Category Archives: Costs

What’s Eating Up Your Paycheck? Healthcare Costs (Healthcare Waste)


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Healthcare waste helps keep wages flat, widening economic inequality and fueling voter anger and frustration.

healthcare waste causes wage stagnation

Tuan Azizi/Getty Images/Thinkstock

 

Everybody talks about how insanely expensive healthcare and health insurance are. And there’s lots of talk about how wages have barely kept up with inflation for at least eight years.

But nobody’s really talking about how those two things – surging healthcare costs and stagnant wages – are directly connected. New research by HCMS Group, a healthcare reform company based in Cheyenne, Wyo., dramatically shows the link.

For a substantial cross-section of private employers and the people they cover, healthcare costs rose more than 10% in 2014, the study showed. Worker pay climbed just 4.1%. For those making less than $30,000 – predominantly women – wages inched up 0.5% while their healthcare costs jumped almost 17%.

What’s the connection? Well, employers lump wages and benefits together in their budgets for worker compensation. As healthcare expenses drain progressively more money out of total compensation budgets, there’s less available to put in people’s paychecks. Many employers try to limit their healthcare costs by raising premiums, copays, out-of-network charges and deductibles. But that just takes even more money directly out of people’s pockets, without improving health.

The study spotlights one of the biggest but least discussed economic effects of runaway health benefit costs. Flat wages widen economic inequality – one of the things fueling voter anger and frustration this election year.

“The key to resolving wage stagnation is to reduce healthcare waste and funnel those dollars into wages,” said Dr. Hank Gardner, the CEO of HCMS Group.

Healthcare waste is at the center of the problem. Waste is overtreatment by medical providers and overconsumption by patients, with risky narcotics at the top of the list. Waste accounts for 30% of national healthcare spending. The current healthcare benefits system encourages waste and does little to improve health.

The HCMS study of wages and healthcare costs was based on the company’s unmatched Research Reference Database, which includes healthcare, compensation and paid time off data for almost 4 million Americans whose benefits are provided by more than 300 employers.

healthcare costs and wage study

In 2014, average wages in the healthcare costs study group of more than 140,000 people rose 4.1% to $81,371. Average health plan costs – including those paid by employers and directly out of employees’ pockets – jumped 10% to $10,263 a person. Among people earning less than $30,000, wages increased $124, or 0.5%, while their health plan costs surged $797, or 16.6%.

People in higher income brackets had higher raises – 4.3% for those making $30,000 to $80,000 and 4.2% for salaries higher than $80,000. Meanwhile, their healthcare costs rose substantially less than expenses for people in the under $30,000 group. The data show how the costs of healthcare waste fall disproportionately on those with lower incomes, contributing to economic inequality.

“This shows the power and importance of real healthcare reform,” Gardner said. “We need to put more money in people’s pockets. People with the lowest incomes – notably women and single mothers – wind up paying the most for healthcare waste in the form of forgone wages.”

 

For self-insured employers HCMS Group offers offer comprehensive, REAL healthcare reform solutions to reduce healthcare waste and costs while improving health. Please contact us at HCMSgroup.com or call (877) 883-5786.

— Bob Simison on behalf of HCMS Group data analytics.


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Behind the Surge in Healthcare Cost: Healthcare Waste, by the Numbers

Behind the Surge in Healthcare Cost: Healthcare Waste, by the Numbers


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an elephant calm in a restaurant interior. photo combination concept

There’s an elephant in the healthcare cost room that nobody wants to talk about. It’s healthcare waste, and it adds up to almost $1 trillion.

Researchers including the government’s own Institute of Medicine have found that 30% of the nation’s $3.2 trillion in annual healthcare spending is wasted.  According to research conducted by HCMS Group, waste in the form of over-treatment and over-consumption accounts for 30% to 40% of healthcare costs for risk-bearing employers and health plans.

Why not talk about it? Well, it’s a touchy subject. Who’s to say what waste is when we’re talking about someone’s health? What’s waste to you might seem like a life-or-death necessity to me.

Nonetheless, that’s what we focus on at HCMS Group, because reducing waste is the best way to lower cost for employers while improving health. Wasteful over-diagnosis and over-treatment by the health industry contributes to over-consumption by patients that increases their risks.

“Most healthcare providers know they over-treat people,” said Dr. Hank Gardner, the CEO of HCMS, based in Cheyenne, Wyoming. “They do it because that’s what patients expect – lots of tests and procedures and prescriptions – and the providers have to worry about customer satisfaction scores.”

To understand healthcare waste, it’s important to know these three numbers:

5 50 30 on blue

For self-insured employers HCMS Group offers a free Healthcare Waste Estimator so you can know your 5-50-30 numbers. Please contact us at HCMSgroup.com or call (877) 883-5786.

