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Analysis on Delivery of High-Cost Services Prepared for Oklahoma State Department of Health August 28, 2015 Presented by: Jeremy D. Palmer, FSA, MAAA Principal and Consulting Actuary Chris T. Pettit, FSA, MAAA Principal and Consulting Actuary


  1. Analysis on Delivery of High-Cost Services Prepared for Oklahoma State Department of Health August 28, 2015 Presented by: Jeremy D. Palmer, FSA, MAAA Principal and Consulting Actuary Chris T. Pettit, FSA, MAAA Principal and Consulting Actuary

  2. Background Specific topics • Evaluate and categorize high-cost services requested in this • Compare cost of OSIM identified conditions across payers analysis include: • Provide summary on demographics of populations • Discuss the methodology for identifying the populations • Define inpatient/outpatient optimization • Provide cost of care based on operational benchmarks INTRODUCTION 2

  3. Table of Contents A. Introduction and background B. High-cost individuals and conditions C. Cost of care and service types D. Optimization and operational benchmarks E. Methodology and assumptions F. Limitations and qualifications 3

  4. Reference to full report This presentation is intended to supplement the full report which documents complete analysis and is titled: Oklahoma State Innovation Model: Delivery of High-Cost Services Discussion Draft August 26, 2015 4

  5. High-cost services in the State of Oklahoma High- High- High- risk cost cost patients services patients • Key to identifying where high-cost services are being delivered is identifying who and where the high-cost patients are located • Analyze across multiple payers: Medicare, Medicaid, commercial • Fosters path to meeting OSIM-defined goals: • Reduce healthcare expenditures • Provide better quality of care • Improve health outcomes INTRODUCTION AND BACKGROUND 5

  6. 80/20 rule on healthcare expenditures 100% 90% 80% Percentage of medical expenditures 70% 60% 50% 40% 30% 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% ���������������������� • 80% of healthcare expenditures are for services/procedures performed on 20% of population • Highlights need to focus on a smaller portion of the population • Can gain the most by focusing on smaller group of individuals with bigger return on invested resources HIGH-COST INDIVIDUALS 6

  7. Spend by category of service Average patient Highest cost patients HIGH-COST INDIVIDUALS 7

  8. OSIM identified conditions • Phase 1 of OSIM plans requests population-based health measures for selected health topics: • Obesity • Diabetes • Hypertension • Tobacco usage • ICD-9 codes to identify through claims information, where available • Proxy morbidities utilized for conditions under reported ������������������ ������������������������������� � ����������� ��������� ��������� ����� � ����� � ��� � �������� ���� � ����� � ���� � ��������� ������������� ����� � ����� � ���� � ����� � �������������� � Prevalence rates for obesity and tobacco were not based on claims information due to under reporting HIGH-COST CONDITIONS 8

  9. Insurance market overview Commercial Medicare Medicaid • Employer- • Age and health • Income-based sponsored status eligibility eligibility • Market-based • Member • Little enrollee benefits premiums and cost exposure exposure to • Oklahoma • State and cost-sharing enrollment federally 800k in 2013 • Federal operated government • Oklahoma • Oklahoma enrollment enrollment 800k in 2014 625k in 2013 • Analyze high-cost conditions across all three markets • Important to treat each population differently based on coverage COST OF CARE 9

  10. Total cost of care $30,000 $25,000 $20,000 $15,000 Commercial $10,000 Medicare Medicaid $5,000 $0 • Highlights disparity in cost of the composite population against analyzed conditions • Does not include all healthcare dollars spent on patients – no Medicare Part D • Medicaid report information not available for obesity and tobacco use COST OF CARE 10

  11. Relative cost of conditions ������������������ ���������������������������������� � ����������� ��������� ��������� �������� ����� ����� !"� ��������� ����� ����� ����� ������������� ����� ����� ����� �������������� ����� ����� !"� #������$��%&������ ����� ����� ����� "'������"��%�&�(���� )�*���� )��*���� )�*���� � • Relative value calculated as condition-specific PMPY over average annual cost • Medicare summarized costs did not include pharmacy spend • Medicaid information derived from OHCA provided studies/reports • Relative value of conditions indicates patients are 2 to 3 times more expensive than average patient • Medicaid experience excludes nursing facility expenditures and enrollment COST OF CARE 11

  12. Types of services $18,000 $16,000 $14,000 $12,000 Ancillaries $10,000 Pharmacy $8,000 $6,000 Professional $4,000 Hospital Outpatient $2,000 Hospital Inpatient $0 • Distribution of services does not vary significantly as observed in highest cost members, but facility spending on high-cost conditions is greater than average • Actuarial cost models included in report detail cost by category • Based on commercial experience TYPES OF SERVICES 12

  13. Degree of healthcare management Degree of healthcare management indicates portion of care that is being well-managed Loosely Well- managed managed Limited use of Minimal incentives Active use of Programs to educate evidence based to manage evidence-based physicians on practices treatment guidelines efficiency Limited use of low Excessive use of Financial incentives On-site utilization cost alternatives costly services rewarding providers management for efficiency Little promotion of Use of primary care change manager OPTIMIZATION AND OPERATIONAL BENCHMARKS 13

  14. Calculating potential savings Commercial Population ��������� ���������� ���������� ���������� ����� ���������� ����������� ��������� ��������� ���� ������ ������� ���������� ���������� ������� ������� )�*��� ���� )��� ����� ���*��� )���+�&&��� �������� �*��� ���� ��� ���� ���*��� )��+�&&��� ������������ �*��� ���� ��� ����� ���*��� )���+�&&��� ������������� �*��� ���� ��� ����� ���*��� )���+�&&��� Medicaid Population • Estimate potential savings utilizing ��������� ���������� information detailed in ���������� ���������� ����� ���������� ��������� ��������� report ��������� ���� ������ ������� ���������� ���������� ������� • Focus on hospital ������� !" ���� !" ����� ���*��� !" inpatient costs �������� �*��� ���� )��� ���� ���*��� )��+�&&��� • Assumes reasonable ������������ �*��� ���� )�� ���� ���*��� )��+�&&��� DoHM improvement goals ������������� !" ���� !" ����� ���*��� !" OPTIMIZATION AND OPERATIONAL BENCHMARKS 14

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