Want to manage healthcare costs? It starts with managing utilization

We have blogged before about managing upstream cost drivers. A new article in Insight by actuaries Jeff Chanin and Rob Park and by Dr. David Mirkin looks at controlling costs for employer-sponsored healthcare. Here is an excerpt:

In a recent study we analyzed a company’s active employee healthcare benefit experience to identify program areas that were performing well and those that were performing poorly. We compared its program experience with benchmarks that reflect the company’s demographic profile, geographic profile, and benefit designs, using benchmarks for “loosely managed” and “well-managed” plans. Loosely managed benchmarks represented plans that have some utilization review, preauthorization, and case management that were ineffective at reducing utilization. We expected any moderately managed healthcare benefit program to produce results significantly better than these benchmarks.

Well-managed benchmarks represented nationwide claim cost and utilization targets in a highly effective managed care environment (such as a staff model HMO or a globally capitated provider group without fee-for-service incentives) that effectively applies utilization management principles across the entire continuum of medical care. This includes inpatient care, outpatient facility care, ancillary testing, routine office care, referral physician care, and prescription drugs. In the current healthcare benefit system, it may not be realistic for a given group healthcare benefit insurer or administrator to produce results equal to, or better than, the well-managed benchmarks. However, the most efficient managed care organizations produce results similar to these benchmarks. In this study, we assumed provider reimbursement levels were identical for loosely and well-managed benchmarks to focus on utilization.

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