Managing Costs: A Health Care Perspective 3 rd  Annual Manufacturing and Wholesale Distribution Conference  Tuesday, Octob...
Agenda <ul><li>Introduction and industry background </li></ul><ul><li>Current issues impacting your group health plan doll...
Introduction and Industry Background <ul><li>#1 – Reduce cost of health care </li></ul><ul><ul><li>RSM McGladrey Manufactu...
Current market factors impacting your group health plan dollars
Factors Influencing Health Care Costs <ul><li>Regulatory </li></ul><ul><ul><li>Payment reductions from federal and state g...
Factors Influencing Health Care Costs (Cont’d) <ul><li>Non-Regulatory </li></ul><ul><ul><li>Develop employer of choice ini...
How are organizations effectively managing health care costs?
Survey responses on the current methods being utilized to reduce health care costs
Pros and Cons to Survey Results <ul><li>Pros </li></ul><ul><ul><li>Short-term gains and effectiveness </li></ul></ul><ul><...
Management Cycle for Fully Insured Plan Costs Strategic Management Design Actuarial Analysis of Plan Design  and  Benefit ...
Managing Fully Insured Plan Costs <ul><li>AGGRESSIVE…. Assessment and movement to self insurance </li></ul><ul><li>Advanta...
Fully Insured Strategic Management Ladder Assessment and Movement to Self Insurance Premiums and Broker Fees Negotiations ...
Management Cycle for Self Insured Plan Costs Strategic Management Design Selection of Service Providers And Benefit Struct...
Managing Self Insured Plan Costs <ul><li>AGGRESSIVE…. External audits of service providers </li></ul><ul><li>Advantages </...
Self Insured Strategic Management Ladder External Audits of Service Providers Service Level Agreements Negotiations Benefi...
Effective Medical and Drug Expense Model Medical Cost  Containment Programs: Wellness Program Disease Management Fraud Cos...
Last Thoughts <ul><li>Be Proactive not reactive to addressing health care costs </li></ul><ul><li>Controlling health care ...
Questions?
Thank you <ul><li>Alicia Faust, Claims Administration Review Services Group Leader </li></ul><ul><ul><li>RSM McGladrey, In...
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RSM McGladrey, Inc. is a member firm of RSM International ...

  1. 1. Managing Costs: A Health Care Perspective 3 rd Annual Manufacturing and Wholesale Distribution Conference Tuesday, October 17, 2006 Alicia Faust, manager, RSM McGladrey
  2. 2. Agenda <ul><li>Introduction and industry background </li></ul><ul><li>Current issues impacting your group health plan dollars </li></ul><ul><li>How are organizations effectively managing health care costs? </li></ul><ul><ul><li>Effective solutions utilized to manage health care costs </li></ul></ul>
  3. 3. Introduction and Industry Background <ul><li>#1 – Reduce cost of health care </li></ul><ul><ul><li>RSM McGladrey Manufacturing and Wholesale Distributions Survey ranking </li></ul></ul><ul><li>More than 80% agreed with this ranking </li></ul><ul><li>More than 60% are passing cost increases to employees </li></ul>
  4. 4. Current market factors impacting your group health plan dollars
  5. 5. Factors Influencing Health Care Costs <ul><li>Regulatory </li></ul><ul><ul><li>Payment reductions from federal and state governments </li></ul></ul><ul><ul><ul><li>Revenue shift from governmental to commercial payors </li></ul></ul></ul><ul><ul><li>Pricing of provider services </li></ul></ul><ul><ul><ul><li>Typically based on payment methodologies of commercial insurers and competitor prices </li></ul></ul></ul><ul><ul><ul><li>Transparent pricing </li></ul></ul></ul><ul><ul><li>Increased dependent age to 30 years in some states </li></ul></ul><ul><ul><li>Mandated benefits </li></ul></ul>
  6. 6. Factors Influencing Health Care Costs (Cont’d) <ul><li>Non-Regulatory </li></ul><ul><ul><li>Develop employer of choice initiatives </li></ul></ul><ul><ul><ul><li>Competitive benefit structures for employee population </li></ul></ul></ul><ul><ul><li>Provider cost cutting impacts quality of care </li></ul></ul><ul><ul><ul><li>Reduction of highly experienced clinical staff </li></ul></ul></ul><ul><ul><ul><li>Ineffective case management protocols </li></ul></ul></ul><ul><ul><li>New technology and pharmaceuticals </li></ul></ul><ul><ul><ul><li>Increased availability and use of more expensive drug therapies, including biotech drugs </li></ul></ul></ul>
  7. 7. How are organizations effectively managing health care costs?
