Why Budgeting for Healthcare is Near Impossible

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The average millennial will spend between 1/2 and 2/3 of their lifetime earnings on healthcare. This jaw-dropping estimate, outlined in David Goldhill’s book Catastrophic Care: Why Everything We Think We Know about Health Care Is Wrong, is the perfect picture of how, for Americans, the new normal involves personally budgeting for healthcare expenses. Unfortunately it’s not an easy task to break healthcare costs down to what comes out of our personal pockets.

Divided equally among each person in the U.S., healthcare’s overall price tag averages out to over $10,000 per person each year—a whopping 18% of U.S. GDP. Since employers provide 48% of the healthcare coverage in the U.S. this burden has fallen heavily on their shoulders, and, as a consequence, they have shared this cost burden with employees. The growing popularity of high deductible health plans and copays means employees are sharing a larger portion of these healthcare costs, and as such, the average person needs to budget for these costs in their financial planning.

Healthcare Costs: What Employers Pay, What Employees Pay

The Milliman Medical Index estimates medical costs each year as they relate to employer and employee contributions. Based on data from 2018, healthcare for a family of 4 in the United States costs $28,166. Of this total cost, $15,788 comes from the employer, while the employee contributes on average $7,674, with an additional $4,704 paid by the employee for out of pocket for deductibles and copays. Here’s a snapshot of the cost breakdown for employer-sponsored health insurance:

*2019  ACA Out of Pocket Maximums  are $7,900/individual and $15,800/family.

*2019 ACA Out of Pocket Maximums are $7,900/individual and $15,800/family.

These estimates are sound breakdowns based on large amounts of employer-sponsored plan data from Milliman. But do they truly inform how an individual can budget for their own healthcare expenses? Unfortunately the answer to this question is not so easy.

What Factors Influence Individual Health Spending

To understand how to budget for individual health expenses, we need to look at the levers that influence healthcare costs. And there are several factors which could cause individual health costs to largely vary. These factors are:

1.      Age and Gender. Not surprisingly, actual health costs can vary greatly based on an individual’s age and gender. The figure below from the Peterson Kaiser Health System Tracker breaks down the American population by age, and then demonstrates each age group’s share of overall health spending.

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2.      Individual health status. Chronic illnesses such as diabetes and cancer have a marked impact on someone’s personal healthcare costs. The Centers for Medicare and Medicaid Services (CMS) report that 90% of the nation’s $3.3 trillion dollars in healthcare spending is for people with chronic and mental health conditions.

3.      Geographic area. Differences in the costs of labor, rents and taxes in different geographic regions affect healthcare costs. Furthermore, areas of the country with more technological advances will have higher utilization rates of healthcare, further contributing to cost differences.

4.      Provider variation. A frequently criticized hallmark of the healthcare industry is that provider costs can vary widely depending on where an individual goes to seek treatment. Furthermore, different payment methodologies, pre-negotiated payment rates and capitated rates can affect healthcare costs.

5.      Insurance coverage. Richer health insurance plans tend to have higher utilization rates than budget options with less coverage. In addition, who is paying for the procedure can affect the ultimate cost. For example, what a provider is paid from Medicare (which, as demonstrated in the figure below, provides 14% of all coverage in the U.S.) and what they are paid under an employer-sponsored plan for the same exact procedure could be two different costs.

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What Healthcare is Costing and What is Coming Out of Our Personal Pockets Are Two Completely Different Things

In short, the reason why budgeting for individual health costs is so challenging is because our system of how we pay for healthcare masks the true cost of healthcare. The subsidization in the health insurance market muddies the waters for anyone trying to budget for their own personal healthcare costs. And just in case this wasn’t confusing enough, the rules that govern this system which determine things like out of pocket maximums, in addition to insurance rates, change every year.

An individual trying to budget for their own expenses can use a best-guess of looking at their annual share of healthcare premiums and their average out of pocket costs each year. This assumes that their own past health expenses are the best way to predict future expenses. But even this approach is not perfect. Understanding how the $170/person cost of healthcare in 1960 made up only 5% of US GDP, compared to healthcare's current share at 18% of GDP…the past might not always be the best predictor of the future where healthcare is concerned.

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About BetaXAnalytics:

We combine data science with clinical, pharmacy and wellness expertise to guide employers and providers into a data deep-dive that is more comprehensive than any data platform on the market today. BetaXAnalytics uses the power of their health data "for good” to improve the cost and quality of health care. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

Analytics For Employers: A Tutorial (Part 2)

A succinct guide on how to save money on employer-sponsored healthcare

A succinct guide on how to save money on employer-sponsored healthcare

Over the past 3 years, the most common question we have heard from employers and brokers is this: health analytics is good, but what do we do with the dataWell, we are going to answer that question in this very post. That’s right, we’re sharing all the most actionable areas we look at for self-insured employers to help them to gain control over their spending. Some may say that we’re giving away our secrets, but we don’t see it that way. Our mission for employers is to make them savvy health care consumers, so making information transparent is what we do. Furthermore, it’s important to open up conversations on how organizations are using analytic data, because these conversations will help to advance insight and foresight so employers can use their data to create, track and refine a long-term strategy for the benefits they offer.

In Part 1 of this post we established that for employers, the best strategy for using health analytics moves beyond simply looking at spending to enter the realm of strategic benefit planning. This is the limitation of traditional healthcare analytics. Over the next decade, we will continue to see employers move away from watching spending go up and down and move towards looking at data in a way that provides both insight and foresight into population health. The next evolution of employer analytics informs a deeper understanding of who associates are, the benefits that will attract the best talent, and identifying the optimal strategy for funding these next-generation benefits packages.

To start, we pulled together a list of areas that any employer can explore if they want to ensure they’re using data to guide their spending decisions on health benefits. We've broken this into 3 sections: 1) Goals, 2) What's Actionable? and 3) Areas of Insight.

Beginning with the end in mind, here are the top goals that self-insured employers have when it comes to monitoring their health spending.



1.      To cut excess and wasteful healthcare spending and to accurately project future spending. Approximately 20% of an employer’s healthcare spending is wasted due to unnecessary and preventable costs. Open access to data helps to inform employers on exactly what areas are driving wasteful spending and how to better predict future spending.

2.      Identify strategies to support associates on their health journeys. While 5% of people drive 51% of health costs, 50% of plan members account for only 3% of health spending. Understanding how to support the unique, complex health needs of members affects a company’s bottom line in both healthcare costs and employee productivity.

3.      Track progress on the current healthcare and wellbeing strategy. An unbiased evaluation of a healthcare program is eye-opening. Not only does it guide the strategic evolution of an employer's healthcare strategy, it may reveal opportunities to recoup hefty vendor performance guarantees.

4.      Make sure members are getting the preventative medical attention they need. We consistently see that between 10%-20% of members never see a doctor. It’s within this group of people who are not driving costs today where an employer’s greatest future healthcare risks can lie.

In order to meet these goals, an organization needs to identify what exactly can be actionable. It's easy to spot the costs that stick out, but when is it too late to intervene on a cost-driver? Here are the most common areas where employers can focus to influence spending, care quality, preventative care, and effectiveness of condition management.


What Is Actionable?

·        The plan’s pharmacy formulary (with some limitations based on the PBM partner).

·        The plan’s rules surrounding specialty medications.

·        The healthcare partners the employer selects (health plan, PBM, condition management services, smoking cessation, behavioral health services, direct primary care, centers of excellence).

·        Plan contributions, deductibles and coinsurance paid by employees for their healthcare benefit, emergency room surcharges, spousal surcharges, smoker surcharges, stop loss arrangements.

·        Cost variation among high cost and/or high volume services (MRIs, musculoskeletal surgeries, cancer care, etc).

·        Effectiveness of member education on health benefits.

·        Targeted wellbeing services offered to members.

Now that we’ve laid out the goals of using data and the areas that are actionable, here are some specific questions to answer when looking at the data.


Areas of insight.

1.      Which conditions and medications represent the largest population health risks? How do these conditions vary by both dollars spent and number of people affected?

2.      Can amending prescription drug policies surrounding step therapy, specialty drugs, generics, place of service/purchase lead to savings for members?

3.      Does the member base have a problem with emergency room (ER) misuse and are certain locations or member categories driving ER costs?

4.      Do changes in member risk score, medication adherence and prevalent disease states such as diabetes show that your investments in condition management, smoking cessation and wellbeing interventions are working? Could performance guarantee fees be recovered from vendors?

5.      Are there trends noticeable related to members who are not engaging with physicians at all? Through looking at healthcare utilization among work location, salary bands, plan types—can we identify trends as to why certain people are not using necessary health services? These barriers to accessing care could be cost, lack of understanding of benefits, and even corporate culture, among others.

6.      What percentage of people are receiving preventative care and age-appropriate screenings among various member demographics?

7.      What are the largest cost variances that can be actionable? For example, could costs associated with procedures such as joint and hip replacement surgery or even MRIs be standardized via options that are available to your members? (Could centers of excellence be leveraged?)

8.      Could a direct primary care model have benefit for the member population?

9.      Are there actionable insights with respect to absence data and workers compensation claims?

10.  What is the size and scope (in dollars and members) of opioid use and dependency-related costs?

In the same way that reading an abstract is not the same as reading the book, please keep in mind that this is a very brief overview of a complex subject.* Every employer has unique challenges related to population health and health spending, so there's is no real "one size fits all" approach. The data drives the discussion in a unique direction for each employer.

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About BetaXAnalytics:

We combine data science with clinical, pharmacy and wellness expertise to guide employers and providers into a data deep-dive that is more comprehensive than any data platform on the market today. BetaXAnalytics uses the power of their health data "for good” to improve the cost and quality of health care. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

* A Note on Data Privacy The purpose of using health analytics is to identify actionable areas to target costs and to improve effectiveness of care options on an aggregate level. This is done by looking at trends in data and under no circumstances should insights be presented to an employer in a way where data is individually identifiable. There are a number of data-related best practices that we recommend to remain adherent to privacy laws. Any employer, broker or consultant who is using health analytics should do so under strict adherence to HIPAA regulations and under the advisement of an experienced data privacy attorney.

