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Case study - Surgery Partners

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Courtesy of Brian Uhlig

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Case study - Surgery Partners

  1. 1. National, Multi-site Health Care Provider Case StudyMinus30 Active management paired with focused tweaks increased EBITDA by $3.38M, free cash flow by $8M, and exit value by $31.3 million, while also reducing overall employee premiums. Company National, multi-site healthcare provider Company HQ Chicago, IL Employees 1,900 w/ 3,700 total plan members Advisor Name Brian Uhlig Health Rosetta Score 2.2 with foundation set for 4. 1=status quo & 5=fully realized Key Health Rosetta Components • Transparent Advisor Relationships • Patient Stewardship Tools & Member Concierge • Transparent Pharmacy Benefits • Outlier Patients • Enabling Technologies & Data Analytics Summary The core takeaway of this case study is how basic strategies like active management by the right benefits advisor, refining the overall benefits strategy, and ongoing minor tweaks to plan design can sustainably lower costs. This strategy also allows the client to incrementally embrace the broader mindset shift necessary for larger changes to capture major cost reductions and dramatically improve quality in future years. Key Accomplishments 1. Limited average employer spending increases to 1% per year from 2012 to 2016, as compared to the average trend of 5.38% per year. 2. Decreased employee payroll contributions over the same period 3. Strategies implemented increased EBITDA by ~$3.38 million in 2016, ~5% higher than if the client’s spending had increased at average trend rates. This translated into a ~$31.3 million of enterprise value in a 2017 exit. 4. Access to senior mgmt. (CEO, COO) enabled strategy that enhanced company initiatives
  2. 2. National, Multi-site Health Care Provider Case StudyMinus30 Details & Financial Results The Health Rosetta advisor started by cleaning up the client’s overall strategy. The company originally had a combination of fully-insured and self-funded plans across multiple states. The first step was to aggregate these into a single plan with a single administrator. This, combined with implementing new data management and analysis tools and processes, opened the door for ongoing active management. With this foundation, the strategy focused on multiple smaller tweaks to create initial wins while minimizing changes to the member experience. Over time, the advisor implemented changes focused on incentivizing smart member decisions and removing common sources of unnecessary waste. A primary goal of this approach was to increase member attention to where and how they spend plan assets, setting the stage for the advisor’s longer-term strategies in 2019 and beyond, such as direct contracts for surgical procedures and high-value primary care. The advisor also optimized various levers for managing costs, such as network limitations for high-cost areas like dialysis, PBM carve outs, dependent audits, spousal surcharges/exclusions, 5 tier rates, and ongoing data analysis to regularly identify opportunities. The client’s satisfaction with the strategy was also very high. Together these strategies drove significantly lower costs, resulting in higher EBITDA, free cash flow, and, ultimately, higher enterprise value at the time of sale. $3.38 million of savings in 2016 compared to average trend created $31.3 million in additional enterprise value. Note: All calculations use the Milliman Mid-market Survey average 2012-2016 trend of 5.38% per year.
  3. 3. National, Multi-site Health Care Provider Case StudyMinus30 Member Experience Improvements 1. The company captured the financial savings in this case study without meaningfully changing non-HSA employee contributions. In fact, they decreased over the 5-year period we analyzed. 2. Implementation of direct-contracted centers of excellence model ensures that patients with the most serious health issues have access to the highest quality care. 3. Benefits concierge & care management solution simplifies member’s entry point to the health care system. 4. Early adopter of covering preventive drugs for HSA plans and eliminating coverage of brand PPIs (July 2014), assisting this transition through free generic versions for first few months. 5. Early adopter of Bswift for enrollment, improving member experience through Bswift’s decision support tool and in-person OE communications for several years during transition to HSA plans. Financial & Operating Impact Significant impact across multiple fronts: 1. Higher EBITDA each year, $3.38 million higher in 2016 ($1,807 per employee) 2. Increased free cash flow by more than $8 million from 2012 to 2016 3. ~$31.3 million higher enterprise value in a 2017 sale to a publicly traded company 4. Managed national program (18 locations) with a single benefits manager 5. Contributed to higher than average exit multiple as a result of comparatively higher margins than other companies in the client’s sector Conclusion As the summary introduced, the likelihood of financial and care quality impact when adopting proven innovative solutions can be high with the right combination of transparent advisor relationships, strategic focus on quick wins, and expertise in executing a long-term strategy that captures ongoing opportunities. The end result is a more sustainably lower cost and effective health care supply chain. Learn More • Contact Brian Uhlig at brian.uhlig@aleragroup.com • Learn more at healthrosetta.org/employers • Get a complementary copy of The CEO’s Guide to Restoring the American Dream at healthrosetta.org/brianuhlig

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