Decreasing Healthcare Costs While Improving Care with Data Analytics

It may seem counter-intuitive, but going to a good doctor costs less overall than going to a bad one. 30% of healthcare costs are due to poor or ineffective care and good doctors wring out those excess costs.

But how do we find the best doctors?

Quality. The problem in healthcare is that we don’t know how to measure quality. As a proxy for quality we fall back on process measures that change the question we should be asking: “Did the patient get better?”

To a question with an easy answer: “What procedures did their doctor perform?”

Another fallback are price transparency tools that tell us what a doctor charges for a procedure or visit, without considering whether the doctor will get us better, and how much that will cost.

And then there are preferred “narrow networks.” Every insurance company touts their best providers, but how do they know? They only know the claims costs, not the outcomes of the care. Insurance companies build these narrow networks with doctors taking fee discounts.

And What Are the Real Costs? Everyone focuses on the claims, what the doctor or hospital gets paid. The claims, however, are only half the equation to an employer. The lost productivity costs of employee medical absences and presenteeism‒when an employee comes to work but can’t fully perform their job‒can be several times the related claims costs.

Health Insurance. There are two ways that an employer can provide health insurance to its employees. In the traditional way, called being “fully insured,” the employer buys health insurance from an insurance company. The employer pays a premium and out of that premium the insurance company pays the claims, its overhead, and makes a profit.

When an employer “self-insures” it bears the risk of paying the healthcare claims. The employer still engages an insurance company to process the claims and provide the network of doctors and hospitals, but the employer just pays the insurance company a fee for those services. And because the employer pays the claims, the employer owns the claims data.

Confluence of Data Sets. Insurance companies and government healthcare have one data set‒the claims.

Fully insured employers also have one data set‒their HR records.

Employers who self-insure, however, have two‒the claims and their HR records.

Inside those HR records live the outcomes of the claims. How long was the employee off work because of the illness or injury? And when the employee returned, could they fully perform their job?

Back @ Work = Good Outcome. The best outcome for an employer is having the employee back at work at the lowest overall cost‒claims plus productivity costs. And if the employee is well enough to be back at work, then they’ve probably had a good personal outcome too.

Value. Having defined a good outcome as the employee being back at work, we can measure all the costs to get the employee there, and thereby calculate the value of healthcare. Value is what you got compared to what you paid. What the employer got is the employee back at work. What the employer paid is the claims plus the productivity costs.

Ranking Doctors. For each diagnosis (e.g. back pain, asthma, etc.) the employer can rank the doctors and hospitals in its network over the entire continuum of care:

• Average risk-adjusted cost to return an employee to work
• Claims + productivity costs

The high value providers for each condition are those that return employees to work at the lowest average cost.

Steering to High Value. After ranking the doctors and hospitals, the employer can steer all the participants in its health plan‒the employees and their dependents‒to the high value providers for what they need.

There are two ways to steer. First, provide the employees with an online portal where they can look up the high value doctors and hospitals for each diagnosis, and augment that portal with an 800# and online chat. Because if you have a heart condition or a sick child, who wouldn’t want to go to the top ranked doctor?

Second, make a portal available to all the primary care physicians in the network to look up the high value specialists and surgeons when making patient referrals.

$lice of $avings. An employer won’t get every employee to switch to a high value doctor, but it doesn’t have to. The opportunity for savings is so great that if just a fraction switch the employer will reap a windfall!