Vol . 49 | No. 8 | August 2012

education | research | information

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M A G A Z I N ESchool District Tackles Health Care Challengep 12

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After carving out the medical management piece of its health care plan and outsourcing it, a school district saw better employee engagement in the health plan and improved utilization trends.

School District Tackles Health

Care ChallengeReproduced with permission from Benefits Magazine, Volume 49, No. 8, August 2012, pages 12-17, published by the International Foundation of Employee Benefit Plans (www.ifebp.org), Brookfield, Wis. All rights reserved. Statements or opinions expressed in this article are those of the author and do not necessarily represent the views or positions of the International Foundation, its officers, directors or staff. No further transmission or electronic distribution of this material is permitted. Subscriptions are available (www.ifebp.org/subscriptions).

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School District Tackles Health

Care Challengeby | Dale Moyer, CEBS, and

Robert Dorsey

in January 2010, a Chicago suburban school district faced the daunting prospect of ab-sorbing an annual health care increase of over 10%. This came on the heels of five prior years of double-digit increases. If the health plan continued to perform like this, the fore-casted expense would be 61% higher within another five years and the district would face the threat of having to reconsider educational delivery to students.

This situation is not unique. For many school districts across the country, significant health care increases over the past decade have siphoned money from operating budgets and employ-ees while, at the same time, benefits and services have decreased.

It became clear that the key to fixing the problem involved understanding the primary cost drivers and determining how employees used the plan. This article describes how the district disaggregated its health care plan—carving out medical management from the national health care carrier’s service offering and establishing it as a centralized piece to coordinate the district’s activities. This set the stage for better employee engagement and a more structured process for the district to manage its employees’ health.

Setting the Stage for ChangePrior to 2010, the district had a fully insured health maintenance organization (HMO) cov-

ering 60% of the district’s 2,400 employees and a self-insured preferred provider organization (PPO) plan covering the remaining 40%. A large national carrier provided both options and handled all aspects of health care administration—enrollment, claims administration, main-taining the provider network, member services, case management, precertification and phar-maceutical services.

The district’s first step was to consolidate the HMO participants to a self-insured PPO plan, resulting in two self-insured PPO plans. This not only lowered costs by 4% through the elimi-nation of premium taxes and risk charges, it gave the district access to important data to evalu-

ate how employers were using the plan. Having the entire population on a self-insured basis allowed the district to analyze cost drivers. The district evaluated the volume and cost of pro-

cedures, the number of doctor visits, and pharmaceutical claims. It was able to develop profile

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groups within its population. Through this analysis, it learned that 5% of the population accounted for nearly 50% of the plan costs (see Table I).

The district worked with its consul-tant to disaggregate health plan ser-vices, or separate them into their com-ponent parts. An examination of health care claims revealed a fragmented health care plan. Employees faced a be-

wildering complexity of multiple health care providers—primary doctors, spe-cialists, hospitals and other providers. And the district’s human resources (HR) team faced a confusing conglom-eration of players in the health plan—the health carrier’s member services and case management departments, the pharmaceutical services group and the account management team.

It became clear that the national car-rier was not able to provide adequate advisory services to employees nor was it providing aggregated and up-to-date information to the district’s HR team. Now that both health plan options were self-funded, the carrier for the first time could centralize claims and utilization data in a meaningful way. But while its ability to gather data improved, the national carrier still was unable to pro-vide detailed and up-to-date claims and utilization data. Basing decisions on in-complete data was not an option. The plan could not be effectively managed through a rearview mirror.

The district discovered further weaknesses with the national carrier. The member services department—the team responsible for answering mem-ber questions—allocated only one full-time client advocate for every 15,000 members. The insurer’s case manage-ment nurses had an average caseload of 100 members with claims in excess of $100,000 at any one point in time. This created a dual problem: Because the carrier did not allocate enough resources to service the plan, district employees were provided with little to no help to understand how the plan worked and what their individual re-sponsibilities were. At the same time, the district’s health plan did not have a process for evaluating the appropriate-ness of care. Without employee advo-cacy or proper controls, the plan would continue to operate at a deficit.

Additional analytics revealed the health plan had incurred significant cost differences for simple medical procedures. By comparing incurred claims for one 12-month period, analy-sis found that the plan had claims for colonoscopies that ranged from $563 to

TABLE IOne Year of Claims Costs

Metric Employees DependentsTotal Members 1879 98 2,310 120Total Medical and Rx Cost $5,819,614 $4,238,550 $3,770,595 $3,886,368Percent of Cost 57.9% 42.1% 49.3% 50.7%Minimum per Member $0 $19,999 $0 $12,105Maximum per Member $19,038 $337,016 $11,659 $270,557Medical and Rx Cost per Member $3,097 $43,251 $1,632 $32,286Providers 4 14 3 12Diagnoses 6 22 5 15Tests 12 99 5 57Rx Fills per Employee 15 44 8 26

Analysis based on one full year of district’s claims from December 1, 2009 to November 30, 2010.

