UTLA Healthcare Crisis Symposium Analysis of LAUSD Health Claims Data April 17, 2004

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UTLAHealthcare Crisis SymposiumAnalysis of
LAUSDHealth Claims DataApril 17, 2004
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Introduction

• DGA Partners
• Health care strategy, finance, and data
  consulting firm
• Advise insurers, employers, unions, physicians
  and hospitals
• LAUSD and UTLA unique cooperative approach to
  addressing health costs
• DGA asked to assist in analyzing data and
  identifying opportunities

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Health costs are rising much faster than other
costs
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The rise in health premium costs has lead
employers to seek cost savings
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The basics of health costs(The Payor Perspective)

• Fee for Service
• Volume x Fee per Unit Total Cost
• E.g., 2 office visits x 75/visit 150
• Capitation
• of members x payment per month Total Cost
• E.g., 4 members x 40/month 160
• Outlier payments
• If a particular case has high costs, switch to
  outlier payment approach
• Often based on charges
• Providers and patients respond to incentives

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Several approaches have been used to manage
health costs

• Copayments and deductibles - ITS YOUR
• Utilization Management (Mostly hospital care)
• Preauthorizations and monitoring for necessity
• Preventive care
• Shift risk to providers
• Case Management and Disease Management
• Require employees to pay part of premium
• Health Savings Accounts - ITS YOUR

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How do we analyze payor cost data?

• Total Cost
• Volume x Cost per Unit
• Using normalized measures
• Utilization per Member per Month (PMPM) -Similar
  to Students per class
• Cost per Member per Month (PMPM) -Similar to
  Cost per pupil per year
• Cost per Unit of Service

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Data in our analysis is helpful, but has
limitations

• Health claims for members
• Member identity protected
• Can identify trends and prevalent conditions
• Some limitations in the data
• Currently focused on Blue Cross only
• Timeframes of available data
• Some helpful information is not provided by Blue
  Cross and Kaiser

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Review of Data and Findings

• Overview
• Membership
• Total Costs
• Utilization
• Cost per Unit
• Areas of High Cost

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Participants in this analysis are mainly divided
between Blue Cross POS, HMO, and PPO
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Most participants in this analysis are
Non-Medicare members
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There are two main types of participants in the
health benefits program

• Non-Medicare participants
• Mainly employees and their covered dependents
• Costs are for full covered benefits
• Medicare participants
• Mainly retirees
• Medicare is primary insurance
• Costs are related to covering deductibles,
  coinsurance, pharmacy, and other services
  Medicare does not cover

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The LAUSD insured population (Non-Medicare) is
older than the overall US population
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Costs are divided approximately 2/3 for
Non-Medicare and 1/3 for Medicare
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More of the costs for Non-Medicare participants
are for professional services
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More of the costs for Medicare participants are
for pharmaceuticals
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Costs per member per month (PMPM) are increasing
for both Medicare and Non-Medicare participants
Note 4th Quarter 2002 not shown due to missing
Pharmacy claims
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Cost Trends

• PMPM Costs
• Utilization PMPM x Cost/Unit

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Hospital inpatient facility utilization has been
stable
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Outpatient facility utilization has been stable
too
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Pharmacy utilization was stable as well
Note Pharmacy claims data for 4th quarter 2002
not shown due to incomplete data.
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Only professional utilization has increased, and
only for the Medicare population
Note Professional capitation costs are not
included in above graph.
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Cost Trends

• PMPM Costs
• Utilization PMPM x Cost/Unit

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Cost per hospitalization increased at an
annualized rate of 20 for Non-Medicare
participants
This could be due to higher payment rates or more
complex hospital admissions
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Cost per outpatient facility service increased at
an annualized rate of 14 for Non-Medicare
participants
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Cost per professional visit increased at an
annualized rate of 8 and 2 for Non-Medicare and
Medicare respectively
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Cost per unit of prescriptions increased at an
annualized rate of 9 for both Medicare and
Non-Medicare
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Possible reasons for rising cost per unit

• Price increases by providers
• Possible increased acuity of services
• Inpatient
• Acuity actually decreased over the time period
• Outpatient service
• Data could not tell us whether complex tests are
  substituting for simple ones (e.g, MRI for x-ray)
• Professional
• Partially due to increased coding of complex
  visits by physicians
• Pharmacy
• Possible shift to costlier options, but difficult
  to tell from the data

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High Cost Cases

• Account for a high proportion of costs
• Targeted programs can reduce costs

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Approximately 5 of participants incur costs
above 10,000 these account for more than half
of total costs
A handful of members incur costs above 50,000
and account for 30 of total costs
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Circulatory diagnoses are the most costly
diagnosis among all members
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Many high cost members are receiving care for
cancer
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For high cost members, most costs are inpatient
facility costs
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Chronic Diseases and Cancer account for 50 of
the medical and pharmacy costs for Non-Medicare
members
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For Medicare members, chronic diseases and
cancer account for more than 80 of medical and
pharmacy costs
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Preliminary thoughts on possible approaches to
reducing costs and improving quality

• High Cost Case Management
• Ensure appropriate members are identified early
  and are managed
• Add incentives to use Centers of Excellence for
  specific conditions
• Disease Management
• Ensure programs are available for most needy
  members
• Add incentives to use chronic disease management
• Member responsibility
• Pursue wellness to reduce illness
• Choose the right provider - Subimo
• Reward members for spending resources effectively
• Contracting
• Exclude high cost providers
• Steer patients to low cost/high quality providers

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Questions

• Clarifications
• Surprises
• Confirmations
• Suggestions