Analytics For Employers: A Tutorial (Part 1)

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It’s been almost 3 years since we started BetaXAnalytics with the goal of using data science to offer strategic guidance to employers and providers on healthcare spending and services. Since opening our doors, we’ve spent a lot of time talking with companies who pay for healthcare for their employees, as well as the brokers and consultants who help to guide these decisions. At the same time, we’ve spent time taking a look at many of the analytic tools that are on the market right now—these are the technology platforms that provide spending transparency to employers and their brokers.

From day 1 when we started these customer interviews, one resounding theme was apparent. The biggest question we heard from employers and their brokers is simply this: Having data is good…but what do you do with it?

3 years later, this is still the most common question we hear. We see this recurring question from employers and their brokers as a symptom of the early-stage maturity of the employer health analytics market. In short, over the past decade as more self-insured employers use health data to help to manage their spending, we haven’t moved too far from the starting line.

Anyone who is familiar with the general progression of analytics will recognize the analytic maturity model below.

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At its most basic level, health care analytics is often pigeonholed into “counting things.” Counting dollars, counting medications, counting members…and watching these numbers go up and down. So every time we get the question, “What do you do with the data?” this just reaffirms that most employers are still in the dark with respect to using data to drive their benefits strategy. This type of “analytics” examines only the past and gives very little insight into the 4 critical areas of focus as a healthcare purchaser (which we explain in Part 2 of this post).

After seeing many of the analytic tools on the market today, we can confidently assert that that the market for using health analytics to control employer healthcare spending is here:

Having data is good…but what do you do with it?  This recurring question is a symptom of the low analytic maturity of the current state of employer health analytics—that is to say, we pay for access to data, but it’s rarely actionable. “Analytics” in this stage is synonymous with “counting” and data is hindsight-focused on reporting what has already happened.

Having data is good…but what do you do with it? This recurring question is a symptom of the low analytic maturity of the current state of employer health analytics—that is to say, we pay for access to data, but it’s rarely actionable. “Analytics” in this stage is synonymous with “counting” and data is hindsight-focused on reporting what has already happened.

The current state of employer analytics is a good start, but it barely scratches the surface of the strategic potential of analytics. Tracking spending is important, but true analytics go far beyond just spending to understand insights into your population health, designing and tracking programs to target conditions and support mental health, and even to provide insight into how well benefits are being communicated to employees. When we move past hindsight analytics to incorporate insight and foresight, we move past counting things, and to the realm of strategic benefit planning. This means developing a deeper understanding of who associates are, the benefits that will attract the best talent, and identifying the optimal strategy for funding these next-generation benefits packages. As with so many initiatives that fall under the Human Resources / Human Capital umbrella—including talent acquisition and retention, compensation, healthcare, engagement, benefits, wellbeing—the most strategic analytics should consider all of these areas. This is the future of analytics—and the future is here.

About BetaXAnalytics:

We combine data science with clinical, pharmacy and wellness expertise to guide employers and providers into a data deep-dive that is more comprehensive than any data platform on the market today. BetaXAnalytics uses the power of their health data "for good” to improve the cost and quality of health care. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

Healthcare’s Next Disruptors: Employers

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The cost of healthcare in the United States is rapidly rising with no end in sight, and this problem is hitting the American worker’s pocket in a more profound way than ever in history.  Healthcare in the U.S. is now at 18% of US GDP at a cost of over $10,000 per person annually.  To put this into perspective, healthcare costs in 1960 were 5% of U.S. GDP ($170/person). 

Here’s what not everyone knows: on the other side of this problem of rising healthcare costs are pockets of people effecting serious change—these people are employers.

Forward thinking employers and the HR leaders responsible for making their healthcare decisions are thinking outside of the box to find health care models that are more effective at keeping employees healthy.  These are people who are rejecting the traditional benefits model of disjointed, piecemeal solutions.  Instead, these employers are using data to form a comprehensive strategy to ensure their healthcare dollars are keeping members healthy.

Consider the following developments in 2018 alone as an indication of the trends we’re seeing in the employer market:

·         Solution Scale: Amazon, Berkshire Hathaway and JPMorgan Chase announced in early 2018 their formation of a healthcare alliance to tackle finding more effective care models for their combined employee base of 1.2 million people.

·         Accountability: The National Drug Purchasing Coalition (NDPC), whose members include employers like PepsiCo and ExxonMobil, has partnered with Express Scripts to form a fully-transparent model where the NDPC pays what Express Scripts pays for prescription drugs.  In turn, Express Scripts will administer a pay-for-performance clinical care model that shifts the financial risk previously borne by employers onto the prescription drug plan administrator.

·         Emphasis on Health Outcomes: GM announced a deal with the Detroit-based hospital system Henry Ford Health System for a direct contracting healthcare model for its 24,000 employees and family members

·         Using Data to Guide Health Strategy: Morgan Stanley recently announced that they have created a chief medical officer role to oversee their use of HR data and analytics.  Said CHRO Jeff Brodsky, “Harnessing our HR data, we can achieve better wellness for our employees and address rising healthcare costs.”

·         Making Healthcare Easier for Employees: Amazon and Apple have joined the 30% of employers that offer onsite medical clinics for employees and their families.

If your company is looking to help to effect change in this healthcare revolution, here are a few ways to start:

1.      Shift financial risk.  Seek partners who are willing to step outside of the traditional fee-for-service healthcare models that currently put the highest financial risk on the employer (and in turn, employees).  Instead, shift financial risk to care providers and other partners who directly impact health outcomes.  Direct primary care is a great example of this type of accountable care model. 

2.      Gain data transparency.  Get access to timely and ongoing data to drive your healthcare benefit decisions. It is easy to get inundated by mountains of complex data and trying to aggregate it with location and other benefits data, so we recommend that employers assign a strategic data subject matter expert to drive the discussion.  This is what the team at BetaXAnalytics does—as data scientists with clinical, pharmacy and wellness expertise, our deep-dive into employer data is more comprehensive than any data platform on the market today.

3.      Remove barriers.  Think about ways to remove the barriers that prevent employees and their families from getting the care that they need—the financial barriers, the time constraints and convenience barriers.  Onsite clinics and telemedicine are just a couple of examples of strategies to make healthcare convenient and inexpensive for employees.

“Employers taking healthcare into their own hands is the most meaningful way we can change healthcare in this country,” Bret Jackson, president of The Economic Alliance for Michigan, a member of the National Alliance of Healthcare Purchaser Coalitions

This week we presented at the Strategic HR Conference at Mount Washington with CHROs and HR leaders throughout the Northeast to share best practices on how HR leaders can use data to drive their health and benefits strategy in a way that maximizes their healthcare budget.  If you’re interested in learning more, email me.

Who pays for healthcare in the U.S.?  We all do.  By way of taxes and out of pocket premiums, we pay for the costs that flow largely through the government and employers.  And the more informed the people are who are paying for healthcare, the more we can effect change.

—Shannon Shallcross, Co-Founder of BetaXAnalytics

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About BetaXAnalytics:

If you're an employer who feels there's got to be a better way to control health care costs, you're on to something. And we can help. BetaXAnalytics partners with employers to use the power of their health data "for good” to improve the cost and quality of their health care. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, to save health dollars and to better target health interventions to keep employees well. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

Most Innovative in Healthcare: BetaXAnalytics Recognized by Providence Business News

Source: Providence Business News

Source: Providence Business News

The team at BetaXAnalytics is proud to receive the Providence Business News award for “Most Innovative in Healthcare.” Our acceptance speech was 3 words: “Data for Good.”

Many thanks to our clients and community partners who believe in what we’re doing—making health data transparent for the right reasons.

See the full story from Providence Business News by clicking here.

Employers Are Using an Innovative Way to Soften the Financial Burden of High Deductible Health Plans

As a healthcare data technology company, the most common question we hear from employers is, “how can we lower our healthcare spending?”  The high cost of healthcare has a significant impact on employer expenses.  The Milliman Medical Index projects that in 2018 the average premium for a family of four is $28,166.  While the magnitude of health costs is a reality for our employer clients, finding an effective way to manage these high costs is often their first priority.

When we drill down into cost-drivers, we consistently see a startling theme across employers—that only 5% of people are driving 51% of healthcare spending.  A very small group of people with chronic conditions (such as diabetes, rheumatoid arthritis, or cancer) are contributing to half of the total health spending.  While this disproportionate spending is a reality within employer populations, according to the Kaiser Family Foundation Medical Expenditure Panel Survey, this also holds true for Americans as a whole.


As a way to manage the rising cost of healthcare, nearly 40% of adults are covered by what is known as a high-deductible health plan.  Under this model, employees share in a greater share of their health expenses, responsible for on average $5,248 of out of pocket medical costs each year.  The thinking behind this way of cost-sharing with employees is that when employees are responsible for paying a greater share of their health expenses, that they will become better healthcare consumers by shopping for the best prices and avoiding unnecessary procedures. 

Unfortunately, in many of these cases the high out-of-pocket medical costs cause financial hardship on many people.  A survey from the Kaiser Family Health Foundation found that 1/3 of adults have trouble paying their medical bills, and 73% have cut back on spending on food, clothing or basic household items to pay their medical bills. The Report on the Economic Well-Being of U.S. Households, an annual survey conducted by the Federal Reserve Board, found that 44 percent of adult Americans claim they would not have $400 in case of an emergency without turning to credit cards, family and friends, or selling their own possessions. When those who are financially strapped have mounting healthcare bills, the consequences can be personally devastating.  A 2015 poll by the Robert Wood Johnson Foundation and the Harvard T.H. Chan School of Public Health found that 26 percent of those who took part in the survey claimed medical bills caused severe damage to their household’s financial wellbeing.

Because the impact of high healthcare deductibles causes such a financial hardship for individuals and their families, many recent studies have shown that this type of health plan causes individuals to delay necessary healthcare.  Researchers from UC Berkeley and Harvard studied the results of a large employer’s choice to offer a high deductible plan over 2 years. Instead of finding evidence to support the theory that high-deductible plans make people take more charge of their health spending, they found no evidence to show that employees were comparing costs or cutting unnecessary services once they had a high healthcare deductible.  They cut low-value health services at the same rate as they were cutting important medical services, causing the employer to question whether members were making the right choices for their long term health.  Additional studies have found that the danger of high deductible health plans is that their members with the highest health risks have shown that they avoid necessary care and medications due to cost. 

