Elap, a partner of AssuredPartners NL, gave a great presentation on Metric (Reference) Based Pricing! We are forming a great relationship!

1. The Next Right Thing for Health Plans
Metric Based Pricing:
Myths and Keys to Success
Wednesday, October 5, 2016

2. Founded in 2003, ELAP Services is a pioneer in health plan cost management that
delivers an industry-best comprehensive solution for self funded employers –
the only that provides:
ELAP Overview
PLAN DESIGN &
CO-FIDUCIARY
CLAIMS AUDIT
DIRECT
CONTRACT
MEMBER
ADVOCACY AND
DEFENSE
ANALYTICS

3. How metric-based
pricing addresses
the root of the
problem
Why MBP?
5 common myths
about metric-
based pricing
Myths
The 3 keys to a
successful MBP
program
Success
Agenda
The unsustainable
‘status quo’ of a
PPO system
The Problem

4. “All the Prices are too damn high”
- Gerard F. Anderson, Johns Hopkins Bloomberg
School of Public Health
Inflated Medical Bills: The Root of the Healthcare Problem
“Getting a 50% or even 60% discount off the
chargemaster price of an item that costs $13 and lists for
$199.50 is still no bargain.”
-Steven Brill, TIME Magazine
“American Employers are the sloppiest purchasers of health
care anywhere in the world…they have passively paid just
about every health care bill that has been put before them,
with few questions asked.”
– Uwe Reinhardt, Princeton Professor

5. A Managed Care Issue or an Economic Debate?
“The health plan fiduciary is typically
oblivious to the true costs hidden
inside their plans in the same way
they don’t understand the all-in costs
of their 401(k) plan.
The major difference is that
healthcare waste can easily be ten
times greater than the “Bps” being
scrutinized inside 401(k) plans.”
- Craig Lack, Benefits Expert

6. SOURCE: Kaiser/HRET Survey of Employer‐Sponsored Health Benefits, 1999‐2015
Healthcare Cost Impact on Members and Their Families
• 40% of Americans
have medical debt
and 1 in 5 have
credit impairments
– most are fully
insured

7. In Eastern Pennsylvania, What Does a Plan Pay for……a CT Scan?
Departmental statistics are obtained from a hospital's most recent Medicare cost report data, from American Hospital Directory – www.ahd.com
$2,892
$1,446
$199
$145
$0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 $3,500
Hospital Cost Medicare Payment 50% PPO Discount Billed Charges

8. How metric-based
pricing addresses
the root of the
problem
Why MBP?
5 common myths
about metric-
based pricing
Myths
The 3 keys to a
successful MBP
program
Success
Agenda
The unsustainable
‘status quo’ of a
PPO system
The Problem

9. Higher Discount = Worse Deal?
*Study using ELAP data for each state
0.0%
10.0%
20.0%
30.0%
40.0%
50.0%
60.0%
70.0%
80.0%
0% 50% 100% 150% 200% 250% 300%
Savings%
% of Medicare
% Savings off Billed vs. % of Medicare
Direct correlation between
higher discounts and higher
payment as multiple of
Medicare

10. What is Metric-Based Pricing?
Metric-based pricing uses rational and consistent
metrics, Medicare and cost, as a starting point for
provider reimbursement – rather than the discount
set by the carriers and insurance companies

11. Why Metric Based Pricing?
We give our clients the opportunity to treat
their medical costs in the same manner that
they would any other business cost
Simply Stated…

12. How metric-based
pricing addresses
the root of the
problem
Why MBP?
5 common myths
about metric-
based pricing
Myths
The 3 keys to a
successful MBP
program
Success
Agenda
The unsustainable
‘status quo’ of a
PPO system
The Problem

13. MYTH #1
‘Reference Based’ and ‘Metric Based’
pricing are the same thing

14. Reference Based Pricing vs. Metric Based Pricing
Hospital CHospital BHospital A
CT Scan
$400
• Medicare and cost can vary greatly from hospital to hospital
• Non-specific reimbursement methods weaken legal position
• Only pricing one way is unfair to providers
Reference-Based Methodology: CT Scan
$400 $400

