AFFORDABILITY REVIEW - Gorman Health Group · AFFORDABILITY REVIEW Mysteries of the Medical Loss...

AFFORDABILITY REVIEWMysteries of the Medical Loss Ratio

APRIL 2016

NANCY DJORDJEVIC

DIRECTOR, HEALTHCARE ANALYTICS

Copyright © 2016 Gorman Health Group, LLC

Government Programs

Leading enterprise of national consulting services and software solutions

for payers and providers.

Our Mission

Our mission, as the industry’s most active professional services consultancy and

provider of technology-based solutions, is to empower health plans and providers

to deliver higher quality care to beneficiaries at lower costs, while serving as

valued, trusted partners to government health agencies.

Washington, DC

Headquartered in Washington, DC, with more than 200 staff and contractors

nationwide with over 2,000 combined years of Government Programs experience.

Leadership

Deep payer and provider knowledge coupled with Centers for Medicare &

Medicaid Services (CMS) regulatory expertise.

Privately Owned

Founded in 1996

Gorman Health Group is the leading solutions and consulting firm

for government-sponsored health programs.

WHO IS GORMAN HEALTH GROUP?

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Our clients have one-stop access to expert advice, guidance, and support,

in every strategic and operational area for government-sponsored programs, across seven verticals.

CLINICALChanging how you approach Medical Management,

Quality and Stars.

PROVIDER INNOVATIONSSupporting network design and medical

cost control implementation.

OPERATIONSBringing excellence to every aspect of your

implementation from enrollment to claims payment.

COMPLIANCEOffering guidance and support in every strategic and

operational area to ensure alignment with CMS.

PHARMACYLeading experts in Part D, PBM, formulary

and pharmacy programs.

HEALTHCARE ANALYTICS & RISK

ADJUSTMENT SOLUTIONSImplementing cross-functional risk adjustment

programs for medical trend management and quality

improvement.

STRATEGY & GROWTHDriving profitable growth and member retention

through strategic marketing, sales, and product

development.

BROAD SERVICES

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Members Revenue

Claims Utilization

Claims Costs

DEMYSTIFY MEDICAL LOSS RATIO

No Room for Error Under ACA


MEMBERSHIP

• Positive growth

• Improves dollars of

income and absorbs

fixed expenses

• Assumes operational

plans are in place

• Stagnant/stable growth

• Requires answers to

aging population

• Negative growth

• Potential death spiral

• Impact on risk score

Members Revenue

Claims Utilization

Claims Costs


REVENUE

• Risk adjustment plays major role –

• Unknown impact of HCC on

new ICD-10

• Double-edged sword – timing of

payment is after claims are paid

Low scores

• If understated due to

bad coding, high

financial risk and missed

opportunity!

High scores

• If inaccurate, invites

audits!

• Star Ratings reflect membership

and impact revenue as well as

expected claims

Members Revenue

Claims Utilization

Claims Costs


CLAIMS COSTS

Networks are the backbone of a health plan

• Must meet CMS requirements

• Must align with population needs

• Insufficient network can quickly

undermine the whole operation –

costs, member satisfaction,

medical management

• Place of service greatly impacts

cost of care

• Partnership for low-cost quality of

care

Members Revenue

Claims Utilization

Claims Costs


UTILIZATION

• CMS tracks inpatient readmits

• Exceeding average

means penalties

• Star Ratings tracks quality

• bonuses or loss thereof

• Pressure on network adequacy

Members Revenue

Claims Utilization

Claims Costs


GOAL: ALIGN OPERATIONS TO BALANCE REVENUE

AND CLAIMS (PLUS ADMINISTRATIVE EXPENSES)

Although maximizing revenue is an ongoing priority, claims review and

efficiency is still a big part of the picture and not to be overlooked.

