Good Data Can Help Cut Care Costs

September 28, 2004
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GRAND RAPIDS — As health-care costs continue their double-digit increases throughout the United States, employers have responded with a variety of cost-cutting steps.

Many of these responses mirror those applied in other business decisions: cost-sharing, seeking new vendors, raising employees' premium shares and co-pays. Other companies have embraced creative options such as consumer-driven health care and wellness plans.

As in all business decisions, it is important to have as much information as possible in determining a course of action.

Therein lies a problem.

In recent years, many employers have switched time-off standards from sick days to personal days, eliminating one of the few direct methods of measurement of health-care cost drivers. The only concrete system of such measurement still available lies in health plan claims. But HIPPA regulations prevent an employer from seeing much of that data.

Designed to prevent an employer from discriminating against employees on the basis of health, the laws prevent those responsible for making claims decisions from having access to the specifics of claims. What most employers see is a breakdown by usage of facilities, doctors and prescribed medicines.

A third-party consultant, however, can help employers elicit the information they need to develop a strategy and evaluate its effectiveness without violating HIPPA's strictures.

"When a plan reports back to an organization, they do so with only the pure facts and numbers about how much they spent in the hospital for their membership and their plan," explained Beth Wierenga, vice president and senior consultant with the Grand Rapids office of Palmer & Cay, a benefits consulting and insurance brokerage firm.

She explained such reports relate how much was spent in certain categories — inpatient or outpatient stays, prescription benefits, etc.

"With the new HIPPA laws there is less information that people can see," Wierenga added, "but when you work with an organization that can do some data mining, they can do an analysis and provide a detailed report without identifying any particular person. Then they give an employer some recommendations and conclusions."

Palmer & Cay believes that it is well positioned to help employers understand health plan costs and develop strategies to lower them. By combining two skill sets — its health plan data analysis tool and the expertise of its clinical strategies — the 38-office, Georgia-based Palmer & Cay offers a data mining service called Intelligence on Health.

"You can't develop a strategy by bed days," said Melissa Tolber, R.N., a vice president at Palmer & Cay's Milwaukee office.

"You need to turn that data into information you can use. If 50 percent of your work force is women, you should be asking questions like, 'How many have had PAP smears?'"

A registered nurse for 20 years, Tolber has been active in developing and overseeing case management, utilization review, quality assurance/improvement and disease management strategies for insurance plans, vendors and employers.

Since joining Palmer & Cay, Tolber has become responsible for the data-mining service and, through that, helps to balance a patient's privacy with the group's fiscal needs.

Tolber explained that employers may use many sets of fragmented data to determine what is driving the costs of their health-care plans.

"The first question you need to ask is what goals are you trying to reach," she said. "I have one client who just wants to improve retention, others who want to lower costs. That will determine what kind of solutions we should look for in the data."

For lowering costs, there are a myriad of steps that may come to light through examining health plan data from different angles.

It is becoming widely understood that a small percentage of plan members are responsible for the total cost of claims, with chronic illnesses such as diabetes, asthma and coronary heart disease the most common.

On this subject, Tolber shared some case studies that demonstrated some of the surprises that may be found in the course of data mining.

For one group, she said, the most common chronic illness claims arose from diabetes (1,246 claims), asthma (992), lower back pain (1,001) and coronary heart disease (888). The highest of all medical costs were diabetes ($13,350,791) and coronary heart disease ($14,601,676).

In the future, she said, the group's providers should work toward preventing such diseases, which can be especially difficult, if not impossible, to recover from.

But looking at the data further, the cost per member of each disease tells a different story. At $10,715, diabetes is far from the most costly disease per member even if it holds the highest total cost and highest instance rate.

Congestive heart failure on the other hand, is nearly the least common chronic illness in this group. But at a cost per member of $46,244, the disorder's sufferers account for nearly four times the cost of those with diabetes.

She said such a situation presents the employer with an opportunity for a rapid ROI because congestive heart failure is one of the easiest chronic illnesses to manage. A change in diet and added exercise can produce results in six months.

Another example involved emergency room visits. Tolber said the largest number of ER claims for one group were attributed to non-spouse dependents. But the charge per visit of dependents was on average much lower than that of employees or spouses, suggesting that a great many emergency room visits were not necessary.

She suggested that such a claims level could be modified fairly easily by raising the ER co-pay.

Tolber said using a third-party consultant provides an additional benefit over just scrubbing claims data: It allows for an impartial assessment of coverage.

"I used to work for a plan that had a professional group as one of its clients, and looking at its members, they could have used a cardiac program," explained Tolber.

"The salespeople had sold them a prenatal package. That was the hot thing, but they only had something like one baby a year. It was great revenue for us, but it wasn't what they needed."    

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