FIGUREChanges in Utilization Drive Savings

Dramatic impact on key drivers of health care costs

Source: Validated study completed June 2011 of pre-post data for 37 year-one groups, incurred basis comparing actual versus expected utilization based on actuarially expected utilization for year one. 1No “expected” comparison so preventive screenings utilization reflects actual change. *Inpatient with and without maternity admissions.

Primary physician use Up 5%

Preventive services1 Up 3%

Outpatient surgery Up 4%

Specialty use Down 4%Emergency room use Down 7%Outpatient diagnostics Down 1%Readmissions Down 24%Inpatient admissions Down 2-7%*Inpatient length of stay Down 15-20%*Inpatient days Down 17-25%*Average cost of cases >$50K Down 14%

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$3,967. Primary care initial adult visits ranged from $85 to $270, and x-rays of the spine (three images) ranged from $38 to $162. Without better oversight, the costs the district paid would continue to be unpredictable.

Getting input From employeesThe district surveyed employees and found that nearly

half of the population had no idea of the cost of health ser-vices. They aren’t alone. Surveys of employer health plans have found that 50% of surveyed patients report they do not understand instructions provided by their physician after leaving a doctor’s office. In addition, 33% of patients are not given postdischarge instructions and 41% of patients self-refer to a specialist with 61% of such referrals made to the wrong physician. This can result in an average 11-month de-lay in the resolution of a patient’s health care issue. Delays of this nature can drive an individual member’s health care costs to be 33% higher.

The district survey did provide encouraging feedback: 78% of employees responded they were “willing” or “some-what willing” to become more involved in the management of their personal health and health care purchasing deci-sions. It became clear that the district needed to engage its workforce. Providing employees with support to make good health care decisions was critical to the district’s future.

pathway to ChangeThe district needed to provide employees with tools to

help them make good decisions about their health and ed-ucate them on how the plan works. It conducted a request for proposal (RFP) to find a firm that would provide coor-dinated full-service member advocacy for district employ-ees, serving as a bridge between employees and health care providers. The focal point for the district became clear: Pro-viding a confidential decision-support team for employees was necessary for fostering a well-informed and discerning group of health care consumers.

District leadership played an active role. The district superintendent, the school board and the president of the teacher’s union conducted multiple site visits together to see firsthand how vendor operations worked. The district chose a nationwide firm with significant experience with school districts to provide a team of member advocacy coordinators to handle all employee health care questions. The district was surprised to learn in the RFP process that carving out the

member advocacy services to the selected firm was actually less expensive on a per-member-per-month basis than what the district was paying the national carrier.

The district announced the selection of the member advocacy team to its employees in September 2011. It was important to introduce the new vendor with complete sup-port from both the district and the teacher’s union. The su-perintendent and teachers’ union president made presenta-tions. Small-group and individual sessions were held over the following four weeks. The outreach included newsletters to employees’ homes, posters in the schools, e-mails to em-ployees and an announcement on the district’s website. Re-alizing that most employees’ first interaction with the new vendor would not occur until the employee sought medical attention, the district capitalized on every opportunity to raise awareness.

The member advocacy team assigned 23 coordinators, of which one-third are nurse practitioners, and two team leads to the district’s account. Across their book of business, the ra-tio of coordinators to members is 1:1,000—a significant im-provement over the national carrier’s ratio of 1:15,000. They serve as the primary health contact for district employees, with a dual role as gatekeeper and employee advocate. The redesign of the district’s health care plan places the coordi-nators at the center of the nexus among the various parties: the district’s employees, the insurance company’s claims and eligibility teams, the PPO network, and the pharmaceutical services team. All utilization management including well-ness coordination and disease management (DM), precerti-fication and case management are done by the member ad-vocacy team. The team interfaces with the district’s HR team to provide summary reports outlining utilization and plan performance statistics. The figure shows changes in utiliza-

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tion as a result of having a member ad-vocacy team in place.

trust Begins on a First-name Basis

When an employee seeks medical attention, he or she calls the assigned coordinator and a record is created so that the health plan has a complete his-tory of each medical encounter. The coordinators have a background in providing direct patient care in medical environments as well as training and experience providing telephonic coach-ing. The coordinators seek to establish a connection with employees through an initial phone introduction. The goal for the coordinators is to introduce themselves as trusted medical profes-sionals in order to establish a personal connection and develop a one-to-one relationship with the district employ-ee. They take an empathetic approach and encourage the employee to call in whenever a medical issue or question arises. This was a very different ap-proach from the former health carrier. From this first phone call, the employee learns that the coordinator is his or her single-point person for all health care questions—a trusted advisor and advo-cate for medical issues.

In addition to managing day-to-day health care issues, the member advocacy coordinators are responsible for educating members to understand their benefits before services are de-livered. They coordinate treatments, schedule doctor appointments on be-half of employees, conduct all precer-tifications, do case management, and run the wellness and disease manage-ment programs. When more than one doctor is treating a patient, the coor-dinator helps to minimize redundant or unnecessary tests by, for example, obtaining MRIs that were conducted on the employee within the past year. The new efficiencies reversed an en-trenched timing and information problem: Where the employee previ-ously learned the cost of a doctor visit 30-60 days afterward, now employees were armed with cost information be-fore the visit.

