Copyright © 2006 Business Insurance

"Wealth of data helping employers control costs" October 31, 2005

by LOUISE KERTESZ

 

Through technology that stores, integrates and analyzes data from medical, pharmaceutical and other service claims, insurers and employers are gaining unprecedented access to aggregated information they're using to control health care costs.

Only the largest employers have the resources to maintain health care data warehouses. And, increasingly, "employers are getting out of data warehousing," according to Dr. Phillip Polakoff, a principal at New York-based Buck Consultants Inc. "Most employers are downsizing their health benefits department," Dr. Polakoff said, "so they don't have the capacity to have independent analysts in house."

Conversely, many employers now have access to vast amounts of data and analysis through their health insurers, employee benefit consultants, third-party administrators or group purchasing associations. These firms maintain data warehouses or contract with warehousing vendors such as Ann Arbor, Mich.-based Medstat and apply powerful new analytic tools from companies such as Boston-based DxCG Inc.; San Jose, Calif.-based Resolution Health Inc.; and Orlando, Fla.-based MEDai Inc.

The new tools, through retrospective analysis or predictive modeling, turn employers' raw health care data into information they can use to control costs.

San Francisco-based bank holding company Wells Fargo & Co. has worked with Medstat for 20 years for data warehousing and analysis, according to Sally Welborn, vp of corporate benefits at Wells Fargo. The company also has partnered with Hewitt Associates of Lincolnshire, Ill., which has a license to run the bank's pharmaceutical data through a DxCG modeler. "We're looking for trends (and for) which conditions appear most often in our population so we can focus communication, disease management programs and wellness initiatives," she said.

In the past, much data analysis was done using "the blunt instrument of age and sex," she said. The DxCG tool more accurately defines the risk of the populations enrolled in Wells Fargo's several health plans. "If an employer is not looking at the risk a plan is carrying, that could negatively impact the way employee contributions are set, and it may drive people away from an efficient plan," she said.

Ms. Welborn conceded that warehousing data for 150,000 employees is expensive, but she noted that the new analytic tools like DxCG's are "surprisingly inexpensive."

George Crowling, director of health care management for New York-based Verizon Communications Inc., agreed that the company's "low six-figure investment" to get the data and analysis it uses for risk adjustment is "peanuts, relative to what we're spending on health care." About 70% of the company's 750,000 employees are in self-funded plans.

Verizon works with Cheyenne, Wyo.-based Options & Choices Inc., which gathers and analyzes Verizon's claims data, through a contract with DxCG. Verizon gets aggregated comprehensive data for each of its health plan members, even including claims from carve-out services such as vision and behavioral health.

Verizon is then able to compare the efficiency of the several hundred local health plans it offers across the country.

The proof is in the pudding. "Our trend (for health care cost increases) for employees was 18% in 2003, 13.5% in 2003, and 8.5% in 2004. We still have high health care costs, but the trend is going in a different direction, and we're not doing it by cost shifting, taking benefits out or with exotic plans that aren't going to work in the long run," Mr. Crowling said.

The Montana Assn. of Health Care Purchasers, a Missoula, Mont.-based organization of private and public self-funded groups, maintains a common database for the four health plans it offers. It contracts with DxCG "at a very favorable rate" for its Risk Smart tool to analyze the data, said Paul Bogumill, director of the medical management section of the Montana Employee Health Plan, a member of the association.

Besides allowing employers to promote the most efficient plans, the tool identifies employees who need disease management and which programs are working. It also allowed Mr. Bogumill to eliminate certain tests in health screening that were shown to be of little value.

Most of the data for Oak Brook, Ill.-based food service retailer McDonald's Corp. is stored at its claims payer, Downers Grove, Ill.-based First Health Group Corp. Together, they work with McLean, Va.-based analytic firm VitalSpring Technologies Inc., which has teamed up with Johns Hopkins University to develop software that assigns McDonald's employees into five resource utilization bands. Group 5 comprises those with the most severe chronic illnesses.

Nurses at First Health contact those who would benefit from "health management," McDonald's preferred term, to "make sure they get the appropriate treatment," according to Bob Wittcoff, McDonald's senior director-human resources. The process "takes management programs from the generic to targeted efforts that can really make an impact on people's lives," Mr. Wittcoff said.

HealthSCOPE Benefits Inc.-a managed care organization and third-party administrator based in Little Rock, Ark.-uses MEDai's predictive modeling tool to identify members of employer health plans who have low utilization levels but are likely to incur high costs in one or two years. HealthSCOPE then focuses on getting those members into disease management programs. "A lot of members in disease management are already high cost. Our model catches them before they peak," said Swati Abbott, MEDai's vp of business development.

"That results in huge savings down the line, when the catastrophic doesn't happen," said Philip Nikolai, HealthSCOPE manager of data analysis and reporting.

San Mateo, Calif.-based Benu Inc. is "an aggregator, a market maker" for midsize employers, said Dr. Michael Mellenthin, vp of finance and risk adjustment. The company, which operates as a health plan, uses the DxCG tool to risk adjust premiums among products offered by participating insurers, thus shielding them from adverse selection. That allows midsize employers to offer the health plan choices typically found in large companies.

The Pacific Business Group on Health, a San Francisco-based business coalition of 50 purchasers, also uses DxCG to risk adjust premiums across plans in their small and large group purchasing pools, said Emma Hoo, director of value-based purchasing. PBGH hosts user groups "to help educate employers on the availability of such tools," Ms. Hoo said. More and more employers see these tools as "absolutely critical" in analyzing health care data and are pressing their insurers to use them, she said.

Many employers turn to Louisville, Ky.-based Humana Inc., whose new Web-based Verisight tool analyzes their data and generates highly visual reports that employers can "translate into specific actions," including offering the type of wellness programs that will make a difference to their populations, said Dr. Melissa L. Weaver, vp of health systems support at Humana. The insurer's huge data warehouse is updated monthly.

Verisight was developed internally at Humana and generates detailed reports for employers. For example, a single screen can display medical and pharmacy claims over a 36-month period, relative to points such as clinical conditions, place of treatment and utilization information. Depending on the employer's comfort level, Humana "translates" Verisight's information or shows them the actual screen.

The tool also is used to support underwriting and answers employers' questions about why their premiums are increasing.

Aetna Integrated Informatics Inc., a subsidiary of Hartford, Conn.-based Aetna Inc., runs all of the insurer's more than 14 million covered lives through its Predicted Utilization by Statistical Evaluation model, or PULSE, every month, according to Tina Brown-Stevenson, the subsidiary's president.

PULSE produces a predictive score of 0 to 15. "A score of 10 means that the person will spend $26,500 in medical costs over the next 12 months, and it's correct 60% of the time for conditions that are predictable," that is, for existing conditions that will exacerbate.

Consultants at Aetna Integrated Informatics show employers and their consultants where changes in benefit design could result in lower health care costs, Ms. Brown-Stevenson said. For example, a tightly controlled pharmacy program could be preventing employees from accessing preventive medications.

© Copyright Business Insurance 2006