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Revenue Claims


WARNING SIGNS OF FINANCIAL HURDLES

• Variance to budget not easy to explain

o Future bids are based on historical claims – 18 mos. to 2-year gap in forecasting

trends (claims and revenue)

o One-time events that can mask trends

• Change in IBNR or reinsurance provisions

o Claims backlogs can impact IBNR and/or budgeting

• Reorganizations

o Change in organization and company personnel can overlook financial and

operational changes

o Allow gaps in reporting

• New systems – claims, vendors, etc.

o Mapping of old to new systems distorts trends

• Comparison of claims to contract administration

o Constant oversight needed for revised contract or impact of mix of services

o Change in provider mix and provider performance

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• Significant changes in membership

o Increase, decrease, geographic shifts can impact revenue

• Complete and accurate medical diagnosis coding to ensure

adequate revenue

o Ongoing oversight of risk adjustment

o Should coincide with claims costs

o Requires strong collaboration with providers

• Different products – add or terminate plans and change product

designs

o Duals – little or no benefit from member cost share on utilization

o HMO vs. PPO – provider access within networks

o Competition

WARNING SIGNS OF FINANCIAL HURDLES

11


OPERATIONAL CHANGES WILL

HAVE A FINANCIAL IMPACT Root causes come from internal system and procedural changes, member

driven claims, and diagnoses as well as CMS reimbursement.

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ANALYTICS

Budget Variances

Claims BacklogsNew Claims Systems

New Vendors, PBMNew benefits, products, territories

or membership

Mix of service changes

Member-driven claims and risk adjustment


TO FIND A SOLUTION, FIRST YOU NEED

TO IDENTIFY THE PROBLEM

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INITIAL ASSESSMENT

*Management Interviews

*Financial Reviews

*Performance Reviews: IT Systems, Vendors, Providers

*Contract Reviews: Vendors, Providers

*Risk Adjustment Overview and History

*Medical Management review

*Product and membership growth

PHASE 1A IDENTIFY DRIVERS

*Develop trend reports by service and split by cost vs. utilization

*Identify trend drivers

*Identify high-volume providers and services

*Monitor risk adjustment accuracy and timing

PHASE 1B QUANTIFY OPPORTUNITIES

*Follow the money

*Quantify potential opportunities for improvement

PHASE 2

ACTION PLANS

*Customize implementation plans

*Set performance metrics and goals

*Develop oversight and monitoring as needed

*Ensure best practices for staffing, quality and performance

*Implement risk adjustment strategies


ANALYTICS CAN LOOK ACROSS

DEPARTMENTAL SILOS

Sales/

Enrollment

Revenue

NetworksFinance

Medical Management

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Healthcare

Analytics


LAKE WOBEGON HEALTH PLAN –

A NOT SO FICTIONAL TALECase Study


LAKE WOBEGON HEALTH PLAN –

A NOT SO FICTIONAL TALE

Case Study

• Plan owned by health system

• Operating in Medicare Advantage (MA) for multiple years

• Multiple lines of business with matrix organization

• Whole suite of reporting capabilities

o Budget year views

o Meetings to review and ask questions frequently missed

• Past had been real good to them

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IDENTIFY THE PROBLEMDespite 18 months of financial losses, unable to identify root cause(s)

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• Membership below budgetSales

• Star Ratings bonus at risk at end of demonstration program

Revenue

• System-owned facilities

• Conflict of interestNetworks

• Not very aggressive

• Insufficient staffMedical Management

• Calendar year reports masking problemsFinance/Claims


DETERMINING ROOT CAUSES

OF CLAIMS TREND

1. Review financials including membership trends

2. Gain insight into operations through in-depth interviews with

subject matter experts

3. Review existing reports and financial performance

o Analyze 3 calendar years or minimum rolling 24 months of FFS

claims data by product

o Generate reports, graphics, and analytics

o Compare membership by month with demographics

(age/gender/county) and risk score for each product

4. Identify trends in cost and utilization at aggregate or detailed

level – compare to provider contracts and industry standards

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OF CLAIMS TREND

5. Determine financial impact – “follow the money”

6. Present interim and final recommendations for “real” solutions

7. Customize action plans to current and future business

strategy

8. Isolate barriers to growth – providers, high-cost claimants,

geographic considerations, benefit design

9. Maximize provider network – align access and affordability to

membership needs

10. Monitor and manage to new objectives – this is an ONGOING

process

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OF CLAIMS TREND

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Claims: Billed, Allowed, Paid

Utilization

Inpatient

Admits

Days of Stay

Average Length of Stay

Outpatient/

Physician

Visits

Procedures

Average Costs/Mix

InpatientAdmits/DRG

Per Diem

Outpatient/ Physician

Visits

Procedures

Capitation


• $7M trend is further aggravated by revenue shortfall (neither trend was

projected in the budget)

