Tag Archives: John Cookson

Milliman launches new features in Hospital Performance Index

Milliman today announced that its Hospital Performance Index (HPI) software, a benchmarking tool for payers and providers that uses statistical methods to identify opportunities for increased efficiency in patient populations, has added two new capabilities.

The first new feature involves observation status benchmarks, which have become more important over the last two years with the institution of the 72-hour rule. HPI can now produce national and regional averages for observation statistics, allowing for quick comparison of individual facilities to national, regional, and state norms. Custom reporting is also available. With such wide discrepancy in rates regarding observation status by facility throughout the United States, this tool can now shed light on the relative performance of every facility in the country.

The second new feature involves readmission rate benchmarks by diagnosis-related group (DRG). HPI now provides data on the relative readmission rate performance of each hospital in the country, information that is crucial for both hospitals and payers. This new feature will enhance the existing functionality around potentially avoidable admissions and potentially avoidable inpatient days.

“These additions to HPI were very much driven by market demand,” said John Cookson, a principal at Milliman. “Hospitals and payers want more and better data so that they can make smarter decisions, improve efficiency, and contain costs. Now that HPI has information on observation status and readmissions rates, they are in a much better position to accomplish those goals.”

Spreading healthcare exposure across capital markets

Health insurers are increasingly using risk-spreading tools to transfer exposure to the capital markets. A recent SNL Financial article reports that Aetna has agreed to an insurance-linked securities deal that will provide the company reinsurance protection.

Aetna Inc. is sponsoring Vitality Re VI Ltd. (Series 2015-1) in an insurance-linked securities deal that will give the insurer at least $200 million of protection on a reinsurance basis against sudden increases in health insurance medical benefit claims, Artemis reported Jan. 9.

…Under the new deal, Vitality Re VI will offer two tranches of series 2015-1 health insurance medical benefit risk-linked notes to investors. The preliminary size of the class A tranche is $140 million, while the preliminary size of the class B tranche is $60 million. Both tranches are linked to the insurer’s medical benefit ratio as a trigger, according to the report. The deal will provide Aetna coverage for three years, from 2015 through 2017.

…Milliman Inc. is providing the risk modeling and calculation agent services, Artemis said.

This article, co-authored by Milliman’s John Cookson and Hannover Re’s Keith Kennerly, offers perspective on how risk-spreading tools such as catastrophe bonds can help health organizations control their claims exposure. Here is an excerpt:

Risk-spreading tools that make use of the capital markets can help ACOs and other organizations, both large and small, mitigate the aggregate population risks. Given the trend spikes and volatility inherent to health risks, these capital structures would rely on a combination of transparency, predictive analytics, and specially-designed indices to provide insight into the actuarial risk and actuarial underwriting opportunity.

By providing a heightened degree of visibility into the underlying actuarial risks, organizations can have a higher comfort level in underwriting those exposures at much lower attachment points that are very close to current Medical Loss Ratios (MLR). This could also set the stage for transforming a large portion of healthcare spending from a cost into a tradable asset (investment opportunity) for capital markets participants/investors.

S&P: Healthcare expenditures for commercial plans up 3.2% in the year ending February 2014

Data released today for the S&P Healthcare Claims Indices shows that healthcare costs rose 3.5% in the 12 months ended February 2014 compared to the 4.9% rise for the 12 months ended February 2013. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.1% and prescription drugs rose 3.5% over the same period. All but prescription drugs rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 2.6% compared to 4.3% in the earlier period while outpatient fee-for-service costs rose 4.9% compared to 6.3% in the earlier period. Prescription drugs expenditures were up 3.5% versus 1.5% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended February 2014.

“With the exception of prescription drugs, healthcare expenditures are growing more slowly than a year ago,” says David Blitzer, Managing Director and Chairman of the Index Committee and S&P Dow Jones Indices. “The overall trends in healthcare costs are lower than that seen a year or two ago, but remain one to two percentage points above the overall rate of inflation. The greater growth in prescription drug costs reflects a combination of higher prices for both generic and branded pharmaceuticals and shifting market shares between generic and branded.

“Among the principal lines of business, expenditures for large and small groups and administrative services only (ASO) plans show stable growth rates. Individual plans, where a participant is not part of a group plan based on employment, are the smallest segment as well as the most volatile. While the growth in costs moved down through 2013, the most recent data suggests a jump in expenditures for this category. Because this is the segment that the will be most affected by Obamacare going forward, it is likely to be closely watched as the new healthcare law is implemented in coming years.

“The rise in total healthcare costs at 3.2% over the 12 months ended with February 2014 is slightly greater than the increase in current dollar GDP from the first quarter of 2013 to the first quarter of 2014 of 2.9%. Moreover, the 2014 first quarter GDP was weakened by unusually severe winter weather and a small decline in consumer spending on health services. With healthcare cost trends moderating, the share of GDP devoted to healthcare may be stabilizing as well.”

