Foretelling who is going to get sick and how to stop or delay that particular sickness is perhaps the most important factor in keeping health care costs to a minimum. In today’s health care parlance, that process is more science than art, and it’s called “predictive risk modeling” (PRM).
Though proven, PRM is not yet an exact science. Some sources say that even the best predictive risk models account for only 40 percent of variations in actual health and medical resource use.
“We are in a knowledge-based employee world right now,” says Larry Mullany, M.D., regional medical director for AvMed Health Plans. “Companies are investing in training and retaining and increasing productivity of employees. They want to keep them around in good health — and they want their health care plan to enhance their benefits package as well.”
Smart Business talked with Mullany about how health care risks are predicted and how PRM interacts other health care options that employers can provide their employees.
What are some employer options for offering health care coverage to employees?
Several tools are available. One would be mapping your health risk assessment program to your care management program, particularly the high-cost issues. The second is doing predictive modeling, looking at experience, asking where the future costs are going to be — even down to an individual level — and asking what you and your benefits provider can do to manage those costs.
In addition, high deductible insurance coupled with Health Savings Accounts (HSAs) are an exciting new approach. They are a way to engage people in their own disease care by bringing market sources to play. But I’m going to submit to you that the type of predictive modeling we’re going to discuss could apply to any number of tools, including HSA use.
What is unique about predictive modeling?
It forecasts the entire continuum of care for people, including a whole line of episodic treatments that help prevent them from going into the hospital. Predictive modeling also means enhancing up-front resources.
Upon what facts, data or theories is predictive modeling based?
You can observe various health factors to identify persons at risk.
In disease management, we know that the 80/20 rule applies: 80 percent of your resources will be expended by 20 percent — or less — of the population. If you can identify the people at risk beforehand, you can stratify them into categories and have action plans in place, even though some people may be more advanced in a disease condition than others and acuity levels are different at that stage of care.
What has experience shown?
A good example is what happened in the city of Asheville, N.C., which has a small health care program.
Managers identified certain high-risk populations of diabetics that included hypertensives and high-cholesterol people. They gave those people medications at a reduced co-pay and were able to sustain, over five years, a flat cost per diabetic patient. More excitingly, they also had no evidence of people going on long-term disability and no worker’s comp. That was a pretty dramatic impact.
More specifically, we know from experience that health care for just plain high blood pressure for a particular group might amount to about $450 per member per year. If there are complications, that amount jumps up to approximately $27,000 per year. The average cost for plain diabetes is about $1,000 per patient per year. Add complications like a stroke and it becomes about $3,000 per member per year; kidney disease becomes around $10,000 per member per year. If you can anticipate future risks and then intervene to reduce those risks, you can make a profound difference.
PRM benefits can impact a company’s bottom line by decreasing health care costs, decreasing the rate of medical inflation, decreasing the downstream illness burden, and decreasing the higher premiums that are passed along to the employer. There is good data on all that.
What should corporate managers and directors look for in a health care plan?
You as a CEO want to avoid premium increases in subsequent years. You do that by making sure to keep your experience (health treatment rate) down. If you can keep your people healthier, you can reduce your rate of inflation. Then you don’t get the double-digit or higher premium increases.
Five to 10 percent of any population will already be in various complex case and care-management programs, but predictive risk management helps you anticipate the people who are likely to get to that stage in the future. If you can pro-actively treat them before they hit the hospital — with medication or nurse time or other resources — that’s when you can really realize some substantive savings.
Companies like ours are in business to first deliver good care, because a healthy work force is the primary benefit. Second, we want to do it in a affordable way, with quality that will ultimately be a cost-reducing measure. And predictive risk modeling can help achieve those goals.
LARRY MULLANY, M.D., is regional medical director for AvMed Health Plans. Reach him at (352) 372-8400, ext. 2869 or [email protected].
