For medical malpractice insurers, market pressures continued in 2018 despite overall profitability, according to a May report by AM Best. One way to combat potential headwinds is by lowering defense costs using advanced analytic techniques. In 2017, NORCAL Group began using Milliman’s Datalytics-Defense®, which uses proprietary data-mining techniques to analyze companies’ defense cost invoices and produce actionable insights. The results shown in the case study infographic below demonstrate the extent NORCAL was able to reduce their defense costs, all the while maintaining their overall claims-with-payment ratio.
On December 31, 2018, the Centers for Medicare and Medicaid Services (CMS) released a sweeping new rule that will significantly change the Medicare Shared Savings Program (MSSP).
One of the hallmarks of the new MSSP rule is faster movement to downside risk. Under the current regulations, accountable care organizations (ACOs) can stay in an upside-only track for up to six years. The new rule requires some ACOs in the Basic Track to begin assuming some downside risk in year 3 (low-revenue ACOs new to MSSP and inexperienced with risk can remain in an upside-only arrangement until year 4) and those in the Enhanced Track assume downside risk in year 1. To date, ACOs in Track 1 have had a longer trajectory for assuming downside risk and may not have experienced the same pressure to reduce costs as ACOs participating in MSSP tracks with downside risk.
Under the new rule, there will be a more urgent need for ACOs to reduce population costs in order to mitigate losses. Identification and reduction of medically unnecessary services should be considered as a strategy to reduce population costs.
In this article, Milliman’s Kate Fitch, Adam Laurin, and Michele Berrios discuss data mining tactics that identify medically unnecessary services. They share several approaches they have seen successful ACOs adopt to effectively guide strategies to reduce medically unnecessary services and in turn reduce the ACO’s total population costs.