• Cost drivers dominate in Inpatient, Professional, and Pharmacy paid claims

• Allowed PMPM data is being worked on to isolate benefit and contracting

changes

• Multiple operating areas being reviewed for improvement

METRICS

(PMPM, UTILIZATION, UNIT COSTS)

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PMPM Impact Percent of Trend

Service CategoryPMPM

ChangeTrend

Utilization Change

Unit Cost Change

Utilization Change

Unit Cost Change

Trend Dollars

Inpatient +$21.43 5.8% $5.18 $16.25 24% 76% $2,856,065

Outpatient: Visit Based +$ 6.22 3.9% $7.19 -$0.97 116% -16% $828,285

Professional +$10.39 3.9% $3.29 $7.09 32% 68% $1,384,509

Pharmacy +$15.91 15.1% $0.96 $14.95 6% 94% $2,119,829

Total $53.94 5.7% $14.01 $39.93 26% 74% $7,188,688


HISTORICAL PMPM BY CATEGORY

Inpatient

$330.42 $340.14 $349.43 $369.47 $385.08 $375.73 $366.55 $387.98 $334.22$300

$310

$320

$330

$340

$350

$360

$370

$380

$390

$400

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

Outpatient

$247.68 $252.58 $252.52 $255.75 $262.82 $258.02 $263.48 $273.87 $250.85$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

Physician

$247.68 $252.58 $252.52 $255.75 $262.82 $258.02 $263.48 $273.87 $250.85$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

Retail Pharmacy

$33.77 $74.95 $100.47 $106.65 $103.92 $106.58 $105.45 $121.36 $78.08$0

$50

$100

$150

$200

$250

$300

$350

$400

$450

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

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INPATIENT SERVICE CATEGORY

Inpatient Paid PMPM

Owned Providers

$0

$50

$100

$150

$200

$250

$300

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

Inpatient LTC Inpatient Maternity Inpatient Medical

Inpatient MHSA Inpatient Non-Acute Inpatient Surgery

Inpatient Paid PMPM

Non Owned Providers

$0

$50

$100

$150

$200

$250

$300

2005 2006 2007 2008 2009 6/2009-

5/2010

6/2010-

5/2011

6/2011-

5/2012

Budget

Inpatient LTC Inpatient Maternity Inpatient Medical

Inpatient MHSA Inpatient Non-Acute Inpatient Surgery

0.900

1.000

1.100

1.200

1.300

0.750

1.750

2.750

3.750

Med

ical

CM

I

Surg

ery

CM

I

Case Mix Index

CMI Surgery CMI Medical

0.900

1.000

1.100

1.200

1.300

0.750

1.750

2.750

3.750M

edic

al C

MI

Surg

ical

CM

I

Case Mix Index

CMI Surgery CMI Medical

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• As a provider-owned health plan, need to recognize cost differences among

providers

• Review waivers of pre-auth to “preferred” providers – consider ongoing reviews

and health plan audits

• One teaching hospital outside of provider system is driving up costs – consider

redirection to system facilities

• Use hospitalists and plan case managers to expand discharge planning to

increase home health and decrease admissions

• Compare diagnoses for inpatient DRG payments to outpatient and professional

diagnoses and correlate to risk adjustment recovery

INPATIENT RECOMMENDATIONS

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Service Category

6/2010-

5/2011

6/2011-

5/2012 Change Trend

6/2010-

5/2011

6/2011-

5/2012 Change Trend

6/2010-

5/2011

6/2011-

5/2012 Change Trend

Change

Driver

Trend

Contribution

Inpatient LTC $68.74 $75.72 $6.99 10.2% 2,491.6 2,557.7 66.1 2.7% $331 $355 $24 7.3% Unit Cost $931,230 ▲

Inpatient Maternity $0.00 $0.00 $0.00 n/m 0.0 0.0 0.0 n/m n/m n/m n/m n/m Unit Cost $0

Inpatient Medical $136.20 $139.59 $3.39 2.5% 1,283.5 1,248.8 (34.7) (2.7%) $1,273 $1,341 $68 5.3% Unit Cost $451,361 ▲

Inpatient MHSA $4.12 $4.23 $0.11 2.8% 110.6 120.2 9.6 8.6% $447 $423 ($24) (5.4%) Utilization $15,237

