Advisers looking for innovative ways to help their clients attack health care costs now have a new arrow in their quiver: the nascent field of surgery benefit management. SBM combines the use of medical centers of excellence and medical tourism with data mining, predictive modeling, health coaching and case management.

EBA caught up with Vic Lazzaro, CEO and cofounder of BridgeHealth Medical, a Denver-based firm that is pioneering the SBM concept. Prior to launching BridgeHealth in late 2007, he was CEO of UnitedHealthcare for the Mountain states region.

 

How do you define the SBM concept?

Anyone familiar with pharmacy benefits management will "get" surgery benefit management. Everybody knows what a PBM is. What they may not know, however, is that the total pharmacy spend is only about one-third that of surgery. There isn't yet a clear, focused view of the whole surgery spend.

According to CMS data, total health care spending in 2008 was $2.3 trillion, including Medicare and Medicaid spending as well as private-sector spending. If we look at the components, the largest spending category - about one-third - was surgery, at about $700 billion.

Obviously some of that cost is not addressable through management. If somebody breaks a leg, no one is going to get in the way by trying to manage that - they're going to get the patient immediate care. But a very high percentage of surgery is manageable and addressable.

 

What drives the cost of surgery?

There are two sides to this: the supply side and the demand side. The supply side is the providers - the hospital or ASC, the anesthesiologist, the surgeon, and the related drugs. There are some measures that address this, such as second opinions. And in the case of transplants, there are centers of excellence.

What we have done at BridgeHealth Medical is to address the supply side and take many of the concepts that are used for transplants. We said, "Let's go to centers of excellence" - hospitals that are rated in the top quartile in their specialty by an independent group like CareChex or Delta Group.

We take the same approach as transplant networks, which are contracted solely in their specialty. This is distinctly different than most carriers and TPAs. And as with transplants, it must be case rate, fully transparent and DRG-based.

We focus on hip replacements, knee replacements, lower back surgery, neurosurgery, cyber knife, gamma knife, bariatric and many other procedures that are high-dollar, low-frequency procedures, but generally schedulable. We pay the provider in advance, which is why we get a very deep discount. So there are typically discounts of 20% to 40% - even 50% - through domestic centers of excellence in our network.

On the demand side we focus on educating the patient. It's the simplest of things, such as advice on what to ask your physician or your hospital, like how many procedures they have done and what the outcomes were. We're trying to get the patient to seek the highest quality.

One will often find, of course, that higher quality results in better outcomes, lower return to surgery, lower complications and faster return to work We actually like the term, "centers of value," because not only are these of higher quality, they're lower priced as well.

 

How do you educate patients?

There are three levels of education. The first is static - either a web page or printed material. Then there's web interactive, then coaching - which could be telephonic or chat. At BridgeHealth we're developing an enhanced, online interactive approach that will combine web-based content and individual coaching.

 

How do you link all this?

This is where predictive modeling fits in. When we work with an insurance carrier or an employer, we begin by looking at their historical claims data. Let's say an employer had five knee replacements, three hip replacements, etc., and spent $1 million last year on surgeries that lend themselves to centers of excellence. If all of those folks had gone to a BridgeHealth center of excellence, the employer's cost would have been only $700,000. That's probably going to be about 5% to 10% of that employer's total medical expenses.

Then we say, using a propriety predictive model that we have - the basis of our "Early Indicators" product - we're going to look at your claims over the last six months, and every month we're going to look at your ongoing claims and identify those people who are on a path to some of these surgeries.

Let me give you a very oversimplified example. A patient in their claims records shows up with an MRI or CAT scan of a knee. Perhaps they're getting cortisone shots, and maybe they've had some physical therapy. We're on the road to something happening with that knee. So now we've gone from the typical concept of a wellness plan, where you're talking to 100% of the employees, to targeting in on who is most at risk of spending the employer's money on care. Furthermore, our algorithms can stratify that to yield, for example, a 90% probability of surgery within six months, or 70%, or 50%, etc. We had a team of physicians in five specialties come up with these algorithms.

So we've assembled all the data, including lab tests, pharmacy, diagnostic procedures, office visits, and lumped them into a type of surgery that they're likely leading to. Now with some of them we can't say precisely, "It's going to be this," but we can say, "It's probably going to be one of these four."

Then we agree on an outreach plan for those targeted patients. We call the individual to inform them about the program their employer has provided through BridgeHealth and describe the incentives available to go to one of our centers of excellence. At that point the dialogue begins. We introduce them to choices and alternatives to surgery. For example, regarding lower back surgery, some choices to talk to their physician about would be to lose weight, exercise, watchful waiting, or pain management.

Our objective is to make members aware of their choices, and have the employer modify a self-insured plan to incentivize their covered lives and select a center of excellence. This can be done very simply and off-cycle. In fact, we recommend that it be done off-cycle so it doesn't get lost [during] open enrollment.

 

Describe a typical client and your price structure.

A typical client is between 300 and 5,000 employees. We charge one of two ways - either a PEPM or per case that actually goes for surgery. Most are currently on the case rate, which offers the employer a very attractive price because they are at no cash-out risk. Brokers typically bring us in to demonstrate that they're looking at cost saving for their self-insured clients. For them, it's an opportunity to show that they're a thought leader.

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