Cost containment articleAs the health care industry continues to evolve, those of you in the trenches of managing cost know how much of an impact even a small percentage increase in health care costs can make. Research from Pricewaterhouse Coopers suggests that if health plans remain unchanged, medical costs could rise by 6.8 percent in 2015.   

 

 

3 New Employer Strategies for Reducing Health Care Costs

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As the health care industry continues to evolve, those of you in the trenches of managing cost know how much of an impact even a small percentage increase in health care costs can make. Research from Pricewaterhouse Coopers suggests that if health plans remain unchanged, medical costs could rise by 6.8 percent in 2015.

Amid the complexity and challenges of health care, Aon Hewitt found that employers have a vested interest in increasing participation in preventative measures as well as overall awareness about health issues. But there is also much more employers can do to mitigate health care expenses.

“On average, we find there is at least 15 percent of current health care spending ‘waste’ that could be eliminated for the average self-insured employer,” says Dr. Rick Perryman, VP of health care strategy at TrendShift.

What new strategies can you implement to curb these rising costs? Below are Dr. Perryman’s top three strategies for reducing health care costs, which he spoke about in our latest webinar (link to recording) on this topic.

Strategy 1: Go Beyond the Audit

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Hear Dr. Perryman address th e problem with today’s health care claims audits  in this short video clip .

Most large organizations are doing some kind of health care audit, which traditionally focuses on the low-hanging fruit, such as duplicate billing, billing the wrong provider or bundling/unbundling services. The problem with audits, according to Perryman, is that they are retrospective, and it can be very difficult to recover money that has already been paid.

Going beyond the audit means establishing real-time analysis so employers can identify problems before they become messy billing issues. Specifically, by accessing the raw, unfiltered data from providers or pharmacy benefit managers (PBMs), health care analytics experts can help employers to find billing issues that might go very deep. Once armed with a better understanding of your high-value providers, organizations can better steer employees toward using those providers and thus reduce overall cost.

Strategy 2: Empower Rx Negotiations

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Managing your PBM relationship is one area that typically produces large savings in health care spending. Watch  this short video clip to hear which other areas also produce significant savings .

Prescription drug spending is by far the fastest-growing segment of health care spend, says Perryman. At 16 percent or more of an employer’s total health care budget[1], it is no surprise that this is an area for employers’ focus. Even with 86 percent of prescriptions being generics, spending is still going up.[2] This is partly because of the rise in generic drug prices as well as the way pharmacy benefit managers (PBMs) negotiate average wholesale pricing.

One tip to better manage prescription drug prices is to seek full fiduciary management of the PBM contract. Perryman explains, “What that means is the PBM accepts fiduciary responsibility and you have true transparency when it comes to the average wholesale price. You’re then guaranteed to get that price every time.” 

Strategy 3: Prevent vs. Simply Diagnose

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Dr. Perryman discusses how to get in front of a diagnosis by answering the question, “How does an agile approach to health benefits management help employers?”  in this short video clip .

According to The Journal of the American Medical Association, 84 percent of overall medical costs are caused by chronic, mostly preventable illnesses, and 67 percent of medical spending is incurred by those under the age of 65. This points to a broader trend – chronic illnesses are becoming an issue for younger and younger people.

Perryman suggests a new way to look at these problems in order to get in front of preventable diseases. By measuring biomarkers more comprehensively and interpreting that data as a trend, employers can begin to see patterns emerge that they wouldn’t otherwise see. Perryman adds, “You can be as much as 10 or 12 years in front of a diagnosis like diabetes, because long before folks have diabetes, they have metabolic syndrome and fatty liver disease. You can see it much earlier, but it requires you measuring consistently and much more comprehensively.”

By looking at health trends over time, it can be easier to get in front of a diagnosis and ideally take action to prevent an illness from becoming chronic, critical or degenerative.

Armed with these three strategies, employers can better reduce costs and drive up savings and accountability when it comes to their health care spend.

For more information:

  • Listen to Dr. Perryman discuss his 3 strategies in this webcast replay
  • Or hear him live on 2/19 – register now!
  • View our infographic on Pharmacy Benefit Management

[1] www.shrm.org/hrdisciplines/benefits/articles/pages/rx-drug-spending.aspx

[2]   www.nytimes.com/2014/07/09/health/some-generic-drug-prices-are-soaring.html