Accenture Transformative Power of Healthcare Technology M&A in Life Science 2015
White Paper
1. The Cost Control of
Health Benefits:
A Beginner’s Guide
to Analytics
by Ginger Campbell
This is the era of analytics. Decision-making based on a thorough
analysis of facts and figures is replacing intuitive “by-the-gut” prac-
tices. Healthcare payers, with their abundance of data and urgent
need to control costs, are in a perfect position to embrace analytical
initiatives.
This paper serves as a guide to analytics for third party administrators,
plan sponsors, hospitals, and other organizations seeking to contain
healthcare costs. It explains the rise of analytics and its acceptance
by the healthcare industry. With the rapidly changing healthcare
environment and emerging analytic trends, a plan for launching an
analytical initiative is prescribed.
2. Table of Contents
The Era of Analytics: A Brief History 3
The Natural Expansion of Analytics to Healthcare 3
Controlling Costs for Healthcare Payers 4
A Full-Support Solution: nFORM Health Benefits Analytics 5
Conclusion 6
Works Cited 7
The Cost Control of Health Benefits • Page 2 May 2012 BancorpSouth Insurance Services, Inc.
3. The Era of Analytics: A Brief History COMPARISON OF
REPORTING AND ANALYTICS
Analytics refers to the practice of creating action-
Reporting Analytics
able information through the sophisticated analysis
of data. Analytics and reporting are different but Primary use To provide data To provide insight
analytics do involve an element of reporting. The
difference is that reporting provides retrospective, To convert To convert data
flat statistics while analytics are forward-looking and information into into knowledge
multi-dimensional. The extra dimensions provide
data [6] [6]
advantages such as drill-down capabilities, trend
tracking, enhanced data correlation, and budget
forecasting. Examples Standard Statistical
reports, graphs, analysis,
The rise in analytics began around 2003. During alerts extrapolation,
this time, technology-based organizations such predictive
as Google, Amazon, and Netflix were dominating
modeling
markets by using complex analytical systems. How-
ever, it soon became apparent that analytics had
applications in other industries. Sports teams such as Provides Past Future
the Boston Red Sox began recruiting top-line statis- quantifiable performance probabilities
ticians to develop a myriad of ways to judge player description of
performance. A prominent casino reaped millions
of dollars’ worth of customer retention by analyzing
Answers What happened Why is this
minute data points, such as the number of smiles its
employees gave in certain intervals of time [5]. The questions: on what date? happening?
list of creative uses for analytics is virtually limitless
and the outcomes are rather impressive. How many What if this
times did it keeps
In markets where new competitive ground is scarce, happen? happening?
analytic breakthroughs are acting as springboards
for forward-thinking organizations. Now, analytical
Where did it What will
practices are expanding to the healthcare industry.
Experts predicted that healthcare analytics would happen? happen next?
see a large increase in 2011 and 2012, and so far the Are any
prediction has proved to be true [3]. opportunities
present?
The Natural Expansion of Analytics to
Healthcare
prominent nonprofit research group, indicates that
The rise of analytics comes at a fortunate time for the the average annual premium for family coverage in-
health benefits industry. Healthcare costs are ex- creased 9 percent in 2011, to an average of $15,073.
ploding out of control and cost containment is criti- This is almost double the cost of family coverage in
cal. A recent study by the Kaiser Family Foundation, a 2001, when premiums averaged $7,061 [11].
The Cost Control of Health Benefits • Page 3 May 2012 BancorpSouth Insurance Services, Inc.
4. The complications causing this instability will likely improvements over existing medications. Pharma-
affect the market for some time. One sustaining ceuticals like Nexium and Clarinex are products of
cause of the rise in healthcare costs is the aging this kind[9]. Expensive “specialty drugs” make up
population. The “baby boom” generation (those born most of the new drugs on the market, and will likely
between 1946 and 1964) is arriving at old age. By account for roughly two-thirds of the projected in-
2020, the number of Americans older than 65 will crease in drug spending between 2010 and 2013[7].
rise by more than 19 million to a total of 54 million
[8]. Because older adults consume a disproportion- Many factors are affecting the market, but these are
ately high amount of medical services, the demand the most significant and prolonged among them.
for medical treatment is expected to increase over Unfortunately, experts are not forecasting the stabili-
subsequent years. zation of healthcare costs in the near future.
