Provider Claims and Plan Administration Cost Management Strategies

Using and applying a Lean Six Sigma Philosophy to Provider Claims and Plan Administration Cost Management yields a fundamental understanding that the presence of defects, variation, non-value added activity, and sub-optimal process velocity are yielding a system with substantially higher costs and unacceptable quality outcomes for the patients. This suboptimal result can be effectively addressed by eliminating artificially introduced friction inherent in Managed Care strategies and focusing instead on keeping people healthier than they would otherwise keep themselves. This is now becoming possible with the data available if it can be transparently exchanged, analyzed, and acted upon by each of the parties involved in the system.

Health Care Costs by Category
Provider Claims	67.6%
Claims Administration	4.0%
Medical and Disease Management	1.8%
Network Access Fees and Network Management	1.8%
Benefit Consultation and Plan Management	4.8%
Human Resources Administration	4.8%
Risk Charge	15.1%

Provider Claims

By far the largest component of Health Care Costs and by far among the most misunderstood. Health Care Delivery is unlike most other economic models whereby reduced Unit Costs do not always directly lead to lower costs. In fact, in PIC's experience, we are witnessing a long term trend of substantial reductions in Physician Compensation with long term dramatic increases in overall Plan Costs. Unique to the Health Care Delivery system, no Provider Claims expenditures can happen without the express order or "prescription" of a physician. As we reduce the compensation and disenfranchise the decision makers, we tend to lose the engagement of the very decision makers in the system. Coupled with an intense increase in Professional Liability premium rates and an increasingly educated and demanding patient base, very few physicians will actively invest substantial amounts of time with patients to talk them out of the need for additional diagnostic procedures or elective surgical procedures.

Key strategies to manage to reduce Provider Claims may at first appear counter-intuitive:

Provider Contracts with Clear, Adequate, and Unambiguous Compensation, Economic, and Appeal/Grievance Terms
Inclusion of Clear, understandable, and highly leveraged Pay for Performance or Pay for Quality Improvement Reward mechanisms
A culture of Professional Respect from Health Plan Clinicians toward their colleagues who remain in Clinical Practice
A culture of Professional Deference from Non-Physician Health Plan and System based professionals toward Physicians serving members
Data Systems which are Clinically Accurate to build Professional Trust between System based Professionals and Practicing Physicians
A focus of support in Complex Case Coordination so as to reinforce the Practicing Physician's trust in future recommendations

Claims Administration
Claims Administration remains a labor intensive administrative activity subject to significant risk of rework. Key strategies to substantially reduce the cost of claims administration include:

Electronic Billing and Electronic Remittance
Clear and Well Understood Plan Documents
Benefit Designs which are easy to interpret by Beneficiaries
Provider Contracts with Clear, Adequate, and Unambiguous Compensation, Economic, and Appeal/Grievance Terms

Medical and Disease Management

Medical and Disease Management by definition demand relatively expensive clinical professional expertise. This function has a significant risk of rework and abandoned projects due to the challenges inherent in coordinating decision-making of a highly educated and independent profession. Key Strategies to substantially reduce the cost of Medical and Disease Management include:

Clear and Well Understood Plan Documents
Benefit Designs which are easy to interpret by Beneficiaries
Provider Relations which are constructive and collaborative
Provider Contracts with Clear, Adequate, and Unambiguous Compensation, Economic, and Appeal/Grievance Terms
Data Systems to Support Accurate and Effective Case Focus which buttress the Medical Management Staff's credibility with the Professional Constituency
Multi-faceted relationships with Physician Offices and Local Physician Organizations to facilitate communications for Complex Case Coordination and Management

Network Access Fees and Network Management

Network Access Fees and Management are highly dependent upon the friction created by the Network Contracting Process. Strong, positive provider relationships backed by effective Claims, Medical, and Disease Management programs provide an environment conducive to appropriate contractual rates. While Network Access Fees tend to be higher for Networks with greater discounts, prudent health benefit managers evaluate both the discounted unit prices as well as the networks effectiveness at managing the "units" of service simultaneously. Key Strategies to reduce the cost of Network Access Fees and Network Management include:

Clear and Well Understood Plan Documents
Benefit Designs which are easy to interpret by Beneficiaries
Provider Relations which are constructive and collaborative
Provider Contracts with Clear, Adequate, and Unambiguous Compensation, Economic, and Appeal/Grievance Terms
Data Systems to Support Accurate and Effective Decision Making and Communication
Multi-faceted relationships with Physician Offices and Local Physician Organizations to facilitate communications

Benefit Consultation, Plan Management, and Human Resources Administration

Benefit Consultation, Plan Management, and Human Resources Administration are driven primarily by two key factors: Plan Costs and Employee Satisfaction. These two issues are fundamentally dependent upon the overall Corporate Philosophy toward HR and Benefits Administration coupled with the current Financial and Strategic Business position of the organization. Key Strategies in this arena include:

Clear and Well Understood Plan Documents
Benefit Designs which are easy to interpret by Beneficiaries
Data Systems to Support Accurate and Effective Decision Making and Communication

Risk Charge

The Risk Charge is fundamentally dependent upon the unknown financial risk of the population receiving benefits. This charge has two drivers: Known Risks and Unknown Risks. Known Risks will be underwritten based upon what is known and more importantly believed about the Loss Control strategies outlined in Medical and Network Management activities. The perceived Unknown Risks are much more costly. While seemingly an innocuous statement, perceived Unknown Risks are fundamentally reduced by converting Unknown to Known risks. Key Strategies to Reduce Risk Charges include:

Clear and Well Understood Plan Documents
Benefit Designs which are easy to interpret by Beneficiaries
Data Systems to Support Accurate and Effective Decision Making and Communication
Clear and Accurate Census Reports Detailing each of the Individual Enrollees in the Plan (Including both Employee and Dependent Detail)
Clear and Accurate Claims Payment Histories
Clear and Accurate Complex Enrollee Case Analyses
A Plan Census with a low risk of turnover or risk of substantial change during the plan period
A Plan Census which is larger to support more actuarial stability

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