Medical Cost Management

1

Medical Cost Management

Managing the Drivers of Medical Expenses

2

Medical Cost Management Discipline

Create a multi-disciplinary medical cost review team

Understand the cost drivers: unit cost, utilization, benefits, and claims processing

Analyze information Develop and implement

action plans for improvement

Measure results

3

Unit Cost Drivers

Underlying provider contract structures (payment terms)

New technology and services

Provider billing practices

Provider cost increases

4

Utilization Drivers

New technology and services

Expanded health benefits Membership growth Changes in membership

demographics (age, sex, medical condition)

Seasonal variations Unnecessary services

5

Managing Unit Cost

Re-negotiate troublesome contract provisions

– Stop loss– Automatic escalators– Provider charge master changes

Manage provider rate changes– Reasonable cost changes– Set benchmark rates

Seek out alternative providers– Lower cost setting– Competition for business volume– Single source vendor for select

services Employ different payment terms

– Capitation (full or partial)– Fixed case rates or per diems– Fee schedules tied to benchmarks– Pay for Performance provisions

6

Managing Utilization

Pre-certification requirements for select services, provider types and settings

Concurrent review process for inpatient admissions and continued stays based upon acceptable standards (i.e. Interqual®)

Discharge planning in concert with affected providers and member

Post-hospitalization follow up management for at-risk population and chronic conditions

Disease management programs for select conditions (e.g. CHF, Diabetes, Asthma, COPD, etc.)

Proactive member health care counseling and education for at-risk population

7

Medical Cost Review Process

Assemble Medical Review Team (CEO/COO, medical director, health services, provider contracting, provider relations, quality management, member, services, claim management, financial analyst)- meet at least quarterly

Retrieve and analyze medical cost data from paid claims

Highlight costs and trends of concern Determine factors influencing trends Brainstorm medical cost

reduction/management actions to employ along with cost-benefit analysis

Assign responsibility, timeframes and expected outcome measurement

8

Monitoring and Measuring Outcomes

Create Medical Cost Action Plan (MCAP) project document

Assign primary ownership for tracking activity & outcomes

Establish cost savings value for each action plan

Consider the MCAP as “living document”

– Quarterly results measured and reported on current initiatives

– New initiatives added when other trends of concern have surfaced

– Incorporate other business plans into MCAP if applicable (i.e. re-contracting business plan, network development or expansion plans, operational and quality improvement plans)

9

Contact Us For Detailed Consulting

Eagle Run Managed Care, LLC– http://www.eaglerunmcc.com– 937-350-5457

25 years managed care experience

Medical cost action plans are usually more detailed than described in the foregoing slides.Review of all cost drivers requires a discipline in data analysis and interpretation. The Medical Cost Review Team should be well versed in this process.