Reducing clients’ health spend by taking an axe to claims
WASHINGTON D.C. – Benefit advisers win business by driving down the cost of healthcare for their employer clients, but this requires more than reducing premiums or switching to a high deductible plan. Real cost containment requires taking control of the employer’s healthcare supply chain.
That was the message brokers heard last week during a panel discussion at the World Health Care Congress held here. The point was driven home by Bob Gearhart Jr., a partner at benefits brokerage DCW Group in Boardman, Ohio. Regardless of what type of plan an employer has in place, he told the advisers in attendance, employers will pay 80 to 85 cents out of every dollar of their healthcare spend for medical and pharmacy claims.
“About 4% of their cost comes from miscellaneous, 30% from professional services, 17% from pharmacy, 30% from inpatient hospitals and 19% from outpatient hospitals,” Gearhart elaborated. “That means brokers are not going to solve the cost containment issue by changing a deductible or adding a health savings account.”
Even for fully-insured clients, Gearhart noted, these costs will dictate the premiums that their carrier must charge to sustain their margins.
Fellow panelist Nelson Griswold, president of Bottom Line Solutions, a consultancy that works with benefit advisers, told the audience that to reduce their healthcare spend, employers must learn to manage their healthcare supply chain in the same way that they manage every other aspect of their business.
Drawing an analogy with how most companies purchase new computer equipment, Griswold noted that an employer would never give each employee a credit card and tell them to go buy their own computer.
“The employer chooses the computers that are most useful to his or her team, the computers are then found at the best price and, once the price is negotiated, the employer makes the purchase,” Griswold said. “But with benefits, employers give every employee an unlimited credit card—known as insurance—allowing them to go anywhere they want, for any procedure that can be prescribed, at any time and for any price.”
Audits to the rescue
To help rectify this, both Griswold and Gearhart recommend using a third-party service to audit an employer client’s claims to ensure that the costs are in line with other comparable claims.
Elaborating on this, Ben Krambeck, CEO of Claim DOC in Des Moines, Iowa and another member of the panel, explained that his firm audits employee claims post procedure to ensure that the cost falls within established norms. Increasingly, he said, many do not.
“Up until six years ago I never saw a million-dollar claim,” Krambeck told the attendees. “I saw premature twins get up to about $980,000 once, but never a million.” But with the advent of the Affordable Care Act, he said that began to change, and now million dollar-plus claims are increasingly common.
To corral the problem, Claim DOC reviews the pre-procedure bloodwork to ensure that the appropriate surgery was performed in the first place, and demands itemized bills that break down the cost for each service that was provided.
“With those two requirements we have caught a ton of wasteful and abusive practices that drove up the cost,” Krambeck reported. These have ranged from excessive spending on medical equipment to failures to screen patients beforehand for possible medical complications.
Unaudited, the costs for these errors wind up being footed by the employer of the covered employee. “Why is the negligence of the hospital the employer-sponsored benefit plan’s responsibility?” Krambeck asks. But all too often, he said, “The TPA isn’t asking this question, the stop loss carrier isn’t asking that and the employer is not asking this question.”
A fourth panelist, Tom Stautberg of Stautberg Benefit Advisors in Cincinnati, Ohio, offered yet another way to contain claim costs. In addition to adopting referenced-based pricing and direct contracting, he recommends that his clients institute physical capability evaluations.
Such evaluations are used to screen prospective hires for any physical limitation that would interfere with their job duties—such as remaining on their feet for an extended period of time or lifting a certain amount of weight. These evaluations ensure that new employees are capable of performing their jobs, Stautberg said, avoiding the likelihood of a future medical claim if they are not.