S&P: Healthcare expenditures for commercial plans up 3.5% in the 12 months ended November 2013

Data released today for the S&P Healthcare Claims Indices show healthcare costs rose 3.5% in the 12 months ended November 2013 compared to the 4.9% rise for the 12 months ended November 2012. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.7% and prescription drugs rose 2.6% over the same period. All rose at a slower pace than a year earlier.

Among the key components of medical costs, inpatient fee-for-service rose 3.5% compared to 4.5% in the earlier period while outpatient fee-for-service costs rose 5.2% compared to 8.0% in the earlier period. Prescription drug expenditures were up 2.6% versus 2.9% one year ago. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended November 2013.

Because of standard industry lags in invoicing claims and resolving disputed charges, it is not possible for the indices to be calculated without a lag. Trends in healthcare expenditures are calculated as the average index level in the 12 months ended November 2013 compared to the average index level in the 12 months ended November 2012 and stated as a percentage, in accordance with the usual practice with healthcare cost analyses.

“The growth in healthcare spending continues to slow,” says David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. “The key question in the slowdown is whether we are seeing a shift in healthcare cost trends that is sustainable or whether we are merely observing the slower pace of overall inflation and weak economic growth. One way to gain some insight is to look at unit cost measures for healthcare derived from the S&P Healthcare Claims Indices.”

“The data show that prescription drug trends tend to lag shifts in inflation while trends in inpatient unit costs don’t show any obvious relation to inflation shifts,” continues Blitzer. “The pattern in prescriptions may reflect consumer preferences towards generic drugs. While the general rate of inflation may affect trends in inpatient medical care, it is probably not the dominant factor. The current low inflation rate is a factor in slowing growth in healthcare expenditures, but low inflation alone will not control the growth in healthcare costs.”

S&P: Healthcare expenditures for commercial plans up 3.2% in the year to August 2013

Data released today for the S&P Healthcare Claims Indices showed that total medical costs rose 3.2% in the 12 months ended August 2013 compared to the 4.8% rise for the 12 months ended August 2012. Medical costs—inpatient and outpatient hospitalization plus professional services—rose 3.7% and prescription drugs rose 0.9% over the same period. All rose less than a year earlier.

Among the key components of medical costs, inpatient fee-for-service costs rose 4.2% compared to 4.4% in the earlier period while outpatient fee-for-service costs rose 5.7% compared to 7.9% in the earlier period. Prescription drugs expenditures were up 0.9% versus 2.9% in the 12 months ended August 2012. These figures, which represent the most current data available, are based on expenditures incurred in the 12 months ended August 2013. Because of standard industry lags in invoicing claims and resolving disputed charges, it is not possible for the indices to be calculated without a lag.

“The S&P Healthcare Claim Indices show healthcare expenditures rose less in the most recent period. This confirms other reports that the supposedly inexorable rise in healthcare costs is moderating,” says David Blitzer, managing director and chairman of the Index Committee at S&P Dow Jones Indices. “While the slower cost increases are most welcome, there is debate over the cause. For some categories there is sufficient detail to examine price and usage separately. For instance, in inpatient fee-for-service, one area showing relatively stable cost increases, the indices show that declining usage is contributing to the slowdown while unit costs rise at about 6% annually.

“One often cited source of moderation is the growth of generic pharmaceuticals, which compete with their branded counterparts on price. Among branded prescription drugs, prices continue to climb at more than 15% annually. Apparently the purveyors of branded pharmaceuticals chose to respond to price competition by increasing prices to offset declining usage. Compared to the branded, where usage is dropping by 15% annually, generics see consistent increases.

“It is too soon to credit the slower cost increases to Obamacare, going forward the indices will show whether the slowing of cost growth continues.”

Milliman launches next generation Hospital Performance Index

Milliman has announced the launch of a next generation Hospital Performance Index software, a benchmarking tool for payors and providers that uses statistical methods to identify opportunities for increased efficiency in patient populations. The new product significantly enhances the granularity of hospital benchmarking available to payors and providers and fits the needs of accountable care organizations (ACOs) by identifying instances where care management may yield improved quality and increased efficiency.

“The move toward accountable care spurred by the Affordable Care Act requires payors and providers to constantly benchmark their populations in search of opportunities for increased efficiency,” said John Cookson, Milliman principal. “The enhanced Hospital Performance Index, which builds on technology with a 20-year track record, is optimized for today’s market and allows national, regional, and local benchmarking. This benchmarking can be performed using multiple variables, including diagnosis-related groups (DRGs), major disease category, readmissions, and avoidable inpatient days.”

The enhanced Hospital Performance Index includes an updated user interface that brings these benchmarks to payors and providers in an intuitive fashion. The benchmarks can be applied against Medicare, Medicaid, and commercial populations and allow for comparison with every hospital in the country. The updated tool can help payors and providers prioritize their care management efforts, highlight instances where better management could result in cost reduction, and aid in contract negotiations and in the creation of accountable care partnerships. For more information, click here.