There is a huge opportunity to reduce healthcare costs if patients understand the expected costs before receiving services and especially if they can compare providers. One of the many provisions in the Affordable Care Act1 is a requirement that every payer must have a patient cost calculator so that members can get an estimate of their costs before receiving services. Most payers already have some type of patient cost calculator but there are significant variations in the range of estimates and specifics for individual providers.
The best calculators allow the user to compare services (e.g. office visits, MRIs) or episodes (e.g. surgeries that include the surgeon, anesthesia, diagnostic tests and facility charge). For episodes they allow the user to build the total cost by component, adjusting which facility and physician(s) to use. The leading calculators show alternative providers within the service area radius input by the user.
Quality and satisfaction scores are typically integrated with the calculator so that users can make a complete informed decision. This has been the goal of consumer driven health plans and transparency efforts for a long time. There are a few stumbling blocks that are slowing the process and/or making the calculators less effective than they could be:
1) Confidentiality provisions in payer/provider contracts. Historically many contracts between the insurers and the hospital/physician providers had confidentiality provisions. It should be easy to eliminate these but many payers and providers are still resisting the transparency push. Most current calculators are listing some provider cost data as “not available” but they usually list them in such a way that implies they are the highest cost provider. If members are educated on how to use these tools and they are able to reduce their out of pocket costs that will pressure the “confidential” providers to eliminate those regulations. Alternatively, legislation could be passed to eliminate confidentiality provisions.
2) Hard to compare fee schedules and reimbursement arrangements. Most payers still have a variety of fee schedules for their providers so that even if you find out hospital A is 15% more expensive than Hospital B for a CT Scan, it may be that a different procedure could be lower cost at Hospital A. Payers can use the same fee schedule for all providers with varying multiples to allow providers to be high or low cost which will allow the estimates to still be relevant even if other services are performed. Currently most calculators are limited to the most frequent services and episodes, standard fee schedules will allow the calculators to cover every service. See my article on the Transparent Cost Network for more information. http://insight.milliman.com/article.php?cntid=7927
3) Efficiency comparisons for episodes of care. The variation within types of episodes is still very large. It is difficult to account for all the reasons for variation and have enough episodes for each provider to have a good estimate of their efficiency for every type of episode they perform. This is an area that will continue to evolve and improve.
Currently these calculators are not being utilized very frequently. There is a huge opportunity to engage members in the cost of the care they are receiving and educate them on their options. I believe this will have a significant impact on the level of competition among providers and will reduce costs. Alternative benefit design options that leverage reference based pricing can make this information even more effective. That will be the subject of a future article.
Exhibits A and B illustrate service and episode based estimates assuming 20% coinsurance.
As health plans and other organizations prepare for Health Reform – including meeting Health Exchange requirements and preparing and competing for the expansion in government program business – there is a renewed focus on meeting accreditation and quality measurement requirements. These requirements are promulgated by organizations such as CMS and state regulators and administered by the National Committee on Quality Assurance (NCQA), URAC and other auditors that are certified by these government agencies.
For experienced health plans with generously staffed Quality Management departments this is old hat to them. To others – newer health plans, provider-sponsored health plans and community-based organizations – the language of the requirements can be foreign and the work required to meet them can seem ominous.
There tends to be theme songs to some of the key quality regulations and requirements. What data do you have that shows your knowledge of the population? How do you use the data to identify opportunities in the population? And how do you measure that your initiatives have had any impact?
Tools like MedInsight, with its clinical analytic and the risk scoring capabilities can be very effective in addressing the needs of some of these requirements. Most organizations are using these tools to identify preventive care gaps and address those gaps but many are missing opportunities to address other critical accreditation and quality improvement areas.
Some of these opportunities include:
- NCQA Health Plan Quality Improvement Standard 7 – requires the ability to identify members with complex illnesses and comorbidities, establish identification methods and conduct an annual population evaluation to determine the continued validity of those methods.
- NCQA Health Plan Quality Improvement Standard 8 – requires the ability to identify condition populations for disease management and implement a stratification approach for selective intervention.
- CMS Special Needs Plan (SNP) Model of Care (MOC)- requires the ability to define the needs of the population, identify frail and high need members and provide interventions based on analysis of population needs.
MedInsight and the Milliman Advanced Risk Adjuster (MARA) provide the ability to efficiently and consistently identify candidates for case and disease management, identify comorbidities and stratify members for targeted intervention. As quality managers and care management leaders gain access to this information these teams will find strong evidence of their ability to meet these accreditation requirements and a solid source of qualified members who will benefit from their programs.
Health Plan (Plan) medical management functions are designed to provide solutions to a wide range of objectives including, controlling utilization, improving clinical quality, credentialing physicians and facilities, complying with regulatory requirements and meeting market expectations. The Accountable Care Act’s provision limiting administrative costs has created an environment where all Plan administrative services are under pressure to credibly show value with a focus on demonstrating financial value. This has brought increased pressure on medical management executives to show the value of all medical management functions. Some functions meet regulatory and market demands and therefore are basic business requirements. For these services the emphasis should not be on demonstrating financial value but on demonstrating best practice efficiency meaning the basic business requirements are being met at the lowest cost. Other medical management functions directly target controlling utilization and claims cost and are expected to result in a quantifiable financial return on investment (ROI). Reliable tools and metrics for measuring the ROI for medical management have not been readily available so Plan executives have had to rely on a variety of non-standardized and often unreliable methods.
This blog post explores the characteristics an idea medical management ROI tool or tools would have and shares Milliman research progress towards developing a portfolio of tools designed to provide solutions for Plan executives wanting to credibly measure ROI of medical management.
Future blog posts will describe each tool in detail.
We believe the ideal medical management ROI tool would have these characteristics,
- Calculates ROI using credible methods that do not over or under value the financial impact of medical management
- Does not credit medical management with value produced by non-medical management interventions such as plan design, provider contracting and others
- Accepted as credible and valid by key internal and external audiences including,
- Plan executives
- Plan actuarial and finance functions
- Plan marketing
- Employer groups
- Providers in risk arrangements where the Plan provides medical management services
- Uses industry standard metrics allowing benchmarking and credible comparison with other Plans