On the other side of the phenomenon that 5% of people drive 51% of health costs, we see another theme that is equally surprising—half of plan members contribute to only 3% of total health spending.  That’s right—a large proportion of costs come from a small number of people, yet a large number of people contribute very little to overall costs.  Why is this? 

At BetaXAnalytics, when we look at employer utilization of health services we consistently find that between 10%-20% of members never see their doctor.  These are the employees who either feel they simply “don’t have time” to see the doctor or “don’t have the money” to spend into their annual deductible.  But it’s within this group of people who are not driving costs today where an employer’s greatest healthcare risks can lie. 

The answer for employers?  Make it as easy as possible for members to get the care they need.  One effective way to ensure that people aren’t avoiding necessary care is to remove the traditional financial and convenience barriers that prevent employees from seeing the doctor.  Hooray Health provides a template for employers to solve this problem. They afford first dollar coverage for preventative, basic and urgent care visits with $0 deductibles, and $25 copays for all in-network visits.  Their innovative network consists of over 2,400 retail clinics and urgent care centers across the country with extended hours and no appointments necessary.  They also provide access to telemedicine visits via phone 24-hours a day, 7 days a week at no cost which makes getting necessary care quick and easy, even when work and family schedules make it difficult to go into a doctor’s office.  Their app-based tools and live medical concierge are available 24/7 make finding care easy and convenient.  As an added benefit to address employee concerns about prescription costs, Hooray Health offers a prescription discount card to ensure employees that they are receiving competitive prices for their medications.

Hooray Health removes financial and convenience barriers that prevent people from getting the care they need by making access to necessary care easy, convenient, and free for employees.  This type of solution is particularly useful for employers with high deductible health plans where high out of pocket costs may deter employees and their families from seeking the necessary care that they need.  While solutions like these remove barriers to care, they also save employers money by providing an affordable alternative to many of the care services needed by their members. Providing easy-to-use concierge-based access to a network of retail clinics, urgent care centers and telemedicine doctors ensures that employee health won’t neglect their health due to lack of money or lack of time.  You can learn more by contacting them at info@hoorayhealthcare.com

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About BetaXAnalytics:

If you're an employer who feels there's got to be a better way to control health care costs, you're on to something. And we can help. BetaXAnalytics partners with employers to use the power of their health data "for good” to improve the cost and quality of their health care. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, to save health dollars and to better target health interventions to keep employees well. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

About Hooray Health:

Since its founding in 2017, Hooray Health has been committed to disrupting the health insurance industry by providing employers, individuals and their families with the assurance that their basic healthcare needs are covered. Here at Hooray Health, we believe that healthcare should be simple, honest, and affordable, that’s why whether you apply online or over the phone, the process is always simple, and acceptance is guaranteed. Partnered with over 2,300 urgent care and retail clinics, and a 24/7 medical concierge team, Hooray Health members know that no matter where they are or what time it is, their healthcare is there for them. Starting plans have a low monthly cost with no annual deductible, an affordable copay, and no surprise balance bills. Every day, Hooray Health is smashing the industry norms and bringing healthcare to all.

Forget Flashy Technology: Here Are 3 Data and Analytics Best Practices Any Company Can Use Right Now

Image credit: iStockPhoto, Ryan J. Lane

Image credit: iStockPhoto, Ryan J. Lane

The ability to take data—to be able to understand it, to process it, to extract value from it, to visualize it, to communicate it—that’s going to be a hugely important skill in the next decades.
— Dr. Hal R. Varian, Chief Economist at Google

Practically everyone is talking about using data and analytics to succeed today in business, but surprisingly companies are only deriving a fraction of the value that’s available to them in their data when they’re making decisions. The reasons for this vary across organizations, but often times it comes down to budget constraints, talent constraints, or lack of recognition from leadership that analytics will help their business to run better. During an interview in 2009, Google’s Chief Economist Dr. Hal R.Varian predicted, "The ability to take data—to be able to understand it, to process it, to extract value from it, to visualize it, to communicate it—that’s going to be a hugely important skill in the next decades." 

Let’s take a look at some of the highest-performing companies out there today.  Over the past 5 years, there have been 13 companies that have managed to outperform the S&P 500 each year.  And when you take a look at this elite group—which includes companies such as Facebook, Amazon, and Google—you find that the majority of these businesses are algorithmically-driven.  These companies take in data constantly, and use this data in real time to update the user-experience.  In their 2012 feature on big data, Andrew McAfee and Erik Brynjolfsson shared findings from their research that “companies in the top third of their industry in the use of data-driven decision making were, on average, 5% more productive and 6% more profitable than their competitors.”  It is hard to deny that success in our respective businesses is not a function of how well we make use of the data available to us. 

So how does Human Resources (HR) fit in to this picture?  HR may not be the first group that you think of when considering who should have a strategy around using data.  However, HR has the weighty responsibility of managing the top expenses of a company—salaries, healthcare, and benefits.  The 2018 Milliman Medical Index estimates that the cost of healthcare for a family of 4 this year will be upwards of $28,166. Yet approximately 20% of employer-sponsored health care spending is wasted each year due to unnecessary or preventable costs across the continuum of care.  The rise of high deductible health plans mean that decisions made within HR on health plans and benefits are decisions that weigh heavily on their employees pocketbooks as well.   When we look at HR through the expense-management lens, we see that HR carries the company’s fiduciary responsibility to manage these expenses not just for the bottom line of the employer, but also for the sake of their employees’ wallets.

We often see companies who make the decision to start using data and analytics immediately start shopping for a tool to make use of their data.  While this step may be right for some companies, there are a few foundational analytics best-practices that we recommend companies have in place before making any analytic technology investments.

1.       Understand the quality of your data.  One of the biggest mistakes we see companies make is that they assume that just because a report comes from I.T. or from a vendor, that the data is correct.  However, very rarely is the data captured by a company in “ready-to-use” form.  IBM estimates that poor data quality cost American companies $3.1 trillion  in 2016 alone.  A recent study of 75 executives who assessed their own organizations data quality found that only 3% of their companies’ data met basic quality standards.  Furthermore, understanding data quality is a fundamental issue within organizations, executives are more informed to understand how data quality affects their vendor partners as well.  Every bit of data that we review is a piece of a much larger picture, and understanding the limitations of the quality of your company’s data helps to make a more accurate assessment of its insights.

2.       Develop your data strategy.  Take a step back from day to day operations to decide how to data can help to inform your decisions.  This affects what metrics you’re looking at, and how often you’re receiving it.  Many companies are surprised to find that the process of developing a data strategy often means reducing the amount of reports people are looking at.  A common assumption is that the more data we’re looking at, the better off we are.  In reality, when decision-makers are inundated with extraneous reports, they may miss valuable messages that they need to see.  What goals is your division working towards?  Which pieces of data most closely track progress to these goals?  The best way to guide a strategic process for looking at data aligns your business goals with a limited number of key metrics to indicate when changes are needed to reset course. 

3.       Identify a data “expert” on your team.  Given the issues that exist in every organization with data quality, it is valuable to identify someone who is intimately aware of the source and limitations of the data your company assesses.  This person can answer questions on why particular data might be wrong, if duplicate records are skewing the data, or how outliers are affecting results.  Your data expert can help to tell the story of your organization’s data to better frame what actions are needed to meet your operating goals.

Using data to make better business decisions does not need to be cost-prohibitive for your company.  Before investing in any data and analytics tools, implementing these foundational best practices lays the groundwork for a sound approach to using data.  They can be used by any company, regardless of size or budget.  And the best part is, you can start to use these best practices today.

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Bob Selle has led culture change and organizational design for America’s most recognized retailers.  He is currently the Chief Human Resource Officer for the northeast's premier close-out store Ocean State Job Lot, leading a transformation that has named them a Forbes Best Midsize Employer two years in a row.

Shannon Shallcross is a data expert who believes that data interpretation holds the key to solving healthcare’s toughest challenges. As the co-founder and CEO of BetaXAnalytics, her company uses the power of data “for good” to improve the cost, transparency and quality of healthcare for employers.

See Bob and Shannon at the Strategic HR Mt. Washington Conference on October 29th, 2018 during their plenary session, Metrics That Matter: Let Numbers Tell a Story.

Risk Adjustment: 5 Things You Should Know About the Latest in the Unraveling of the ACA

Photo: iStockPhoto

Photo: iStockPhoto

$10.4 billion is in limbo, representing roughly 11% of individual market health insurance premium dollars. This is the latest headline on the unraveling of the Affordable Care Act as the government recently made a disruptive announcement that they would be freezing risk adjustment payments that were expected to be paid in the fall. While on the surface this sounds like a doomsday scenario, healthcare’s future in America may look less bleak than it sounds. Here are 5 things you should know about this trending topic.

1.      What is Risk Adjustment?

Risk adjustment has played a big part in the ACA to encourage insurers to cover people regardless of their health status instead of cherry-picking the healthiest people. This is not to be confused with other ObamaCare subsidy programs. Instead, risk adjustment payments shuffle money from insurers with relatively healthy populations to insurers with unhealthy members. As a way to keep this system fair, insurers with the healthiest members pay money to those with the least healthy members to cover their more expensive costs of care. This system was designed to remain budget-neutral. This most recent decision to freeze risk adjustment payments equates to $10.4 billion tied to the individual and small group health insurance markets for the 2017 plan year. For reference, risk adjustment transfers play a large role in the current insurance system, comprising 11% of total premium dollars in the individual market in 2016. 

2.      What led to this announcement that risk adjustment payments would be suspended?

The government has announced that risk adjustment payments expected for the fall of 2018 would be frozen due to a February 2018 ruling of the US District Court for the District of New Mexico. This ruling pertained to a complaint made by a New Mexico insurer who claimed that the risk adjustment formula was inaccurate and was disproportionately rewarding larger insurers. The New Mexico federal judge on the case ruled that the risk adjustment formula is unfair because it uses the statewide average premium in the calculation, whereas some have argued that using the carrier’s own average premium would be fairer. It is interesting to note that this New Mexico ruling from February 2018 conflicts with a ruling in a similar case from just one month earlier in Massachusetts, where the federal court sided in favor of using the statewide average premiums in the risk adjustment methodology.