Inpatient Non-Acute $0.03 $0.04 $0.01 33.2% 0.0 0.0 0.0 n/m n/m n/m n/m n/m Unit Cost $1,265

Inpatient Surgery $157.47 $168.40 $10.93 6.9% 738.1 761.1 23.0 3.1% $2,560 $2,655 $95 3.7% $1,456,973 ▲

Inpatient Total - Days $366.55 $387.98 $21.43 5.8% 4,623.8 4,687.7 63.9 1.4% $951 $993 $42 4.4% Unit Cost $2,856,065 ▲

Utilization / 1000 Paid Unit CostPaid PMPM


$0.00

$10.00

$20.00

$30.00

$40.00

$50.00

A B C D E F G H

System and Non System Owned Providersof Inpatient Acute

FACILITIES A-D OWNED BY PARENT

PROVIDER, FACILITIES E-H NON-OWNED

Costs (adjusted for severity) vary by facility, and “E” is a non-owned

teaching hospital, which suggests stricter authorizations and discharge

planning could control costs and utilization.

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READMITS ON THE RISE

Need to manage readmits with better discharge planning, including

goals for home health

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Service Category

6/2010-

5/2011

6/2011-

5/2012 Change Trend

6/2010-

5/2011

6/2011-

5/2012 Change Trend

6/2010-

5/2011

6/2011-

5/2012 Change Trend

Change

Driver

Trend

Contribution

Outpatient Diagnostic $8.57 $8.56 ($0.01) (0.1%) 373.5 393.9 20.4 5.5% $275 $261 ($14) (5.2%) Unit Cost ($698)

Outpatient ER $24.51 $28.22 $3.71 15.2% 460.3 506.2 46.0 10.0% $639 $669 $30 4.7% Utilization $495,017 ▲

Outpatient MHSA $0.96 $1.05 $0.09 9.0% 39.0 43.4 4.4 11.2% $295 $289 ($6) (2.0%) Utilization $11,510

Outpatient Other $47.22 $43.74 ($3.48) (7.4%) 2,685.1 2,430.4 (254.7) (9.5%) $211 $216 $5 2.3% Utilization ($463,200) ▼

Outpatient Pharmacy $13.53 $15.46 $1.93 14.3% 728.4 795.7 67.2 9.2% $223 $233 $10 4.6% Utilization $257,408 ▲

Outpatient Supplies and Devices $0.11 $0.07 ($0.04) (36.0%) 263.8 319.3 55.5 21.0% $5 $3 ($2) (47.1%) Unit Cost ($5,428)

Outpatient Surgery $55.89 $53.34 ($2.56) (4.6%) 494.6 458.4 (36.3) (7.3%) $1,356 $1,396 $40 3.0% Utilization ($340,911) ▼

Outpatient Therapy $9.92 $16.62 $6.71 67.6% 1,447.5 1,881.1 433.5 30.0% $82 $106 $24 29.0% $893,689 ▲

Outpatient Lab $18.39 $18.98 $0.58 3.2% 3,950.7 4,050.8 100.1 2.5% $56 $56 $0 0.6% Utilization $77,728 ▲

Outpatient Rad $27.03 $26.30 ($0.73) (2.7%) 1,298.7 1,272.8 (25.9) (2.0%) $250 $248 ($2) (0.7%) Utilization ($96,829) ▼

Outpatient - Visit-based $206.13 $212.34 $6.22 3.0% 11,741.8 12,152.0 410.2 3.5% $211 $210 ($1) (0.5%) Utilization $828,285

Utilization / 1000 Paid Unit CostPaid PMPM

OUTPATIENT RECOMMENDATIONS

• Utilization up 10% in Emergency Room – need for frequent flyer report and

review of copays to manage ER utilization. Engage PCPs to avoid ER

utilization by improved access to care in office settings.

• Pharmacy includes injectables with 20% coinsurance, but claims system

needs auditing – no difference in paid vs. allowed costs.

• Outpatient therapy up 30% for utilization and 29% for costs – review pre-

authorization requirements and implement quantity limits.

• Other includes dialysis opportunities for combined savings.

