jay himes, cae, executive director, pasbo...health insurance for schools symposium december 12, 2017...
TRANSCRIPT
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
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CHOOSING THE RIGHT HEALTHCARE
BENEFIT PROGRAMCHARLES E PETERSON, JR, MBA, SFO, PRSBA
JONATHAN A SAPOCHAK, FSA, MAAA
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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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THREE-LEGGED STOOL
Imperfect metaphor
Emphasis on the bottom of the pyramid
Three legs
Plan design
Eligibility
Employee premium cost-sharing
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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
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FUNDING ARRANGEMENTS
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Illustration
is not drawn
to scale!
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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
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PLAN DESIGN OPTIONS
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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
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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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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.
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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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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.
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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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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”
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ELIGIBILITY
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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)
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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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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
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PRESCRIPTION DRUG CARVE-OUT
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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
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CARVE-IN VS CARVE-OUT
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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CARVE-IN VS CARVE-OUT
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
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Source: Health Affairs Blog, 6/13/2017
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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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MAJOR ISSUES IN PHARMACY CONTRACTING
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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MAJOR ISSUES IN PHARMACY CONTRACTING
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?
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MAJOR ISSUES IN PHARMACY CONTRACTING
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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PRESCRIPTION DRUG MANAGEMENT
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Source: CVS Health Insights, 3/15/17
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Source: CVS Health Insights, 3/15/17
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34Source: CVS Health Insights, 3/15/17
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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
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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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STOP LOSS
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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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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)
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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
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CHOOSING AN ATTACHMENT POINT
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
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CHOOSING AN ATTACHMENT POINT
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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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
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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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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
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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
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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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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
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QUESTIONS?
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CONTROLLING PHARMACY COSTS
INCREASED PRESCRIPTION
DRUG TRANSPARENCY WITH
DATA ANALYTICS
DEBBIE PARTSCH, PHARM.D.
CHIEF PHARMACY OFFICER, INNOVU
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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.
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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
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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
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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.
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Which model is best for you?
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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?
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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
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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.
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* 2016 national data trended 8.6% for brand inflation
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GENERIC UNIT COST COMPARISON
SCHOOL DISTRICT CLIENT
• 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.
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MEDICAL PHARMACY
SCHOOL DISTRICT CLIENT
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$877 ThousandClient cost for
Infliximab 2017 YTD
$132,000
Potential Savings with
Regional Price
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POTENTIAL LANDMARK ACQUISITION CVS - AETNA
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Will this reduce
cost for the
consumer?
Why would these
profitable
companies
consider merging?
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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.
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QUESTIONS?
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PROVIDER CONSOLIDATION:
WHY … AND WHAT CAN WE EXPECT?NED LAUBACHER
VICE PRESIDENT, STRATEGY
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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
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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.
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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?
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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
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THE 2 INGREDIENTS
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• 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
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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
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HOW TO MIX THE INGREDIENTS
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer Benefits)
Self-Insured Employers
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
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PAYER OF RECORD
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer
Benefits)
Self-Insured Employers
Patient Pockets
Who Sets Price to be Paid?
1. Medicare Fee For Service
2. Medicare through Health
Plans & PBMs
73
Network
Agreement
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PAYER OF RECORD
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer Benefits)
Self-Insured Employers
Patient Pockets
Who Sets Price to be Paid?
1. Medicaid Fee For Service
2. Medicaid through Health
Plans & PBMs
74
Network
Agreement
38
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PAYER OF RECORD
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer
Benefits)
Self-Insured Employers
Patient Pockets
Who Sets Price to be Paid?
Health Plan & PBM
Fee for Service
75
Network
Agreement
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PAYER OF RECORD
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer
Benefits)
Self-Insured Employers
Patient Pockets
Who Sets Price to be Paid?
Health Plan & PBM
Fee for Service
76
Network
Agreement
39
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PAYER OF RECORD
Payment for Care
Medicare
Medicaid / CHIP
Health Plans & PBM
(Fully-insured Employer
Benefits)
Self-Insured Employers
Patient Pockets
Who Sets Price to be Paid?
Health Plan & PBM
Fee for Service
77
Network
Agreement
78
BABIES GOES BOOM
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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)
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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
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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
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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
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1 One day of headlines, Becker’s Healthcare Review, December 5, 2017.