3.      Why should we care?

An announcement like this spreads chaos that comes with uncertainty during an already challenging time for American healthcare. Payers who were expecting risk adjustment payments prior to this freeze would lose billions, as presented in CMS’s recent summary report of the 2017 risk adjustment program.

Source: Centers for Medicare and Medicaid Services

Source: Centers for Medicare and Medicaid Services

Insurers’ 2019 rate filings are in progress, and the $10.4 billion in risk adjustment payments factor heavily in how these health insurance plans are priced. Furthermore, suspension of these payments in 2018 could lead to financial solvency challengers for insurers, which would lead to higher premiums.

4.      What do the experts say?

Despite the current uncertainty, many policy experts believe that the risk adjustment payment freeze will be lifted, and payments will be ultimately made in the fall. The Centers for Medicare and Medicaid Services (CMS) released a statement saying that the agency has asked the New Mexico court to reconsider its decision and expressed hope for a prompt resolution of the issue. 

5.      Where do we go from here?

The government could do a few things that would immediately fix this issue:

·        File an interim final rule which could address the risk adjustment formula concerns raised by the court  

·        Ask for a stay on the impact of the New Mexico court ruling

·        Appeal the ruling

·        Ask the court to clarify that the ruling only applies to plans sold in New Mexico

Whether any of these things will actually happen is still unknown. We can expect to hear the result of CMS's request for reconsideration of the New Mexico decision, as well as CMS's further clarification on the status of the risk adjustment payments in the near future.           

For more information on risk adjustment, the following sources provide a well-rounded view of the issue:

Politico - Obamacare Insurance Rate Hikes

CMS 2017 Summary Report Risk Adjustment 2017

Wall Street Journal - Trump's Latest Affordable Care Act Move Adds to Insurers Uncertainty

The Incidental Economist - Taking a Dive on Risk Adjustment

Fierce Healthcare - Examining the Future of the ACA

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BetaXAnalytics combines clinical data science with emerging technology to improve the cost and quality of health care for payers, providers and employers. Our risk adjustment natural language processing tools help payers and providers to improve coding accuracy and to maximize their financial performance. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

How Much of Our Healthcare is Waste?

Image credit: iStockPhoto

Image credit: iStockPhoto

It’s no secret that healthcare costs in the United States are skyrocketing, as the latest estimates put our annual healthcare spending at 18% of the U.S. GDP. Furthermore, the health of Americans ranks among the worst compared to health outcomes in similar developed countries. This complex reality is aggravated by a number of problems. Much of the care that we receive is known as “fee-for-service”—we pay for each medical service or test we receive. What this means for patients is that the more they see their doctor, the more they pay. This is problematic for many Americans, as nearly 40% have a high deductible health plan where individuals are responsible for on average $5,248 of out of pocket medical expenses each year. A survey from the Kaiser Family Health Foundation found that 1/3 of adults have trouble paying their medical bills, and 73% have cut back on spending on food, clothing or basic household items to pay their medical bills. With the cost of healthcare in the U.S. being such a recognized problem, one of the many concerns that contributes to this issue is what is known as “low value care,” or in other terms, wasteful healthcare services. 

Choosing Wisely® is an international initiative that promotes facilitating conversations between patients and their doctors about the clinical need for low value care. The goal is to reduce wasteful medical tests and unnecessary health services.  As part of this initiative, over 80 partners have published an extensive list of clinically-vetted recommendations that represent medical best practices. A 2014 study of the Virginia All Payer Claims Database applied a list of these clinical recommendations and found that low cost, high volume health services contribute the most to unnecessary health spending; wasteful spending in this study was estimated at $538 million.

What does spending on wasteful healthcare services look like at an employer level? One of our clients, a large, self-insured employer, was interested in understanding if wasteful health spending was an area of concern for their members. To answer this question, we looked through 3 years of their medical and pharmacy claims to pull out services that were deemed “clinically wasteful.” From this data, we narrowed our focus to 11 specific measures of wasteful services which are based on areas of waste that are clinically validated under both the Choosing Wisely® initiative and HEDIS. These 11 areas are as follows:

  1. Don't do imaging for an uncomplicated headache.
  2. Don't perform PAP smears on women younger than 21.
  3. Don't perform PAP smears on women who had hysterectomy for non-cancer disease.
  4. Don’t perform routine annual PAP tests in women 30–65 years of age.
  5. Don’t diagnose or manage asthma without spirometry.
  6. Members with a primary diagnosis of low back pain should not have an imaging study (plain x-ray, MRI, CT scan) within 28 days (4 weeks) of diagnosis.
  7. Don’t indiscriminately prescribe antibiotics for uncomplicated acute rhinosinusitis.
  8. Don’t order sinus computed tomography (CT) for uncomplicated acute rhinosinusitis.
  9. In the evaluation of simple syncope and normal neurological examination, don't obtain brain imaging studies (CT or MRI).
  10. Don't do CT for evaluation of suspected appendicitis in children until after ultrasound has been considered.
  11. Don't recommend follow-up imaging for clinically inconsequential adnexal cysts.

Out of the entire member population consisting of employees, spouses and children who were covered under the company’s health benefits, there were 2515 members who received care in the 11 categories of care that we studied. Our study found that half (1274) of these people received medical services that are considered clinically wasteful.

Who was affected.jpg

15.5% of spending in these 11 categories was considered to be wasteful. Out of $1.47 million spent on care within these 11 categories, $229k was spent on these clinically wasteful services. 

How much waste.jpg

There are a few limitations to keep in mind while evaluating these measures of waste. First, we examined 11 out of over 500 clinical best practices. This is because we wanted to focus on data points that were more accurately represented by claims data, as EMR notes were not available as part of this study. What we measured were specific types of waste and we did not calculate the total amount of “healthcare waste” in this employer’s spending. Furthermore, our study examined direct claims-based costs and made no assumptions of additional downstream medical costs for those who received low value care services. 

Type of Waste.jpg

What do these findings mean for this company and others who are paying for healthcare? Healthcare waste (low value care) is a reality in our healthcare system today. Patients, providers, and those paying for care are all affected. Even in this study that examined health spending in one company, out of the 11 areas of clinical waste we studied we found that half of the people receiving care in these categories received low value services. Initiatives such as Choosing Wisely® are effective in raising awareness of low value care and opening conversations between patients and their doctors to avoid unnecessary medical tests and treatments. You can find more information on this educational initiative at www.choosingwisely.org

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BetaXAnalytics is a healthcare data consulting firm that helps payers and providers to maximize their CMS reimbursements and helps employers to reduce their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

The Missing Piece of Corporate Well-being--How We Treat Each Other

                                                          Image Credit: iStockPhoto

                                                          Image Credit: iStockPhoto

What has the greatest impact on employee well-being? Often when we hear the word “well-being” we instantly think of health screenings, nutritional education, fitness challenges, and online health risk assessments. But imagine you have the best-designed wellness program at your company.  Would your employees all be at their peak of health and productivity?

Consider my personal story. I worked at a wellness company—it was a lot of fun! Inside the company’s walls you saw daily company-wide walking breaks, ping pong tables in the break room, and a massive gym on-site. The whimsical environment came along with a mission to change people’s lives through improving their health. It wasn’t uncommon to see someone floating from reception to the call center on a skateboard. Your dog is snuggling at your feet below your desk. Sounds like the perfect recipe for a health utopia, right? 

Well get this—I gained weight while working at this wellness company. Why? Stress! Along with this fun environment came a lot of stress which was natural at any rapidly-growing startup. The stressful environment wasn’t because the company didn’t offer enough healthy programs and perks. We worked in a metaphorical test-kitchen for corporate wellness program best-practices. But none of this cancelled out the abundance of meetings where our days would be spent sitting in a chair, the long hours fixing issues, and a daily obsession with identifying who was responsible for these issues. There was frequent travel which increased pressure to get even more accomplished while in the office. And let’s not forget the ever-important foundation that how we treat each other in the workplace is essential to creating engaged, happy, high-performing teams. No wellness program can create this—the values exhibited by a company’s culture are strategic, deliberate, and are fostered by people from the top to the bottom of an organization. 

Well-being encompasses the whole person—not just a person’s body, but their mind as well. In this sense, a health check on company culture is just as important, and perhaps even more important, than offering programs to ensure physical health. An environment where employees are happy is one where there is respect for people. Emotionally healthy workplaces are marked by trust, kindness, and forgiveness. Hundreds of studies by pioneers of positive organizational psychology including Adam Grant at Wharton, and Jane Dutton and Kim Cameron at the University of Michigan, have found that a positive work culture characterized by humanity improves employee loyalty, engagement, productivity and performance. With three quarters of the U.S. workforce disengaged when they’re at work, how can we expect them to engage in the company’s wellness program? 

Even beyond considering an employee’s emotional well-being, stress in the work environment impacts physical health. A large study by Anna Nyberg at the Karolinska Institute found the link between a harsh boss and heart problems in employees. A separate study found that bad bosses significantly increase employees’ risk of heart attack. And after examining 279 different studies, the Journal of Applied Psychology linked an employee’s perception of unfairness at work to physical health. An unfair work environment was linked to mental health issues, sleep disorders, high blood pressure and obesity. 

There is an abundance of data that supports the link between a positive work environment and physical health.  So how do companies miss this when shaping their wellness strategy? Unfortunately in many cases we mislabel “work environment” as a place instead of a feeling. Creating a positive work environment could be mistaken for building a Zen space, adding a foosball table to your break room or instituting Puppy-Snuggle Fridays. In reality it might mean processing employee feedback, crafting a meaningful company culture, and making developing leaders a core competence. The most important step to improving employee health could be as simple as examining the employee experience. A work environment that fosters well-being gets to the core of workplace culture—how we treat each other

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- Shannon Shallcross is Co-Founder and CEO of BetaXAnalyticsa healthcare data consulting firm that helps employers to cut their healthcare spending through proven strategies to contain costs. 