15. Reference Based Pricing vs. Metric Based Pricing
Metric-Based Methodology
Hospital CHospital BHospital A
$352
$348
$248
$302
$458
$485
• Look at specific hospital’s specific costs and Medicare rates for each line on bill
• Re-priced two ways and paid at higher rate to ensure fair payment
• Paid exactly as plan document states – strong legal position (specific, current, attested by CFO)
CT Scan

16. MYTH #2
Metric-Based Pricing underpays
Hospitals

17. Is Medicare a fair baseline?
• Do Hospitals make money on Medicare?
• Studies vary:
• Anywhere from -9.0% margin to +1.5% profit margin on Medicare payments
• Nearly 50% of Hospitals make money on Medicare
$80
$85
$90
$95
$100
$105
$110
Hospital All-In
Cost
Medicare
Payment
Metric-Based
Payment
• Even at worst case (-9.0%) and a very low metric-based reimbursement (Med +20%) – hospital
makes profit

18. MYTH #3
Only metric-based pricing leads to
balance billing and credit impairments

19. Credit Impairments Due to HC Costs
“62% of US bankruptcies are related to medical bills, 75% of those filing for bankruptcy were fully insured.”
- Medical Bankruptcy in the United States… a study by Harvard University (2007)
“Bankruptcies resulting from unpaid medical bills will affect nearly 2 million people this year—making
health care the No. 1 cause of such filings” – CNBC (2013)
“Mounting evidence shows that chaos in medical billing is not just affecting our health care but dinging the financial
reputation of many Americans… the credit record of one in five Americans is affected”
… unpaid medical bills in collection “frequently end up on consumer credit reports,” as an outgrowth of “very complex
and confusing systems of figuring out who owes what after a medical procedure.”
- When Health Costs Harm Your Credit, The New York Times (2014)

20. Metric-Based Pricing Reduces Change of Hitting Full OOP
W/PPO
(45% disc)
Billed Charges $10,000
Total Allowed/Paid $5,500
Member Deductible $5,000
Member Paid $5,000
Plan Paid $500
Total Paid $5,500
W/MBP
(62% disc)
$10,000
$3,800
$5,000
$3,800
$0
$3,800
Scenario: $10,000 Billed Charges for Hospital Visit
Savings
$1,200
$500
$1,700

21. MYTH #4
Providers won’t let people with
metric-based plans in to their facility

22. Provider Pushback
Providers accept MBP patients the vast majority of
time
1
In rare cases, providers will demand payment up front for
a planned procedure (colonoscopy / mammogram) --- in
those cases a single-patient contract can be negotiated so
member receives proper care3
Most common forms of pushback
occur after bill is paid – appeal and
balance bill 2

23. MYTH #5
Metric-based pricing is a short-term
solution

24. Not if it’s done right…
Negotiating payment any time there is pushback
leads to cost uncertainty, stop/loss issues and
encourages providers to increase pushback1
Current PPO model with annual increase in health
care spend is not sustainable
3
ELAP has clients w/ 9+ years on
full audit program with little to no
increase in spend year over year 2
Hold the line
Consistent Savings
Status Quo ineffective

25. How metric-based
pricing addresses
the root of the
problem
Why MBP?
5 common myths
about metric-
based pricing
Myths
The 3 keys to a
successful MBP
program
Success
Agenda
The unsustainable
‘status quo’ of a
PPO system
The Problem

26. 3 Keys To A Successful MBP Program

27. KEY #1
Employer and Employee education

28. KEY #2
Strong and experienced patient
advocacy

29. KEY #3
Picking the right prospect

30. Indicators of a good MBP fit
• Self-funded, 150+ enrolled employees
• High health care costs / high renewal increase
• Engaged executives / innovative mindset
• Organization with tight budgets, or low margins

31. QUESTIONS