  8. 8. Survey responses on the current methods being utilized to reduce health care costs
  9. 9. Pros and Cons to Survey Results <ul><li>Pros </li></ul><ul><ul><li>Short-term gains and effectiveness </li></ul></ul><ul><li>Cons </li></ul><ul><ul><li>Reactive to costs </li></ul></ul><ul><ul><li>No effective longevity </li></ul></ul><ul><ul><li>Additional resources, time and costs </li></ul></ul>
  10. 10. Management Cycle for Fully Insured Plan Costs Strategic Management Design Actuarial Analysis of Plan Design and Benefit Structure Premium Disclosure and Analysis Negotiate Premiums And Broker Commissions
  11. 11. Managing Fully Insured Plan Costs <ul><li>AGGRESSIVE…. Assessment and movement to self insurance </li></ul><ul><li>Advantages </li></ul><ul><ul><ul><li>Negotiate service provider contracts </li></ul></ul></ul><ul><ul><ul><li>Avoids insurance company loads included in premiums </li></ul></ul></ul><ul><ul><ul><li>Greater control over benefit structure </li></ul></ul></ul><ul><ul><ul><li>Exemption from state mandated regulations </li></ul></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><ul><li>Acquiring historical data </li></ul></ul></ul><ul><ul><ul><li>Additional internal resources and time </li></ul></ul></ul><ul><ul><ul><li>Management of the third party administrator (TPA) / pharmacy benefit manager (PBM) </li></ul></ul></ul><ul><ul><ul><li>Returning to full insurance </li></ul></ul></ul>
  12. 12. Fully Insured Strategic Management Ladder Assessment and Movement to Self Insurance Premiums and Broker Fees Negotiations Analysis of Plan Design Case Management Disease Management Wellness Programs Successful Cost Containment
  13. 13. Management Cycle for Self Insured Plan Costs Strategic Management Design Selection of Service Providers And Benefit Structure Negotiation of Service Level Agreements On-going Monitoring And Management
  14. 14. Managing Self Insured Plan Costs <ul><li>AGGRESSIVE…. External audits of service providers </li></ul><ul><li>Advantages </li></ul><ul><ul><ul><li>Service level agreement (SLA) compliance with performance guarantees </li></ul></ul></ul><ul><ul><ul><li>Greater internal controls assurance </li></ul></ul></ul><ul><ul><ul><li>Financial reserve accuracy </li></ul></ul></ul><ul><ul><ul><li>View into the TPA/ PBM </li></ul></ul></ul><ul><li>Disadvantages </li></ul><ul><ul><ul><li>Contract limitations </li></ul></ul></ul><ul><ul><ul><ul><li>Contingent fee auditing </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Extrapolation of results to total population </li></ul></ul></ul></ul><ul><ul><ul><ul><li>Sample size </li></ul></ul></ul></ul>
  15. 15. Self Insured Strategic Management Ladder External Audits of Service Providers Service Level Agreements Negotiations Benefits Structure Case Management Disease Management Wellness Programs Successful Cost Containment
  16. 16. Effective Medical and Drug Expense Model Medical Cost Containment Programs: Wellness Program Disease Management Fraud Cost Sharing Programs: Provider Discounts And Pharmaceutical Rebate Eligibility Administration And Validation Effective Expense Management
  17. 17. Last Thoughts <ul><li>Be Proactive not reactive to addressing health care costs </li></ul><ul><li>Controlling health care costs requires management </li></ul><ul><li>Cannot reduce health care costs but can effectively manage current and future spend!! </li></ul>
  18. 18. Questions?
  19. 19. Thank you <ul><li>Alicia Faust, Claims Administration Review Services Group Leader </li></ul><ul><ul><li>RSM McGladrey, Inc., 20 North Martingale Rd., Ste 500, Schaumburg, IL 60173-2420 </li></ul></ul><ul><ul><li>847.413.6969 or alicia.faust@rsmi.com </li></ul></ul>

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