For more insights on using data to drive healthcare, pharmacy and well-being decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

Medications that Don't Work and Costs that Vary by 865%: Here's What We Found Hiding in 1 Employer's Healthcare Spending

BXA Dashboard.JPG

Approximately $2 billion of employer-sponsored health care spending is wasted each year due to unnecessary or preventable costs across the continuum of care. This is approximately 20% of total health spending by employers each year, according to the American Health Policy Institute

Wasteful spending was a concern that one of our clients was facing when we met them. Their healthcare spending was increasing year over year in line with the healthcare industry trend, which is right now at +6% to +7% each year. Like most employers, a small group of people was driving a large percentage of their healthcare costs. And as, year over year, they were footing the gargantuan bill for their employees and their families, they were left with some very reasonable questions:

“Is the money we’re investing in our wellness program even making people healthier?”

“Is our diabetes-management program working?”

And, quite literally, the million dollar question…

“Where can we save on our healthcare costs?”

This employer partnered with us because of our team’s background in healthcare and wellness data science, as well as our team’s experience in advising large employers on their health spending strategy. We studied several years of their health and pharmacy data and we looked at this data by member status (employees, spouses, children) and by work location (corporate office, field offices, distribution center). We brought in absence data and we looked at the smoking status for each member. Here’s just a sampling of some of the highlights we found:

Diabetes is a major cost driver, but it could be costing less. Diabetes test strips, which were one of their top prescription drug cost-drivers, have costs that can vary by brand by up to 865%. The high cost variability of these test strips is not necessarily correlated to their quality. On one hand, an employer wants to make it as easy as possible for employees to access the diabetic supplies they need. However, without controls around this spending this could be a source of health spending leakage.

Members are not being driven to cost-effective medications. Pharmacy costs for diabetes medications were increasing year over year while medication adherence was decreasing. That right…the employer was paying more for less pills. What we found was that fewer people were taking their medications (adherence was decreasing). And of those who were taking their medications, they were being driven to the “preferred” brand of medication, but this brand was not the cheapest. This explains why they were paying more for less pills. This is also an indication that their medication formulary needs to be revised. 

An expensive method to quit smoking was not working. A costly and well-marketed medication to quit smoking was costing in excess of $63,000. When we examined adherence, very few of the people who took this medication completed treatment. This was most likely due to the medication’s unpleasant side effects. In fact, of the 58 people who started taking this medication, only 3 completed the recommended round of treatment. Clinical evidence indicates that 1 in 2 patients completing this therapy will quit smoking. This means that it cost this company $63,000 for 1 or 2 people to quit smoking. This expensive (and, in this case, ineffective) medication was on the plan’s preferred drug list. If the pharmacy plan had step therapy in place, people looking to quit smoking would be directed to use effective, yet less expensive medications before moving to more costly medications.

The Emergency Room is a cost-driver, while very few members use Urgent Care. Emergency Room visits were on average 4 times more costly than visits to Urgent Care. Not only were very few members ever using Urgent Care, there was a long list of Emergency Room “frequent flyers.” This informs the employer’s communication strategy on educating their members on the purpose of Urgent Care, as well as how to identify when a trip to the Emergency Room is necessary.

Employers typically have two goals when it comes to paying for employee healthcare: they want to support employees in improving their health, and they want to control costs. As a former veteran of the corporate wellness industry, I will be the first person to tell you that lots of companies will promise to make employees healthy and to save them money. Very few will actually deliver. This is because employers want a partner who will help them to control health costs, not just to deliver a program. 

Unfortunately, there’s no magic wand an employer can wave to suddenly reverse everyone’s chronic diseases. But there are many opportunities to ensure condition management programs have a positive return on investment. Furthermore, there are subtle clues hiding in their data that can show them areas where they are losing money where they shouldn’t. These are the many little holes where there’s healthcare spending leakage. It is our job is to find these holes for employers.

The good news for any employer looking to reduce wasteful health spending is that the insights we find are actionable. In this example, what we uncovered in this data is now being used by this employer to save money. Their Chief Human Resource Officer deserves enormous credit for not accepting the status quo with respect to their healthcare spending. He is among a growing number of HR professionals who understand that with the high cost of healthcare comes a responsibility to closely manage these costs. Their data drives a holistic strategy around health and wellbeing services that aligns with the strategy of the business. We are proud to partner with them to provide the actionable transparency they need to achieve their wellbeing goals.

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BetaXAnalytics is a healthcare data consulting firm that helps employers to cut their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

What the Facebook / Cambridge Analytica Scandal Teaches Us About the Future of Our Personal Data

Colored Facebook Background.JPG

I’m about to reveal a big secret about myself. I love a good Facebook quiz. Whether I’m finding out what I will look like in 20 years or what my leprechaun name is, it’s fun to do these mindless games on Facebook and compare results with friends. If you’ve ever done one of these, you know it’s easy--you click one button to agree to share information about yourself, information in your Facebook profile, and information on your Facebook friends. What could be the harm? We figure, "Of course this information is needed if we’re looking to find the accurate answer to 'What will my Hollywood movie poster look like?'" It seems harmless, so we trust it.   

The Facebook platform collects massive amounts of data on us, and it does so in a brilliant way. Imagine having a stranger come knocking on your door and asking you for a list of all your family, your friends along with photos and everything you know about them.  No one would ever fall for this. But now that Facebook is such a familiar and popular way to connect with people, it doesn’t feel like a stranger to us. We “trust” Facebook, and we use it to store massive amounts of information about ourselves and the people we know. In fact, we trust it so much that when it comes to their “privacy agreement,” we agree to it without even reading its terms.

The reason why the Facebook/Cambridge Analytica debacle has people angry is because people assumed there was no risk in how their data from Facebook would be used. But in this case, to the shock of the world, Facebook exposed data on 50 million Facebook users to a researcher who worked at Cambridge Analytica. And, as another piece of the puzzle, Cambridge Analytica worked for the Trump campaign.  So as the public is wielding pitchforks at Facebook’s door, the first lesson for us all is this:

#1: Any data that we’re publicly sharing will be used.

And once our data is out there, absent restrictions, we have little control over how it is being used. Data is valuable to companies, both in utility and in dollars. So when it comes to any platform that collects and stores any data on you, you can assume this data will be used in some way or sold to a 3rd party. 

#2: So much more of our personal data exists than what we realize.

It’s scary, I know. Data on you and me is everywhere. And if you have watched my talk for TEDxProvidence, you know how the amount of data we’re able to capture has increased exponentially in just the last 15 years. According to Google’s former CEO Eric Schmidt, the same amount of data created from the beginning of time to 2003 is what was generated in the last 2 days. 

Eric Schmidt.JPG

Our data is used by marketers, by election strategists, by grocery stores, and by prescription drug companies. It’s used by every social media platform, and our data is used by their affiliated companies as well. Simply put, most companies are using our personal data in some way.

#3: Not only are most companies using our data, but the most successful companies are built on data. 

There are 13 companies in the S&P 500 that have managed to outperform the entire S&P 500 5 years in a row. The majority of these companies are “algorithmically driven,” meaning they gather data from their users and they update the consumer experience almost automatically. These are companies like Facebook, Amazon and Google. Global business investments in data and analytics will surpass $200 billion a year by the year 2020. In the future, we will see more and more businesses moving data to the core of their competitive strategy.

What does this mean to us? The time is right for the public to champion a universal code of ethics surrounding our data use.

#4: Our data should be protected by a common code of ethics.

Now that we have just a glimpse of what can happen when data is available unrestricted in the hands of others, we need to have a common set of rules to govern data use. DJ Patil, the first Chief Data Scientist for the White House, reminded us that “with great power comes great responsibility” in his February 2018 call to action “A Code Of Ethics for Data Science.” This post coincidentally was published over a month before the Facebook/Cambridge Analytica Scandal hit the press. The weighty responsibility of using data appropriately weighs on the minds of many within the data science community.

When my partners and I formed our company BetaXAnalytics, our founding principle is that we wanted to use the power of data “for good” to improve the cost and quality of healthcare in the United States. Since we had a deep experience in clinical and pharmacy data science, we knew there was a resounding need for ethical transparency for those who are paying for health services. We wanted to provide the actionable insight that our clients need to make decisions regarding healthcare services and care coordination.

Since my company BetaXAnalytics works with healthcare data, the way we protect data is governed by HIPAA; this legislation ensures both the privacy and safeguard of people’s health-related information. A large amount of our time and resources are put towards our focus of maintaining data security and privacy. The data we use is governed by strict contracts with our clients and we never sell data to third parties.

As a company whose business is built on interpreting health data, we live by the mantra “with great power comes great responsibility.” We hope to see this movement grow both within and outside the data science community to work towards using the powers of data “for good.”

- Shannon Shallcross is Co-Founder and CEO of BetaXAnalytics

This week in healthcare news: Warren Buffett, CVS, Aetna all talking about lowering costs--who will succeed?

Source: CNBC, 2/26/18

Source: CNBC, 2/26/18

Warren Buffett Shares Details on His Healthcare Alliance with Amazon, JPMorgan

Warren Buffett made some bold statements for CNBC on Monday about Berkshire Hathaway’s healthcare alliance with Amazon and JPMorgan. Buffett stated, “I love the idea of tackling what I regard as the major problem in our economy,” referring to the rapidly increasing proportion Americans are paying for healthcare. He goes on to explain that in 1960, healthcare was 5% of GDP ($170 per person), and this spending has increased to today’s rate of 18% of GDP (over $10,000 per person). For Warren Buffett, this is a competitive disadvantage for America. 

Speaking of the goals of Berkshire Hathaway's alliance with Amazon and JPMorgan he states, “It would be very easy to shave off 3-4% just by negotiating power…we’re looking to do something much bigger than that.” They want to halt healthcare’s increasing share of U.S. GDP by finding a way to deliver better care at a better cost. See the 5-minute interview here: Buffett Shares Details on Healthcare Alliance.