Another reason for the ongoing increase in health-
care costs is changing legislation. The Patient Protec- Controlling Costs for Healthcare Payers
tion and Affordable Care Act (PPACA) signed into law
by President Obama in 2010 will take full effect in In unfavorable market conditions, analytical report-
2014. However, important provisions became effec- ing tools open new doors for healthcare payers.
Traditional uses for analytics include budget fore-
tive in 2010 and others continue to roll out. The leg-
casting, rate setting, and identifying individuals for
islation affects large and small companies differently,
chronic-care management. However, because of the
but in general it places higher demands on employ-
capability and the opportunity analytic reporting
ers that provide health benefits to their employees.
provides, the number of applications continues to
grow.
Lastly, advances in medical technology are increas-
ing healthcare expenditures. Typically, technological New approaches to using analytics include financial
developments lead to lower prices, but for medical and clinical algorithms, which allow healthcare orga-
advances this is not always the case. For example, nizations to implement advanced methods to iden-
some new procedures allow for treatment of pre- tify, manage, and measure risk within a population.
viously untreatable conditions. Other scientific The analyses detect correlations between multiple
breakthroughs have created expensive but effec- related data sets. Once an outlier is located, it can
tive treatments for terminal diseases such as heart be drilled down upon and fully investigated. Con-
disease and HIV. Demand is extremely high for new trast this streamlined process with how employers
treatments, which inflates healthcare prices [10]. struggle to receive claims data from plan administra-
tors. Without access to this information, employers
The rapid development of new pharmaceuticals have little choice but to base decisions on what has
contributes to the rise in healthcare costs as well. happened as opposed to what is likely to happen as
The government awards pharmaceutical companies predicted by forward-looking analytics.
with patents that create monopolies on new drugs.
This helps the businesses offset the immense cost of With full exposure to claims data, many organiza-
drug development and generate profits[10]. How- tions use analytical auditing tools to shrink health-
ever, it also leads to consumers paying much more care and pharmacy costs. With auditing capabilities,
for a drug than what it costs to manufacture. On a companies get a better picture of their plan and can
macroeconomic scale, this is not cost-efficient past renegotiate with their carriers for better pricing. Also,
a certain point. Current regulation also incentivizes employers that internally monitor carriers can verify
companies to develop drugs that make only small that pharmacy discounts are truly being applied.
The Cost Control of Health Benefits • Page 4 May 2012 BancorpSouth Insurance Services, Inc.
5. Analytics play a large role in making plan partici- case, it is beneficial to ask a series of questions
pants accountable for their own health. Employers before committing to an analytics solution:
can hone in on which intervention programs are
needed and which members have care gaps, then Ten Questions to Consider When
?
adjust health coverage accordingly. Plan participants
who choose not to participate in these programs or Shopping for an Analytics Platform
refuse to comply with recommended treatment may 1. Is the platform suitable for someone with limited time?
find themselves paying more for their employer-
sponsored plan. 2. How will my organization learn to use this?
3. Is this something that needs to be constantly monitored or does
Chief financial officers and other executives use it feature automated processes?
analytics to empower cost centers, especially human
resource departments, so that they affect revenues. 4. How committed is the platform’s provider in helping my
Where health plans are concerned, HR normally organization learn their product?
works between the company and the employee. For
5. Is it simple enough to be used by the less technically-minded
this reason, HR specialists tend to manage plans in a
way that is not equally beneficial to both the em- people, yet sophisticated enough to produce valuable information?
ployees and the company, making plans more costly 6. How long will it take my organization to learn to use this?
than they need to be. With analytical applications,
HR departments operate with bottom-line costs in 7. Will a basic understanding of office software help in learning this
mind and manage plans more equitably. platform?
8. What in-depth features are included?
Occasionally, an analytical initiative will innovate
and affect processes in such a way that it creates 9. Is the data easy to export out of the system?
great change within an organization. “Breakthrough 10. What upfront technology investment will be needed to use this
applications” are those analytic platforms that are
platform?
engineered to accomplish positive transformations.
This terminology originated in a 2011 white paper
by Bloor Research, a European healthcare IT and A Full-Support Solution: nFORM Health
consulting firm. The most effective breakthrough Benefits Analytics
applications 1) deliver personalized, accessible infor-
mation 2) have comprehensive access to data and Clearly, the application of analytics to health-bene-
3) and drive informed action [2]. Many new analytic fits management is a rapidly growing practice. How-
platforms provide these results.
ever, steep learning curves can be detrimental to
Analytics have created a new frontier of cost contain- the success of analytical initiatives. An ideal analytics
ment for healthcare payers. However, there are some solution will have a strong answer for this problem.
barriers to success in this process. Because analytic
platforms are powerful tools with breakthrough nFORM Health Benefits Analytics addresses the
capabilities, they take time to master. Unfortunately, learning curve by providing clients with training and
excessively high learning curves can cause organi-
ongoing consultation. nFORM personnel help clients
zations to let their investment fall by the wayside.
