see 50% are completely disenfranchised from any benefit payable. Does it make sense for the plan sponsor to eliminate benefits payable for the bottom 50% to 60%?  How much impact will the new $2,000 deductible have on the top 1% members spending an average of $90,000 per year?

Remember that very sick members are not consumers in the sense of purchasing an automobile. They are fighting for their lives. The bottom 50% of members are not consumers either, as the vast majority are not in life or death disease struggles.  Due to the 100% expense, these 50% are foregoing necessary wellness visits and other necessary disease management services. From a risk management standpoint, this plan design doesn’t compute.  I think this builds a speed lane into the top 5%/1%!

 The centerpiece of my consulting practice at Med-Vision is actionable, independent, HIPAA compliant, patient centric health plan data. Recently, while digging through a client’s outpatient hospital data, I noticed a $7 million paid run of charges recorded under revenue codes entitled — other pharmacy IV solutions and pharmacy incidental to radiology. These have no detail, no backup, and will require the administrator to request itemized billings to investigate. This could be totally legitimate, but I find it amazing clients are scouring the lunch tabs of their sales force and increasing the deductible for needed member preventative health services, while blindly paying $7 million for possible saline injections.  If this isn’t a home run example of the necessity of actionable data, nothing else is.

I often joke that many large self-funded health plans could be purchasing someone a brand-new Mercedes- Benz, S-500, each month with no notice.  It’s time for employers to take notice, evaluate their plans, implement solutions, and gain control of their healthcare costs.  What’s more, with the right plan design and data analytics, costs can be cut while simultaneously enhancing benefits and improving the quality of care.


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