Today: CVS and Aetna’s General Counsels Testify Before Legislators in Washington

Amid investigations in numerous states of accusations of unfair claim denials and unfriendly patient practices, Aetna has been getting its fair share of negative press in the last month. But on Tuesday, February 27th Aetna's and CVS’s General Counsels testify before the House Subcommittee on Regulatory Reform, Commercial and Antitrust Law on CVS's planned acquisition of Aetna. Their goal? To convince this subcommittee that CVS and Aetna’s combined forces are good for healthcare and good for consumers. The testimonies, both published in full on sec.gov, paint a very different picture of Aetna’s future goals from what's currently volleying through the media.

The testimony of Thomas Sabatino, General Counsel for Aetna, starts by acknowledging that the U.S. healthcare system is inherently flawed; he explains it was formed in the mid-20th century for the benefit of hospitals, employers and insurance companies—not for the benefit of patients. He acknowledges that the U.S. is “the most expensive system in the world,” yet half of American adults are affected by chronic conditions such as diabetes, heart disease and obesity. With rapidly rising health costs and deteriorating health, he says that Aetna recognizes that “the status quo is not sustainable.” But he goes on to assert that now, with increasing consumer demands and rapidly advancing technology, that it's time to focus on the consumer.   And, as his testimony states, CVS and Aetna are the players that will make that possible. With compelling figures that 70% of Americans live within 3 miles of a CVS store and 5 million people visit a CVS every single day, he lays out how the retail chain is poised to be a community-based health center to address the areas of the World Health Organization's holistic view of health (“a state of complete physical, mental and social well-being and not merely the absence of disease or infirmity.”) He states, “the key to our strategy is more regular, individualized, and effective engagement with health care consumers not just when they are sick, but as they take steps to maintain and improve health.”

Same Goal, Two Very Different Strategies

Buffet’s healthcare alliance and CVS’s Aetna acquisition are two completely different strategies to tackle rising healthcare costs, but at the helm of these initiatives is a goal to accomplish the same thing—to provide better care for Americans at a lower cost. It's an exciting time for healthcare with big changes on the horizon. Stay tuned to see if these initiatives live up to their hype.

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BetaXAnalytics is a healthcare data consulting firm that helps employers to cut their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

If you want to learn more about solving healthcare’s challenges, you may also like:

Will Amazon's Joint Healthcare Venture Make You Smile?

The Future of Healthcare is 3 Letters: CVS

Dear Employer: High Deductible Health Plans Are Making People Sick

Will Amazon's Joint Healthcare Venture Make You Smile?


Amazon has revolutionized so many aspects of our lives, and now the big question is: will they revolutionize healthcare?  It seemed that way, given their joint announcement on January 30th with Berkshire Hathaway and JPMorgan Chase, claiming they were teaming up to form a healthcare company “free from profit-making incentives and constraints.”  While the intended goal of this joint venture is “to improve U.S. employee satisfaction while reducing overall costs,” Jamie Dimon of JPMorgan Chase explained, “the three of our companies have extraordinary resources, and our goal is to create solutions that benefit our U.S. employees, their families and, potentially, all Americans."  This announcement sent shockwaves throughout the market, as the stocks for major insurers and healthcare companies went tumbling.  Market analysts began waging their predictions for what this new company would look like—Alexa for employee benefits?  Diagnostic wearable technology?  What could it be?  To calm the fears of JPMorgan Chase’s clients, company representatives tempered the message, explaining that the initiative can be compared to a group purchasing organization, similar to the type of setup used by hospitals to buy supplies, so the 3 companies could leverage better deals for their employees.

Whoa, Nellie.

OK, maybe we all got a bit ahead of ourselves.  Warren Buffet, who compared healthcare’s skyrocketing costs to a “hungry tapeworm on the American economy” admitted that the three companies do “not come to this problem with answers.”  But he resolutely stated that they did not need to accept the current state of healthcare.  Bezos went on to say, “hard as it might be, reducing health care’s burden on the economy while improving outcomes for employees and their families would be worth the effort.”  These companies bring serious purchasing power to the healthcare market.  Amazon, JPMorgan Chase and Berkshire Hathaway have a combined market cap of $1.62 trillion, and between all 3 companies there are 1.2 million employees.  Last year, JPMorgan alone spent $1.25 billion on medical benefits for U.S. employees where the medical plan covers almost 300,000 individuals, including employees and their family members.

What will this healthcare partnership most likely look like?

While we can’t predict what this solution will evolve to become over time, JPMorgan disclosed a crucial piece of information following the joint venture announcement—that the initiative can be compared to “a group purchasing organization.”  The overall goal of this initiative is to cut healthcare costs and to improve employee satisfaction.  So the best way we can understand what this joint venture solution will be is to look at the current state of employee healthcare for these companies.

Hint: follow the money

Taking a look at who is currently making a profit off of Amazon, Berkshire Hathaway and JPMorgan Chase’s healthcare benefits is a good place to start when we’re asking ourselves what this new healthcare company will look like. 

A 30-second tutorial on health benefits

But it’s useful to take a 30 second detour for anyone unfamiliar with the employer healthcare market to understand where these companies are coming from.  These days, most employers with over 1000 employees “self insure” for their healthcare benefits, meaning they pay health claims for their associates from dollar 1.  For large employers, and especially for jumbo employers like Amazon, Berkshire Hathaway and JPMorgan Chase, it’s simply more cost-effective to pay for healthcare in this manner—they tend to not need to pay a health insurance company to take on the financial risk of their “sickest,” most costly employees (i.e. people who require major surgeries or treatments, those requiring costly medications or people with multiple chronic illnesses).  Employers like this work with a health insurance company (for instance, United Healthcare, Aetna, Blue Cross) to perform the administrative functions of paying providers and settling claims.  Either the health insurance company or a pharmacy benefits manager will handle the pharmacy side of employee healthcare claims.

Large employers such as these 3 have been using innovative tactics to control healthcare costs for years.  From using healthcare analytics to strategically manage wasteful spending to moving health clinics right into their corporate offices, large employers historically have been ahead of the game with managing healthcare spending.  After all, it’s Warren Buffet who notoriously said, “GM is a health and benefits company with an auto company attached,” understanding that because healthcare is the first or second highest company expense, that portion of the “business” must be managed as strategically as any other business unit.

Mission critical: cut out middleman expenses, cut down on employee healthcare headaches

So back to the original question of, “who profits from Amazon, Berkshire Hathaway and JPMorgan Chase’s healthcare spending today?”  Here’s a sampling of the likely suspects who are middlemen in the game of keeping employees and their families healthy:

1.       Health insurer(s) (United Healthcare, Aetna), who charge an administrative fee for settling medical claims

2.       Clinical condition managers (often employed by the health insurer) who help to coordinate care for employees with chronic conditions such as diabetes, cancer, heart conditions

3.       Wellness service companies such as Limeaid or Virgin Pulse, who administer health-related educational programming, employee health screenings, incentive programs to encourage employees to see their doctor and stay active, and fitness challenges to encourage physical activity and healthy behaviors

4.       Pharmacy benefits managers or related pharmacy services, such as Optum or CVS who take care of prescription drug claims and/or cost-management

5.       Surgery cost-bundling vendors who negotiate with medical providers to receive more competitive, bundled rates on surgeries and costly medical tests

6.       Health analytics companies such as Truven (IBM) or Medeanalytics who use health and pharmacy data from employee claims to help with strategic healthcare cost management

7.       Telemedicine vendors who offer the availability of doctors via phone for employees who need to discuss a health concern, but cannot see a doctor in person (or cannot wait for an appointment)

8.       Health advocates and/or health “concierges” that exist to help employees navigate the confusion of the health system to better understand services that are in and out of network, applicable deductibles and coinsurance

9.       Employee benefits platforms that exist so employees can understand the specifics of all benefits available to them, including health insurance and pharmacy coverage, and employee health savings accounts

10.   Benefits brokers and consultants who help to manage the coordination of all these programs and manage vendors

Understanding that the goal is to cut healthcare costs, it’s this list of middlemen who may be on the chopping block, as their services may potentially be replaced by this new joint venture.  For instance, these 3 companies may form a non-profit company to handle settling their employee claims (the job which is currently done by the health plan).  Similar to many health insurance companies, managing chronic diseases, managing pharmacy costs and offering wellness services could be companion services offered by this new venture.  Only these services would likely be more effective than those of a health insurer because the company would solely exist to keep employees healthy—not to make money.  And since profit would not be the motive, access to healthcare analytics to enable strategic management of costs and population health would be more transparent, truly existing for the benefit of Amazon, JPMorgan and Berkshire Hathaway.  There are many possible solutions that will save healthcare dollars and improve employee satisfaction for these companies, but the most likely solution will incorporate some form of replacement of some or all of these 10 services that employers use to provide healthcare coverage, to manage healthcare costs, or to help employees better leverage healthcare services for better health outcomes.

So will this forward-thinking trifecta hack healthcare to solve the problem of rising costs for the rest of the country?  Perhaps in time.  But the more significant message in this bold move is that Amazon, JPMorgan and Berkshire Hathaway have taken a public stand to say that they will not accept the status quo of healthcare in the United States.  The rising costs, the confusion of employees trying to navigate the tangled healthcare maze, and the overall lack of improvement in employee health can no longer be accepted as the norm.  And as this solution begins to take shape, it will send ripples through the healthcare space, as a new expectation takes priority in employer-sponsored healthcare—getting healthcare shouldn’t be so difficult, it shouldn’t cost so much, and healthcare should be making people healthier.  Now there’s a change that will bring a smile. 

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BetaXAnalytics is a healthcare data consulting firm that helps employers to reduce their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

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Correcting Patient Coding Can Save Millions


Physician burnout is a real thing.  Between seeing increasing numbers of patients, documenting visits and reviewing health records, more tasks are expected of healthcare providers.  According to a Mayo Clinic Study, 54% of physicians reported at least one symptom of burnout. While there are many new technologies to assist with patient care, using new technology does not always integrate well with the face-to-face, personal nature of providing medical care.  Some physicians perceive that technology slows them down, as they do not have the time between patients to update codes and clinical details in documentation.  But the reality is that taking the time to ensure proper coding reduces the likelihood of redundant tests, the risk of medical errors, and can significantly impact value-based contract reimbursements.  So in this sense, taking the time to input patient information, document and code patient conditions is critical.

