Nine Ways Regional Health Plans Can Reduce Costs

Regional payers are increasingly under fire from all corners: They don’t have the capital or people to compete with the larger payers, who can offer more comprehensive plans at lower costs.

And now with retailers like Walmart and Amazon getting into the marketplace with new health insurance concepts aimed at younger, healthier (and less-costly) Americans who are the foundation of any health plan, the risks of becoming commodities-or even going extinct-go even higher.

What many regional payers are discovering, however, is that the secret sauce for fending off these pressures and creating a unique niche is analytics that give them insights into the total cost of care for their overall populations as well as key specific populations. By gaining a much deeper understanding of who their sickest patients are and what levers they can pull to improve the health of their sickest members, they are learning where to apply their limited resources to drive better health outcomes.

The result is a level of efficiency that helps them lower their costs and improve quality as well as provider and patient satisfaction. In other words, achieve the Quadruple Aim.

By using data effectively, they can build a more targeted and personal relationship with each member, giving each of them as much (or as little) support as they need. This enables regional health plans to distinguish themselves from the impersonal experience of large payers (and retailers) while creating more member loyalty as well.

Targeting resources appropriately

Unlike large payers and retailers, regional health plans can’t just throw money at problems. Instead, they must use analytics wisely to determine where their resources will have the greatest effect.

It is well understood in healthcare that the sickest 5% of a health plan’s population accounts for 50% of the cost. They hold the greatest risk, so clearly the first step is to identify who those members are so they can be targeted for the appropriate interventions.

But it is also important to identify those with rising risk of becoming part of that 5% in the future. By keeping them healthier now, regional health plans can reduce their exposure immediately as well as significantly lower their future costs. 

Related article: Rising Healthcare Costs Require Vigilance

 For example, under fee-for-service, an orthopedic surgeon will tend to automatically choose the surgical option to solve most issues. In a value-based reimbursement contract where members are capitated, however, a change in prior authorization requirements may in many cases encourage those surgeons to pursue non-surgical (and less costly) interventions such as physical therapy first, especially if there is no financial penalty for doing so.

By using data and analytics to remove some of the variation in care, and orient it toward the least-costly, medically effective option first, regional health plans can quickly reduce their costs by 4 to 5% while increasing member satisfaction.

Ingredients in the secret sauce

Inpatient management and changing requirements around prior authorization are just two of the nine levers regional health plans can use to help reduce the total cost of care for members and themselves. The full list includes:

• Benefit design. Looking at the makeup of the population and creating plans that address their prevalent needs.

• Case and disease management. Once populations are stratified by risk, plans can dedicate resources to helping high-risk members become healthier and examine how mitigating certain conditions now will prevent rising risk members from jumping to the next level.

• Network choice and unit cost. This involves using analytics to evaluate who the high-performing providers are-the ones with the highest quality at the lowest cost-and building networks that include a high percentage of these providers.

• Patient education, motivation. There are two pieces to this lever. The first is to build the resources to help those who are already interested in self-managing their conditions learn how to do it more effectively. The second is to understand what will motivate as many others as possible to improve their health. For example, a member with COPD who wants to walk his daughter down the aisle will be more motivated to adhere to a plan of care than if providers or health plans simply talk about “better health.”

• Provider education and incentives. Demonstrate how adopting changes will help providers deliver better outcomes to their patients, and how they will share financially in the rewards, to overcome the natural resistance to change.

• Inpatient management. When members are in the hospital, create interventions that will help them recover quickly and set them on a path to remaining healthier/avoid unplanned readmissions once they are discharged.

• Value-based agreements. Remove the financial incentive to deliver more services or order additional, expensive tests and instead pay for care on a fixed per-member per-month basis, adjusted for risk. This lever offers incentives for improving the quality of care and keeping members healthy while removing a typical source of fraud, waste and abuse.

• Claims accuracy. Ensuring that all care is fully documented for medical necessity, and that it is in line with the care received through other providers in the region, helps create a checks and balances system throughout the health plan’s network.

• Prior authorization. As mentioned earlier, health plans can use analytics to help remove unnecessary variations and keep providers in their network more consistent in care delivery and cost. They can also “gold card” certain providers who have proven their reliability for specific procedures to reduce the administrative burden and enable them to deliver care faster.

Sweet taste of victory

It is becoming tougher and tougher for regional health plans to compete with industry (and retail) behemoths by doing what they’ve always done. In fact, the situation may seem dire at times.

But by taking advantage of the wide availability of data coupled with advanced predictive and prescriptive analytics, these same plans can not only hold their own but thrive in a hyper-competitive market.

Kevin Keck, MD, serves as chief medical officer for SCIO Health Analytics, an EXL company, and leads the clinical analytics development team. His responsibilities include assessing the leakage and the impact of quality and cost in provider analytics.