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Transcript of Metric Based Pricing:
The Next Right Thing for Health Plans
Metric Based Pricing:Myths and Keys to Success
Wednesday, October 5, 2016
Founded in 2003, ELAP Services is a pioneer in health plan cost management that delivers an industry-best comprehensive solution for self funded employers –
the only that provides:
ELAP Overview
PLAN DESIGN & CO-FIDUCIARY
CLAIMS AUDITDIRECT
CONTRACT
MEMBER ADVOCACY AND
DEFENSEANALYTICS
How metric-based pricing addresses
the root of the problem
Why MBP?
5 common myths about metric-based pricing
Myths
The 3 keys to a successful MBP
program
Success
Agenda
The unsustainable ‘status quo’ of a
PPO system
The Problem
“All the Prices are too damn high”- Gerard F. Anderson, Johns Hopkins Bloomberg School of Public Health
Inflated Medical Bills: The Root of the Healthcare Problem
“Getting a 50% or even 60% discount off the chargemaster price of an item that costs $13 and lists for $199.50 is still no bargain.” -Steven Brill, TIME Magazine
“American Employers are the sloppiest purchasers of health care anywhere in the world…they have passively paid just about every health care bill that has been put before them, with few questions asked.” – Uwe Reinhardt, Princeton Professor
A Managed Care Issue or an Economic Debate?
“The health plan fiduciary is typically oblivious to the true costs hidden inside their plans in the same way they don’t understand the all-in costs of their 401(k) plan.
The major difference is that healthcare waste can easily be ten times greater than the “Bps” being scrutinized inside 401(k) plans.”
- Craig Lack, Benefits Expert
SOURCE: Kaiser/HRET Survey of Employer‐Sponsored Health Benefits, 1999‐2015
Healthcare Cost Impact on Members and Their Families
• 40% of Americans have medical debt and 1 in 5 have credit impairments – most are fully insured
In Eastern Pennsylvania, What Does a Plan Pay for……a CT Scan?
Departmental statistics are obtained from a hospital's most recent Medicare cost report data, from American Hospital Directory – www.ahd.com
$2,892
$1,446
$199
$145
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500
Hospital Cost Medicare Payment 50% PPO Discount Billed Charges
How metric-based pricing addresses
the root of the problem
Why MBP?
5 common myths about metric-based pricing
Myths
The 3 keys to a successful MBP
program
Success
Agenda
The unsustainable ‘status quo’ of a
PPO system
The Problem
Higher Discount = Worse Deal?
*Study using ELAP data for each state
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0% 50% 100% 150% 200% 250% 300%
Savi
ngs
%
% of Medicare
% Savings off Billed vs. % of Medicare
Direct correlation between higher discounts and higher payment as multiple of Medicare
What is Metric-Based Pricing?
Metric-based pricing uses rational and consistent metrics, Medicare and cost, as a starting point for
provider reimbursement – rather than the discount set by the carriers and insurance companies
Why Metric Based Pricing?
We give our clients the opportunity to treat their medical costs in the same manner that
they would any other business cost
Simply Stated…
How metric-based pricing addresses
the root of the problem
Why MBP?
5 common myths about metric-based pricing
Myths
The 3 keys to a successful MBP
program
Success
Agenda
The unsustainable ‘status quo’ of a
PPO system
The Problem
MYTH #1
‘Reference Based’ and ‘Metric Based’ pricing are the same thing
Reference Based Pricing vs. Metric Based Pricing
Hospital CHospital BHospital A
CT Scan
$400
• Medicare and cost can vary greatly from hospital to hospital
• Non-specific reimbursement methods weaken legal position
• Only pricing one way is unfair to providers
Reference-Based Methodology: CT Scan
$400 $400
Reference Based Pricing vs. Metric Based Pricing
Metric-Based Methodology
Hospital CHospital BHospital A
$352
$348$248$302
$458$485
• Look at specific hospital’s specific costs and Medicare rates for each line on bill
• Re-priced two ways and paid at higher rate to ensure fair payment
• Paid exactly as plan document states – strong legal position (specific, current, attested by CFO)
CT Scan
MYTH #2
Metric-Based Pricing underpays Hospitals
Is Medicare a fair baseline?
• Do Hospitals make money on Medicare?• Studies vary:
• Anywhere from -9.0% margin to +1.5% profit margin on Medicare payments• Nearly 50% of Hospitals make money on Medicare
$80
$85
$90
$95
$100
$105
$110
Hospital All-InCost
MedicarePayment
Metric-BasedPayment
• Even at worst case (-9.0%) and a very low metric-based reimbursement (Med +20%) – hospital makes profit
MYTH #3
Only metric-based pricing leads to balance billing and credit impairments
Credit Impairments Due to HC Costs
“62% of US bankruptcies are related to medical bills, 75% of those filing for bankruptcy were fully insured.”
- Medical Bankruptcy in the United States… a study by Harvard University (2007)
“Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making health care the No. 1 cause of such filings” – CNBC (2013)
“Mounting evidence shows that chaos in medical billing is not just affecting our health care but dinging the financial reputation of many Americans… the credit record of one in five Americans is affected”
… unpaid medical bills in collection “frequently end up on consumer credit reports,” as an outgrowth of “very complex and confusing systems of figuring out who owes what after a medical procedure.”
- When Health Costs Harm Your Credit, The New York Times (2014)
Metric-Based Pricing Reduces Change of Hitting Full OOP
W/PPO (45% disc)
Billed Charges $10,000
Total Allowed/Paid $5,500
Member Deductible $5,000
Member Paid $5,000
Plan Paid $500
Total Paid $5,500
W/MBP(62% disc)
$10,000
$3,800
$5,000
$3,800
$0
$3,800
Scenario: $10,000 Billed Charges for Hospital Visit
Savings
$1,200
$500
$1,700
MYTH #4
Providers won’t let people with metric-based plans in to their facility
Provider Pushback
Providers accept MBP patients the vast majority of time1
In rare cases, providers will demand payment up front for a planned procedure (colonoscopy / mammogram) --- in those cases a single-patient contract can be negotiated so member receives proper care 3
Most common forms of pushback occur after bill is paid – appeal and balance bill 2
MYTH #5
Metric-based pricing is a short-term solution
Not if it’s done right…
Negotiating payment any time there is pushback leads to cost uncertainty, stop/loss issues and encourages providers to increase pushback 1
Current PPO model with annual increase in health care spend is not sustainable3
ELAP has clients w/ 9+ years on full audit program with little to no increase in spend year over year 2
Hold the line
Consistent Savings
Status Quo ineffective
How metric-based pricing addresses
the root of the problem
Why MBP?
5 common myths about metric-based pricing
Myths
The 3 keys to a successful MBP
program
Success
Agenda
The unsustainable ‘status quo’ of a
PPO system
The Problem
3 Keys To A Successful MBP Program
KEY #1
Employer and Employee education
KEY #2
Strong and experienced patient advocacy
KEY #3
Picking the right prospect
Indicators of a good MBP fit
• Self-funded, 150+ enrolled employees
• High health care costs / high renewal increase
• Engaged executives / innovative mindset
• Organization with tight budgets, or low margins
QUESTIONS