From a financial standpoint, healthcare CFOs understand the benefits of accurate patient coding.  The transition to value-based payment models in healthcare is accelerating under the Medicare Access and CHIP Reauthorization Act (MACRA).  The intent is to provide financial motivation for providers to manage more patients under risk-bearing or coordinated care contracts.  The two methods of managing physician reimbursement under MACRA—Advanced Alternative Payment Models (APMs) and Merit-Base Incentive Payment Systems (MIPS)—both hinge on correct clinical documentation to assign accurate risk adjustment scores.

From a provider’s standpoint, risk adjustment scores such as the Hierarchical Condition Category (HCC), impact physician documentation practices and requirements.  This means that all chronic conditions need to be reported on an annual basis for all patients, regardless of the care setting, in order to correctly estimate the risk score for a provider’s patients.  Annually, this information is reported to the Centers for Medicare and Medicaid Services (CMS) in a Risk Adjustment Processing System (RAPS) submission.  In many cases, this submission is compiled from claims data; but while claims data carries a great deal of information on a patient’s medical history, it often understates the true “risk” of the patient population. In financial terms, this means that providers who understate their patient risk receive a lower reimbursement from CMS.  In other words, because of inadequate patient coding, healthcare providers are leaving money on the table.

How can healthcare organizations solve the problem of underreported patient risk?  We ventured to take on this problem, and sought to find a solution that any provider group, large or small, could use.  Understanding that not everyone has the budget for an expensive platform or a team of auditors to check through exhaustive patient records, we wanted to see what technology could do to ensure patient risk is accurately coded and reported—without putting an additional burden on physicians. 

We used machine learning and natural language processing of unstructured data, encompassing millions of files, including doctor’s notes and faxes.  Within the many silos of data were notes captured of patient conditions that were not always reflected in the claims coding in the patient’s electronic health record.  This technology enabled us to shortcut the work that would normally be undertaken by an entire auditing team manually reviewing patient files. To give an idea of the efficacy of a process like this, in this case we were able to discover $1.3 million in under-represented risk reimbursements for the provider group. 

For healthcare CFOs who are looking to make sure patient coding is accurately reflecting population risk adjustment for CMS reporting, there 2 options to ensure your organization isn’t leaving money on the table.  1) Invest in hiring additional people to educate, input, and audit correct patient EHR codes or 2) invest in a technological solution to ensure you’re not losing out on reimbursements due to under-reported patient risk.  Healthcare organizations who form a strategy to ensure coding accuracy can see millions in additional deserved reimbursements on their bottom line. 

For a free demo, contact us.

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BetaXAnalytics is a healthcare data consulting firm that helps payers and providers to maximize their CMS reimbursements and helps employers to reduce their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

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How To Make Data-Driven Decisions When You Don't Have Data

Image Credit: Pixabay; _Marion

Image Credit: Pixabay; _Marion

In 1934, T.S. Eliot famously lamented the empty soul of modern work life. Though he wrote “Choruses from the Rock” over 80 years ago, he hits a nerve in our present-day struggles by asking, "Where is the wisdom we have lost in knowledge? Where is the knowledge we lost in information?" In current times, we have so much data at our fingertips, but does that mean we are making better decisions? Today, the core of data analytics is simply using information to make well-informed decisions. The only difference today from 80 years ago is that we simply have more information available to make decisions and more sophisticated methods to use this information. 

TS Eliot.png

A question that I get time and time again from managers is “How do I make data-driven decisions when I don’t have any data?” As a decision maker, it’s incredibly frustrating to feel hampered by a lack of data.  Despite wide availability of information, companies might not put data into the hands of decision makers for a couple reasons. Maybe the organization does not have an effective way of capturing data—this happens in companies that have older technology in key areas of the business. Or maybe the data they have is too messy—for instance, perhaps they can track customer quotes online, but they have no way of cleaning up the 30 different customer quotes that actually were generated by the same person. In other cases, data is kept sectioned off in certain parts of a company, but it is not shared widely with people whose decisions depend on the information. For whatever the reason that managers feel like they do not have access to information to make an informed decisions, there are a few guidelines you can follow to ensure that you are making the right decisions.

The key is not to get more data – it’s to get the right data.

It’s important to keep in mind you can have all the data in the world and still not have the information you need. The key is not to get more data – it’s to get the right data. In research from the book Stop Spending, Start Managingexecutives reported wasting an average of $7,731 per day—or $2.8 million per year—on wasteful “analytics.” The first step to making sound decisions is to recognize what that “right” data is for your business. Once you identify this, you can cut your time looking at reports significantly because now you have a strategy. You know exactly what you need to see to make a decision, and you can see through the noise of mountains of data that don’t add value to your decisions. 

Executives reported wasting an average of $7,731 per day—or $2.8 million per year—on wasteful “analytics.”

If you don’t have access to the data you need at work, here are some steps you can take:

1.      Identify your business goals.  Here’s your opportunity to start at square one and holistically rethink how your decisions are made. This entails taking a 50,000 foot view of your business to make sure that you’re asking the right questions. We often get in the habit of process, and we repeat process patterns of looking at old reports that don’t tell us what we really need to know. If your business unit always looked at a set group of metrics, it’s easy to get tunnel vision and to see it as a bad decision to stop looking at a certain report. But I recommend taking a step back to ensure you’re asking the following questions before even looking at any data:

·        What are the business objectives for which we are responsible? (In other words, what are our goals?)

·        What are the crucial areas of the business that we need to be tracking?

2.      Identify which data you need to track progress on your goals. What data do you need to see to be able to track progress on these goals and to make sound decisions? In most cases, every business goal you cite has one or multiple metrics that will help you to gauge progress against that goal.

3.      Examine your data access. Identify which of these must-have pieces of data you have access to. For the data you don’t currently have access to, identify how you can get access. This can be as easy as requesting access from another department, or as hard as implementing a way to capture new data.

4.      If needed in the short term, identify proxy data for the information to which you don’t have access. When you can’t access crucial data, is there a proxy measure that would tell you the same thing? For instance, if you have no way today of tracking the number of customers who are calling with a particular complaint, can you poll your front line customer service representatives to identify trends in complaint themes? Finding a short-term proxy for needed data will provide you with some useful information. The proxy is not a perfect solution, but in the short term it’s better than using no information at all.

5.      Start the process of gaining access to the data that you need. As simple as this sounds, if you’re in a situation where you don’t have access to crucial data, the goal is to exit this reality as soon as possible. Whether this means insourcing or outsourcing to gain access to data you need, there’s simply no business case for continuing to manage without the right information.

The guiding principle of how to manage your data is to identify what data aligns with your goals—if you don’t have access to this data today, the best place to be is somewhere on the track to gaining access to this data. Identifying proxy data is a bridge to dealing with an undesirable situation, and moving towards one that puts you on the right path. But it is important to not accept a lack of data within your company simply because it’s “the way it’s always been done.” If you find yourself clamoring for meaningful metrics, creating a process to get this data involves some work--but there are huge rewards for your business in the end.

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BetaXAnalytics is a healthcare data consulting firm that helps payers and providers to maximize their CMS reimbursements and helps employers to reduce their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

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The Future of Healthcare is 3 Letters: CVS

There’s a lot of speculation surrounding CVS’s acquisition of Aetna that’s planned for 2018. But one thing we know for certain is that CVS’s direction in 2018 will make an enormous imprint on healthcare in the U.S. as we know it. 

On December 3, CVS announced their agreement to acquire Aetna, the nation’s 3rd largest insurer, for $69 billion. To put the sheer magnitude of a deal like this into perspective, this deal would be the largest in the history of health insurance. CVS is currently a Fortune #7 company with an annual revenue of $177.5B; Aetna is #43 on Fortune’s list with an annual revenue of $63B. According to the current Fortune 500 list, the merged CVS/Aetna would have the 2nd highest annual revenue, second only to Wal-Mart. 

CVS has expressed the desire for this acquisition to improve the integration of patient care, and to provide higher quality care at a lower cost in "communities, homes and through the use of digital tools to support health." CVS's President and CEO Larry Merlo communicated the desire to put customers "at the center of health care delivery." The intent would be to leverage CVS's 9,700+ retail stores and 1,100 Minute Clinics to create community-based centers that include resources for wellness, medical, pharmacy, vision, hearing and nutrition services. And the touted benefit of acquiring Aetna is that integrated care and higher negotiation power for pharmaceutical drugs is the key to lowering costs. 

This deal is projected to happen in the second half of 2018. At this point, it is unknown whether the acquisition will face anti-trust opposition. While vertical mergers (which combine 2 companies which are not direct competitors) don't traditionally get blamed for stifling competition, CVS's announcement comes on the heels of the Justice Department's block of AT&T's takeover of Time Warner, citing the acquisition would create "too powerful of a content company." And with 2 recent horizontal healthcare deals halted for antitrust reasons (Aetna/Humana and Anthem/Cigna), CVS's Aetna deal will need to pass through close scrutiny in Washington before the deal can be finalized.  In October, Trump declared  “My administration will…continue to focus on promoting competition in healthcare markets and limiting excessive consolidation throughout the healthcare system,” though many are betting that this vertical deal will go through with only the requirement of some concessions by CVS and Aetna. 

My predictions for 2018? One of two things will happen.

Possibility #1: Regulators block CVS’s Aetna acquisition

What is to stop regulators from saying that this deal will create “too powerful of a healthcare company?” This is indeed a possibility, albeit one that many think is unlikely. But in this past year alone, the Federal Trade Commission blocked Walgreens’ purchase of Rite Aid, while the Justice Department intervened to prevent Aetna’s acquisition of Humana and the Anthem/Cigna merger. While these were considered horizontal deals among competitors, the Department of Justice blocked these deals because they would drastically restrict competition and “fundamentally reshape the insurance industry.” Would the CVS/Aetna deal not also do the same thing?

If this acquisition is blocked, it signifies that the regulatory tide could be changing with respect to how the largest players in healthcare can evolve. With the “big five” insurers, which cover approximately 90% of all commercially insured Americans, unable to strategically gain market share through jumbo mergers and acquisitions, this opens up the door for new entrants into healthcare markets who are better at solving healthcare’s problems than their behemoth counterparts. It also encourages existing competitors to home-grow solutions in their organizations rather than joining forces with outside partners.