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20% COINSURANCE

NOT BEING COLLECTED Audit Claims System Configuration

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FINANCIAL IMPACT OF ACTION PLANS

1. More focused Quality

Improvement (QI) and Star

Ratings program with specific

action plans

2. Work with PCPs on specific

coding initiatives

3. Enhanced focus on risk

adjustment program with

optimal mix of retrospective and

prospective targets

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REVENUE

$5.75 M

to

$8.75 M


FINANCIAL IMPACT OF ACTION PLANS

1. Reduce inpatient admits and

readmissions through multiple

mechanisms

2. Part B coinsurance on specialty

drugs

3. OP cost drivers

4. IP cost drivers

5. OP utilization drivers

• $1.3 M

• $1.06 M

• $0.74 M

• $0.65 M

• $0.20 M

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COST REDUCTION


Accomplishments

• Translate best practices from Medallion

Issues / Risks

• Work the frequent flyer list and include medication cost and utilization

• Steerage of non-emergent diagnoses to alternate place of care• Engage PCPs and BH vendor for follow up to ER- assign clerk to

contact PCPs. Coordinate with Provider Relations.• Develop provider profiles - gaps in network, access to specialists

– identify best practices within PCP offices• Partner with shelters and public health centers• Explore member education and engagement through community

events and health fairs, etc.• Develop case manager reports with combined medical and

pharmacy spend by member. Better utilize auth and Rx data for fast track reports.

Upcoming Events & Work in Progress

Dependencies

• Coordinate with disease management• Incorporate student nurses and pharmacy students for outreach• Leverage nurse line, transportation and CAHM services• Coordinate with Magellan for BH services• Member and provider education• Leverage VA data exchange

Track Milestones Status Delivery Date Comments/Updates

Develop high-cost hospitals

report

Develop high-cost members

report

Develop action plans

Develop tracking reports

Major Milestones Target Date Overall

Overall Track

Develop ER utilization metric to produce target savings

Develop enhanced reports and generate action plans regarding ER

billing practices, member engagement, coordination with disease

management and PCPs

Develop tracking reports

Engage PCPs and vendors as needed

REDUCE ER VISITS/1000 PROJECT DASHBOARD

= $400,000 TARGET OVER FY 2015

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RESOURCE OPTIMIZATION

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Risk Adjustment

Return on Investment

Pro

ba

bili

ty o

f S

ucce

ss Medical Mgmt

Network Structure

Star Rating Mgmt

Claims System


RECAP: BEST PRACTICES AND

VIGILANCE ARE HERE TO STAYOn average, an MA HMO needs 12-15% savings from better

contracting and medical management just to break even.

• Continued downward pressure from CMS on revenue through tighter

risk adjustment methodology and projected trend rates

• CMS still phasing in new county rates for ACA

• Ongoing impact of benefit designs and changing demographics on

future costs

• Ongoing vigilance of provider reimbursement strategies, including,

but not limited to, contract changes

• Ongoing review and audit of clinical best practices to achieve Star

Ratings

Even PPOs, ACOs, and non-HMO models require cost controls through

benefit design and provider access

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OPERATIONAL EXCELLENCE

CAN NEVER STOP

• Set goals for providers and

performance benchmarks

• Constant monitoring of

financial and operational

performance

• MLR performance is more

than a budget variance report

– need both to survive

changing regulatory and

clinical dynamics

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Gorman Health Group, LLC (GHG) is a leading consulting and software solutions firm specializing in government health

programs, including Medicare managed care, Medicaid and Health Insurance Marketplace opportunities. For nearly 20 years,

our unparalleled teams of subject-matter experts, former health plan executives and seasoned healthcare regulators have

been providing strategic, operational, financial, and clinical services to the industry, across a full spectrum of business needs.

Further, our software solutions have continued to place efficient and compliant operations within our client’s reach.

GHG offers software to solve problems not addressed by enterprise systems. Our Valencia™ software reconciles membership

of more than 10 million members in Medicare, Medicaid and the Health Insurance Marketplace. Over 3,000 compliance

professionals use the Online Monitoring Tool™ (OMT), our complete Medicare Advantage and Part D compliance toolkit, while

more than 33,000 brokers and sales agents are certified and credentialed using Sales Sentinel™. In addition, hundreds of

health care professionals are trained each year using Gorman University™ training courses.

We are your partner in government-sponsored health programs

T

E

NANCY DJORDJEVIC

Director, Healthcare Analytics

202.355.3841

[email protected]

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AFFORDABILITY REVIEW - Gorman Health Group · AFFORDABILITY REVIEW Mysteries of the Medical Loss...

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