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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
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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?
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WE ARE IN THE HEALTHCARE BUSINESS
How Do Providers View the Employer?
As a Desired Revenue Source
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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.
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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, …
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I SPEAK HEALTHCARE
Provider Sound Bytes Translator
“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.
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I SPEAK HEALTHCARE
Provider Sound Bytes Translator
“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?
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PROVIDERS’ CONTEXT
These Actions Make Absolute Sense in Light of…
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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)
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BUT THE EMPLOYERS’ VIEWPOINT CANNOT BE
IGNORED!
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HERE’S YOUR BURNING PLATFORM
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• 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
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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.
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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
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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
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Medical Rx -
InjectableCommon 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
Hospital Outpatient Physician Office
$200 per unit $106 per unit
SITE CONVERSION FOR INJECTABLE
DRUGS
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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
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
SITE CONVERSION FOR INJECTABLE
DRUGS
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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
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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
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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
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$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
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TO KNOW EVERYTHING ABOUT YOUR
HEALTHCARE PURCHASING BUSINESS …
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LOWER HEALTHCARE COST WITHOUT
SHIFTING THEM TO YOUR EMPLOYEES
PASBO HEALTHCARE SYMPOSIUM
DECEMBER 12, 2017
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SPEAKERS
Jan Klein, Director of Business, Mt. Lebanon School District
Mike Garofalo, AON, Vice President
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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
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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
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MARKETPLACE IMPACTS
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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
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WHY THE BATTLE?
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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
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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
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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
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DATA DRIVEN DECISION-MAKING
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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
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• 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
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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
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• 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.
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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)
Premium increase 2.75%
2016-17: $8.8 million profit (Budgeted for a deficit of $2-3 million)
Premium increase 2.25%
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
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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
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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
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THIS IS A
JOURNEY TO
WHICH OUR
ENTIRE
CONSORTIUM IS
PASSIONATELY
COMMITTED
We love questions!
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PLAN DESIGN NEEDS FOR THE NEXT
FIVE YEARS
TIM SHROM
SCOTT LABRECQUE
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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---
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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
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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)
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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 $373K per treatment...
Side-bar & Take away Note----to know eligibility is to know reinsurance.......or.........no eligibility is to no reinsurance.
Gilead leads this effort
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MORE HEADLINES --- DRUGS (3)
Since 2000 (last 17 years for the math challenged) biopharmaceutical companies have invented more than 550 FDA approved medications ......
About 33 per year....these are not in your CBA
As of (10/10/17) more than 800 experimental cancer drugs are under development---from tiny bio-tech startups to the giant multi-nationals---$ 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
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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
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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?
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PARTNERS
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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
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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.
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20% SPENDING YOUR 80%----WITH NO PO?
....INFORMED DATA, ADHERENCE, & QUALITY OF LIFE
MATTERS
Mr. Scott Labrecque, Stoudt Advisors
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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)
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137*Data sources: 2016 Kaiser Health Study, 2015 DOL statistics
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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
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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)
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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.”
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Case Study 1: “Low Hanging Fruit”Manufacturing Company
~2500 Enrolled Employees
Northeast HQ, Multi-Site
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.
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Case Study 1: “Low Hanging Fruit”Manufacturing Company
~2500 Enrolled Employees
Northeast HQ, Multi-Site
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
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Case Study 2: “White Bag It”Healthcare Company
~400 Enrolled Employees
Northeast HQ, Multi-Site
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.
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Case Study 2: “White Bag It”Healthcare Company
~400 Enrolled Employees
Northeast HQ, Multi-Site
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.
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Case Study 2: “White Bag It”Healthcare Company
~400 Enrolled Employees
Northeast HQ, Multi-Site
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
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Case Study 3: “Well Worth It”Tech Company
~850 Enrolled Employees
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.
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Case Study 3: “Well Worth It”Tech Company
~850 Enrolled Employees
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.
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Case Study 3: “Well Worth It”Tech Company
~850 Enrolled Employees
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.
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Case Study 3: “Well Worth It”Tech Company
~850 Enrolled Employees
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.
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Case Study 3: “Well Worth It”Tech Company
~850 Enrolled Employees
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.