Possibility #2: CVS’s Aetna acquisition moves forward in 2018

Let’s imagine for a moment that the deal does go through as planned.  The likely next step is that Express Scripts, the only other big PBM not owned by an insurer, will merge with a health insurer like Humana, and may even buy its own pharmacy chain such as Walgreens. This trend would change the landscape of healthcare, giving all power to a few vertically integrated giants, and putting any smaller PBMs or insurance companies at a crippling competitive disadvantage.  

CVS's vision of transforming local retail stores into community health centers where people can not only pick up prescriptions, but also see a doctor, talk to a nutritionist, or receive vision care is a compelling evolution of the way we seek self-care. This type of model could be the answer to the convenience that people want with telemedicine, but it breaks down the barriers to full adoption by putting a community-based centralization on the care they receive.

As we consider these two possibilities, we should ask some big questions. 

  1. Do companies become more innovative when they get bigger?
  2. Do competitive moves like this help to fight the steadily rising costs of healthcare?
  3. Will this improve the quality of care that people receive?

Whether 2018 is the year that the CVS/Aetna merger moves forward, or whether 2018 is the year that the CVS/Aetna deal is blocked, either way will lead to a crossroad that will signify the next evolution for healthcare in America. The promise of the benefits to consumers—transforming retail stores into hubs for health services and potentially better prices as a trickle-down benefit from improved negotiation power with pharmaceutical manufacturers—paint a compelling picture for what the future of American healthcare could be. Only time will tell whether consumers will be the winner in this deal, whether the winner will be the shareholders, or whether we’ll never get to find out.

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BetaXAnalytics is a healthcare data consulting firm that helps payers and providers to maximize their CMS reimbursements and helps employers to reduce their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

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If you think understanding your own hospital bill is confusing, imagine scrutinizing a bill for 18,000 people. How do companies know if they’re being overcharged for healthcare services? Are people receiving care that is actually effective? Why are some medications so expensive? As an employer, this is a challenge that is all too real. 

Many companies want to offer competitive benefits, but the high cost of healthcare adds real challenge (and cost) to this goal. A great quote from Warren Buffett wraps up the employer/healthcare conundrum in a bow:

GM is a health and benefits company with an auto company attached.  -Warren Buffett

Employers who purchase health insurance for their employees are paying one of the most significant portions of our total healthcare “bill” in the U.S.--$640 billion each year to be specific. It’s unfortunate that we’re in this place where the cost of healthcare has risen so sharply over the past decade that healthcare is now often an employer’s 2nd highest expense, right after salaries. Shouldn’t this expense be managed with the same rigor as any other part of the business? 

If you ask a traditional broker how to manage costs as an employer, you may get a list of strategies that don’t actually lower healthcare spending, but rather they change who is paying for it. Here’s an example of exactly what this looks like. The 2016 Society of Human Resource Management (SHRM) Survey  lists the following strategies as the most successful in controlling health care costs:

  • Offering consumer-directed health plans (e.g., health reimbursement arrangements, health savings accounts).
  • Creating an organizational culture that promotes health and wellness.
  • Offering a variety of preferred provider organization (PPO) plans, including those with high and low deductibles and co-pays.
  • Increasing the employee share contributed to the total costs of health care.
  • Offering a health maintenance organization (HMO) health plan.
  • Providing incentives or rewards related to health and wellness.
  • Placing limits on, or increasing cost-sharing for, spousal health care coverage.
  • Increasing the employee share contributed to the cost of brand name prescription drugs. 

These strategies absolutely hit the goal of impacting an employer’s bottom line, but this often happens at the expense of employees. Noticeably missing from these strategies is anything that actually gets at the high source cost of services. But what actually lowers the underlying cost of healthcare?

Instead of these mainstream strategies that are often-cited as the go-to methods for employers to “save money," here are just some of my top high-value strategies that target cost-management without putting more financial burden on employees:

1.      Explore new funding models. Small and mid-sized employers who are fully-insured pay higher operational costs since the health plan takes on more financial risk. However, hybrid plans of self-insurance provide lower costs while incorporating stop-loss coverage and predictable, level payments so that even small and mid-sized employers can self-insure.

2.      Change the healthcare delivery model. Employers can use high performance networks that have a limited number of quality health care providers. Because the cost of health services can vary wildly between different providers and these price differences are not correlated to the quality of care, using narrow networks helps to ensure that you’re getting the best value for your money—great care at a fair price. The benefit of exploring new healthcare delivery models is lower premiums, lower out of pocket costs, or a combination of both.

3.      Use new payment models. This solution includes care that is pay-for-performance such as partnering with Accountable Care Organizations (ACOs). The advantage of moving away from traditional payment models is that we move away from “fee-for-service” (the doctor gets paid more for seeing you more often) and towards outcomes-based payments (providers get paid for curing you, regardless of how many times they see you). The National Business Group on Health’s 2018 Health Care Strategy and Plan Design Survey indicated that 21% of employers plan to promote ACOs in 2018 but that number could double by 2020 as another 26% are considering offering them. Other payment models include using “centers of excellence” for high-cost procedures. This enables the employer to ensure that associates are receiving the best care and the best price under payment agreements that are bundled into one comprehensive cost. 

4.      Proactively manage pharmacy costs. Partnering with an organization to keep pharmaceutical drug costs in check can hold a great deal of value for an employer’s bottom line. A big part of the management of pharmaceutical costs involves developing a strategy around specialty medications. This includes looking at specialty drug spending trends among members, how drugs are being used, cost differences in where they’re administered (hospital vs. provider), coordinating benefits between the medical and prescription plans, and implementing step therapy to ensure that options for less-expensive similar medications are used before jumping to the most expensive prescription. In addition, reviewing and revising formularies can make a large impact on costs with very minimal impact on members.

Are you cost-saving, or cost-shuffling?

Just how any other business unit in a company manages to their budget, managing health spending and strategy is a necessary part of ensuring that the high cost of health services are kept in check. This can be done by shuffling who is paying for healthcare, or it can be done by going after the source of what’s driving the costs. If I can share one takeaway here, it’s that employers have options with respect to saving health dollars. In the coming years we will see more and more employers moving away from simple “cost-shuffling” of health dollars and getting strategic about managing healthcare's underlying high cost.

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BetaXAnalytics partners with employers to use the power of their health data "for good” to improve the cost and quality of their health care. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, to save health dollars and to better target health interventions to keep employees well. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

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The Top 3 Reasons Why Your Hospital Bill Is So Confusing

Personally trying to navigate the maze of the U.S. health system is a micro version of the macro problem

Personally trying to navigate the maze of the U.S. health system is a micro version of the macro problem

It’s no secret that we have a pricing issue in healthcare. The U.S. healthcare spending was $2.7 trillion in 2011 and is expected to reach 20% of our GDP by 2020 if this trend continues. We spend twice as much per capita on healthcare in this country, but ironically our health ranks among the worst in the world. For us, the baffling reality is that the high cost of healthcare in no way means that we are healthy.

When we break down our cost and quality issues in healthcare, we find that the experience for patients trying to navigate the maze of the health system is a micro version of the macro problem. It’s confusing, and it seems that there is no relationship of the cost of services and their quality.

Why? Our best intentions say that the average consumer has the tools they need to gain some visibility into pricing of healthcare services, but unfortunately there are some big obstacles that make this difficult.

1.      Different patients and payers are charged different prices for the same services. Each hospital assigns a price to each service in what’s known as a “chargemaster.” This is a price list for each and every service and supply a hospital provides. The chargemaster is something very few people inside a hospital have visibility into, let alone consumers trying to navigate the health system. Oh, and we should mention that a chargemaster could contain 20,000 services and supplies; scrutinizing price lists is not easy for the average person. Insurance companies negotiate these list rates down for their “in network” providers. These discounts are usually related to how much buying power the payer has, and these discounts tend to be buried in private contracts. A patient who is uninsured or out of-network does not get the same negotiated discount on services that would be afforded to a patient who is insured and in-network. 

2.      Prices for the same services can vary significantly from hospital to hospital. Can you imagine 2 car dealerships each selling a Honda Civic, where the price at one dealership is $18k, yet the price at the other dealership is $100k? Well, this is exactly what happens in healthcare right now. The difference between prices for the same procedure can be upwards of 800%, and the price difference is in no way indicative of a higher-quality surgery. 

Consider a few real examples:

  • A report from the Healthcare Financial Management Association cited estimates between $33,000 and $101,000 for a knee replacement when several dozen health providers were asked by the US Government Accountability Office.
  • The cost for a hip replacement can range between $11,100 and $125,798.
  • An appendectomy can cost anywhere between $1,529 and $186,990.
  • A basic health care plan available under the ACA can cover most, but not all health expenses. According to George Washington University, an appendectomy could mean anywhere between $458 and $56,000 in patient out-of-pocket expenses.
  • Cotton swabs or x-rays can be marked up by 400%.

3.      Even if you shop around, you can still get a surprise bill. If you have ever needed a trip to the emergency room, chances are your wallet may have taken a hit. A recent Yale study found that 1 in 4 emergency room visits to an in-network hospital resulted in surprise billing to consumers for an out-of-network doctor. That’s right—your in-network hospital can bill you for out-of-network doctors. This could be for an anesthesiologist, a radiologist, or a doctor who is helping your in-network surgeon, and involvement of any of these individuals on your care team could end up on a surprise bill once you’re discharged.

The reality: price transparency in healthcare is murky at best. The Catalyst for Payment Reform gave 43 states an “F” grade for price transparency in health care. You can see how your state stacks up here: Report Card on State Transparency Laws 

Health Transparency Grade, By State

How employers can help. Employers are footing $640 billion of the healthcare bill in the U.S.; we have the buying power and leverage to have a say as to where this money is going. The lack of healthcare price transparency makes it a challenge for people trying to navigate the healthcare system, but employers can use strategies to control the source of healthcare costs. Stay tuned for my part II of this post, where we will explore these strategies in detail.

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BetaXAnalytics partners with employers to use the power of their health data "for good” to improve the cost and quality of their health care. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, to save health dollars and to better target health interventions to keep employees well. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.