Analytics providers will address this issue if they are gather reporting information and install automated
dedicated to client success. To verify that this is the features, such as report generation and alert setting.
The Cost Control of Health Benefits • Page 5 May 2012 BancorpSouth Insurance Services, Inc.
6. After the platform is implemented, consultants work recognize the existence of a learning curve. Expert
with users to uncover the “gems” in the data that are consultation and ongoing guidance are effective at
instrumental in controlling costs. These consultants overcoming this obstacle. Platforms that offer abun-
remain committed to helping clients overcome dant personnel support should be strongly consid-
stumbling blocks and progress in their mission. ered when choosing an analytics solution.
For many analytic platforms, it is necessary that users
learn a whole new computer skillset. The difficulty is
comparable to using a program like Excel for the first
time. To avoid putting users through this, nFORM
functions similarly to common office software. Data
is arranged in cells and rows that can be easily ma-
nipulated and exported to spreadsheets or PDF. This
layout is familiar to most people and allows them to
transfer existing skills to new applications.
nFORM is a cloud-based solution that
Overall, a good goal to have when shopping for an includes ongoing consultation.
analytical solution is a manageable, capable platform
that provides lots of support. nFORM Health Benefits
Analytics is based on this idea and represents market
leadership in usability.
For a full list of nFORM features or to learn more
about the platform, visit www.nformanalytics.
com on the Web, or call (800) 486-8283 ext. 5304.
Live demos are available.
Conclusion
The inspiring companies and individuals responsible
for the rise of analytics have changed the business
landscape. Existing data records can now breathe
new life into business practices with transformative
results.
The advent of analytics could not come at a better
time for the data-rich health benefits industry. Likely,
healthcare costs will continue to rise due to persis-
tent, large-scale trends affecting the market. With
analytical tools, healthcare payers have the means
available to bring costs back down.
Organizations seeking an analytical solution should
The Cost Control of Health Benefits • Page 6 May 2012 BancorpSouth Insurance Services, Inc.
7. Works Cited
1. Abelson, Reed. “Health Insurance Costs Rising Sharply This Year, Study Shows.” The New York Times.
Sept 28, 2011. Page A1.
2. Bloor Research. “Building Breakthrough Applications.” Prepared by Philip Howard. London, Oct 2011.
White paper. Page 1.
3. Davenport, Thomas. “Analytical Integration in Healthcare.” Analytics-magazine.org. Web. Jan 2012.
4. Davenport, Thomas. “Are You Ready to Re-engineer Your Decision Making?” MIT Sloan Management
Review. Oct 1, 2010. Volume 52, Number 1, pages 1-6.
5. Davenport, Thomas H., and Jeanne G. Harris. 2007. “Competing on Analytics: The
New Science of Winning.” Boston: Harvard Business School Press.
6. Desa, Manish. “Reporting Vs Analytics”. My Business Analytics. Mar 29, 2011. Web. Accessed Feb 20, 2012.
7. Medco. “2011 Drug Trend Report.” Web. 2011. Volume 13.
8. National Center for Health Workforce Analysis, Bureau of Health Professions, Health Resources and
Services Administration. “The Impact of the Aging Population on the Health Workforce in the United
States: Summary of Key Findings.” Center for Health Workforce Studies, School of Public Health,
University at Albany. Web. Mar 2006.
9. Porter, Eduardo. “Do New Drugs Always Have to Cost So Much?” The New York Times. Web. Nov 2004.
10. The Henry J. Kaiser Family Foundation. “How Changes in Medical Technology Affect Health Care Costs.”
Snapshots: Healthcare Costs. Web. Mar 2007.
11. The Henry J. Kaiser Family Foundation. “U.S. Healthcare Costs.” Prepared by Adara Beamesderfer and
Usha Ranji. Web. Feb 2012.
For a full list of nFORM features or to learn more
about the platform, visit www.nformanalytics.com
or call (800) 486-8283 ext. 5304.
BancorpSouth Bank is a wholly owned subsidiary of BancorpSouth, Inc., a financial holding company headquartered in Tupelo, Mis-
sissippi, with $13 billion in assets. BancorpSouth Insurance Services, Inc., a division of BancorpSouth Bank, employs more than 500
insurance and risk management agents. The organization is annually ranked as one of the nation’s largest brokers by Business Insurance
magazine and serves clients across the globe through its Worldwide Broker Network.
The Cost Control of Health Benefits • Page 7 May 2012 BancorpSouth Insurance Services, Inc.