At the same time the member ad-vocacy team was introduced, the dis-trict also decided to select a different national health care carrier. From day one, the new carrier and member ad-vocacy team worked closely together, setting up daily data feeds and agree-ing on protocol and process. The coor-dinator team was provided with a file

of two years of prior employee claims from the former carrier and nightly feeds of current claims information. This ensures the member advocacy team has up-to-date information within hours of an employee’s visit to a doctor.

The coordinators prioritized out-reach to district employees with se-rious health conditions. This was an important implementation phase that involved engaging with the sickest members of the employee population. From historical claims, coordinators stratified district members into chronic condition subpopulations such as dia-betes, chronic obstructive pulmonary disease, coronary artery disease and others. Each group was further strati-fied by severity. Armed with this in-formation, coordinators conducted outreach to employees. Within the first three months, 53% of all district house-holds had been contacted. And 50% of employees voluntarily participated in a health history survey.

As part of its engagement efforts, the advocacy team enrolls employees in the district’s wellness program. Employees participate in a biometric assessment which, together with the health history questionnaire, provides further health care insights. If an employee has a chronic condition, he or she is enrolled in condition management, a more posi-tively received version of disease man-agement.

While much of the coordinators’ ef-forts involve providing a more efficient health care experience, they are equally tasked with improving health care liter-acy. Each interaction with an employee is an opportunity to educate about his or her options and to help make choices grounded in sound health care planning

takeaways >>•  Moving employees from an HMO to a self-insured PPO plan lowered costs and gave the

district access to data showing how employees were using their health plan.

•  The district found that under its old health care carrier, employees didn’t understand how the plan worked or its cost, nor did they know their responsibilities.

•  District leadership actively promoted member advocacy services provided by the new vendor the district selected.

•  Member advocates do all utilization management, including wellness coordination, dis-ease management, precertification and case management. Their priorities are employees with serious health conditions.

•  The health plan’s performance has improved as employees better understand costs.

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and common sense. The district began to see in a short period that engaging and educating its workforce was paying off.

Seeing resultsAfter the first 90 days, coordinators had handled 7,981

employee health issues—more than eight times the vol-ume the former health carrier had handled in the previous year. To further strengthen engagement, the coordinators worked with individual district employees to help them select a primary care physician. Engaging employees involves strengthening their connection with the medical communi-ty. Today, 85% of health care services are now scheduled (see Table II). The district’s health plan is better equipped to help employees manage routine and complex medical issues.

Through detailed analytics in real time, the district has access to aggregated and deidentified data within 24 hours. Helping employees to understand costs before they are in-curred and accelerating the results of medical encounter information have improved the district’s health plan perfor-mance. Advocacy and cost transparency have resulted in bet-ter communication, trust and understanding.

Implementing these changes has helped set the stage for further improvements. The district is in the process of work-ing with a large area hospital to serve as a preferred provider for all cardiac cases. The area hospital has adopted the Cleve-land Clinic’s standards for cardiac care. Coordinators will coach employees with cardiac conditions to meet with spe-cialists at the area hospital. This will ensure that every mem-ber with a cardiac condition will be reviewed by physicians who have adopted best-in-class standards. Depending upon the severity, the member may be transported to the Cleve-land Clinic. Additional inroads are being made for cancer and transplant services, with these cases being reviewed by the Mayo Clinic.

The experiences of this school district show that the disaggregated model provides an opportunity for the employer to strengthen its health plan to one that is re-sponsive to employees’ needs and vigilant in its approach to cost containment. Engagement, trust and measurable outcomes are becoming this school district’s hallmarks for change.

health care

Dale Moyer, CEBS, is a principal with Benefits and Compensation Resources (BCR) and has over 20 years of experi-ence in compensation and benefits. He has served in leadership roles in

both the public and private sector. Moyer supports clients in the design, development and implementa-tion of total rewards solutions. He is a graduate of the University of Illinois and received his M.B.A. degree from Loyola University of Chicago. Moyer is a current board member and former president of the Chicago Compensation Association. He can be contacted at dale@b-cresources.com.

Robert Dorsey is a vice president with GCG Financial in Chicago, Illinois, where he specializes in employee ben-efits management and consulting. He has over 25 years of experience in the

health care industry. Dorsey has been a featured speaker and resident employee benefits expert at conferences for several organizations over the years including Educational Research and Development Institute, National School Board Association and Triple I Joint Annual School Board Conference.  Dorsey received his B.A. degree from Mount Mercy University in Cedar Rapids, Iowa. He can be contacted at rob.dorsey@gcgfinancial.com.

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bios

TABLE IIConsumer Advocacy Results for First 60 Days

Number of member health issues addressed 7,981

Employees having a designated primary care physician 56%

Members who had submitted health history questionnaire 59%

Number of members identified with a chronic condition 387

Number of members identified with a high-risk condition 49

Percent of employees with high-risk chronic condition working with a nurse 55%