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Ortho111 #17
Employers are waking up to the fact that the second highest expense on their P&L is healthcare, behind only wages. KFF reports that the average employer paid $7,034 for single coverage and $17,393 for family coverage in premium contributions in 2023.
The third highest healthcare-related expense is musculoskeletal. Therefore, you, an orthopedic operator or physician, are one of the highest-cost items of a business. That may sound like a bad thing, but after spending my nights and weekends looking into employer claims data, I think it is potentially a great thing.
Why?
Because there is a massive opportunity to help employers reduce their cost of care, while shifting more volume (and improved payor mix) to your practice.
I'm going to explore two headwinds employers are battling when it comes to orthopedics:
Orthopedic practices, particularly those that operate primarily in the ASC setting, are of immense value to the CFO and Benefits Managers at large employers.
But most CFOs, Benefits Managers, and employers I speak to do not understand this. They need you to help them see the light...
Today’s Ortho111 provides a how-to guide for analyzing employer claims data and offers tips on crafting the ROI story.
A quick disclaimer.
Claims data is notoriously broken, missing, and frustrating. With a healthy proficiency in Excel, you should be able to gain some high-level insights.
As always, I’m happy to help walk through this process in-depth if you’d like.
Let’s dig in.
For this step, I am going to analyze a sample employer claims file.
For context, the employer has roughly 850 covered lives, is in the construction industry, and based in Kentucky. The majority of their employees are in a concentrated, mid-size market but they do have employees across the southeast. I have deidentified provider names to protect the innocent (or guilty) and of course, this is a deidentified file, including ZERO PHI.
We'll call the employer “KY Construction.”
Key Finding: Overall MSK spend
Understanding the overall MSK spend is a critical first step to analyzing potential impact and ROI into your orthopedic employer program.
For KY Construction, MSK is the second highest spend, coming in at $1.2m of the $6.3m total spend (20%).
Key Finding: MSK spend Month-over-Month
Ideally, you have a multi-year picture of claims to analyze. In this case, I only had a year. Showing how their medical spend is trending over time can be helpful, especially when that cost is rising.
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Key Finding: Cost-by-Procedure
Claims data is interesting for seeing the broad picture, but where it is impactful is when you get into the weeds. The detailed, line-level information is where employers can make more informed decisions and increase savings without sacrificing quality.
KY Construction had four carpal tunnel surgeries. Two were performed by the same surgeon at Facility B. Dr. M, performing at Facility C was $7,466 less than Dr. J at Facility A.
Detailed information can be powerful, but be mindful of the Law of Small Numbers and that there can be variance case by case. In this situation, I analyzed the claim lines, and the surgeries we analyzed were essentially the same - except for the price.
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Key Finding: Spend by Group
Analyzing spend by group lets the employer see where employees are going for care. There were a few MSK-related office visits elsewhere, but for these purposes, we want to evaluate the high-visit and high-cost entities. The Allowed Average is interesting but can be misleading because of the types of service happening at each Entity.
The focal point should be that a large sum of cases are happening at an Entity that does not have the best cost and quality. Showing this information to an employer as a part of your employer program can align incentives to drive their employees to your practice.
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Key Finding: ED & UCC Visits
Unnecessary emergency room or urgent care visits can drastically raise employer spend. What surprised me was the disproportional number of ED visits compared to the urgent care. When I began looking closer into the market, there were fewer urgent cares and many more free-standing emergency rooms. The ease of access to higher-cost EDs is impacting KY Construction.
Offering extended hours at your practice, priority appointments, or virtual care options as a tool to reduce this spend can be an effective strategy to support the employers.
For KY Construction, 111 MSK-related emergency visits in one year with only 850 employees is a high amount of utilization. This should be a number the employers want to address, and you have a great solution to help.
Employer claims data offer a trove of value if you take the time to leverage it. It will show your value and make your sales process much easier when engaging HR or the CFO. The big question is where to look. These are just a few data points you can use to craft your story to employers.
Tactically, I always recommend a simple deck or one page leave-behind highlighting the information you covered in your meeting. In an increasingly digital world, something physical to sit on their desk for the weeks to come is always a nice touch.
Where there is a wide range of categories employers care about when it comes to health benefits, cost is always on the list. If you can marry your Quality Story with a financial story using their personalized data, you will be bulletproof. It's worked for us, and it will work for you.
I fear that the vast majority of healthcare providers will continue to manage their business the same way they have for decades. Contract as a part of a network with payors, payors sell access to that network to employers. The providers have limited negotiating leverage. The employers have virtually no negotiating leverage.
What gives me optimism is the innovators cutting out the middlemen. By creating direct relationships between providers and employers, the supply side gains volume and reduces administrative overhead, while the demand side reduces cost and improves access. Win-win.
As with most things in the business of healthcare, logic doesn’t always prevail. And when it does, it comes in the span of decades, not days. It will take years to come to life, but the innovators are planting flags in the ground now and will be the ones to reap the benefits.
Analyzing claims data is just one step in a long journey to creating strong relationships with employers and building sustainable revenue streams for your practice.
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