— Bob Simison on behalf of HCMS Group data analytics.


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How Employers Can Better Manage the Recovery-Time Dimension of Healthcare

How Employers Can Better Manage the Recovery-Time Dimension of Healthcare


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A hidden dimension to healthcare costs lies in a workplace perk that most people take for granted: Paid time off to recover from an illness or injury. And most employers can improve their approach and improve health while reducing lost time by focusing on the right people, based on research by HCMS Group.

Work time lost because of illness or disability represents a major indirect cost in addition to the direct expenses of healthcare and other employee benefits. Sick days, disability, and workers’ compensation time off run into the millions of dollars every year for large employers and into the hundreds of billions for the U.S. economy, studies have shown.

The average worker with a disability claim uses about 11 days of recovery time a year, costing employers $5,577 annually (see figure 1 below). That is based on 10 million lost-time episodes from HCMS Group’s Research Reference Database of almost 4 million people covered by more than 300 employers.

But those averages mask the true nature of the issue. People in the 5% of the population that accounts for more than 50% of healthcare costs consume much more recovery time. For them, disability and sick time adds up to almost 92 days a year and costs almost $42,000. By comparison, members of the lowest-cost 50% use fewer than 2 sick days a year at a cost of less than $1,300. Clearly, the high-cost 5% group offers a great opportunity for helping people return more quickly to health and work, saving money on recovery time.

This is where most employers could improve their management approach. Almost every disability-management program in use today focuses on a patient’s primary medical problem. There’s a whole industry built around “disease management.” Do a Google search on that term, and you get more than 41 million entries.

What’s wrong with that? Well, a person’s primary disease is often only a relatively small part of the picture, based on more than a decade of research on the high-cost 5% group by HCMS. These are people with complex health needs who typically have 11 medical diagnoses and 10 healthcare providers, and are taking 10 prescription medications, HCMS researchers have found.

The additional conditions, known as comorbidities, account for anywhere from 50% to more than 90% of total healthcare costs for people in the 5% group, according to HCMS data (see figure 2 below). For example, among people with cardio-metabolic syndrome–one of the highest-cost diseases–the primary heart condition amounts to just 9% of total medical costs. For those with a musculoskeletal condition, the cost of treating the basic injury to the body’s structure of bones, joints and muscles comes to just 24% of the total.

Consequently, disease management that focuses on a single dimension of a person’s set of conditions will fail to address most of what else is keeping that employee away from work. The main takeaway from these research findings is the need for a whole person-centered approach to helping people return to health and to work.

— Bob Simison, HCMS communications, on behalf of HCMS Data Analytics

Figure  1: Average disability cost by population group, from the lowest-cost 50% to the highest-cost 5%.

Disability Claimant PRA

(Click image to enlarge)

Figure 2: Cost of primary condition and comorbidities, by category of primary disease.

Disability Claimant Comorbidity Analysis

(Click image to enlarge)


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A Game-Changing Predictive Health Risk Index

A Game-Changing Predictive Health Risk Index


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We’re all defined by numbers. Social Security number, age, height, weight, bank account, credit score. Each of them tells something about you now or in the past, but none of them can predict your future.

There’s a new kind of number that is designed to predict something – your future health. It’s HCMS Group’s Human Capital Risk Index® (HUI, patent pending). The HUI (pronounced “Huey”) score takes into account more than 300 variables, including how many and what kinds of prescription drugs you take, what medical diagnoses you have, your healthcare history, how much time you’ve lost from work, and other important factors like your job compensation.

There are many other health risk calculations available — for assessing your chances of having kidney failure, heart disease, cancer and other diseases. Health insurance companies and health benefits consultants are creating broader metrics, attempting to get ahead of medical costs. Most of these are based on healthcare claims data and specific disease factors.

However, the predictive powers of most disease risk calculators are limited, according to company benefit managers who’ve tried them. “It seemed like we were always looking in the rear-view mirror,” says one.

What sets the HUI risk index apart is that its design gives the number considerable predictive power, based on more than a decade of research using the HCMS Group’s research reference database of almost 4 million people covered by more than 1,600 employers. As a person’s HUI score rises above an average of 1.0 for the general population and approaches 2.0 or higher, the chances of a complex health situation and high medical costs increase dramatically, research shows.

HCMS researchers compared the HUI score with a common disease risk metric and measured each index’s findings against actual healthcare costs for the 12 months through July 2012. The HUI’s predictive power for health benefit costs for the entire population was almost twice that of the disease index. It was also superior in forecasting disability compensation costs for the 5% of patients who account for more than 50% of medical spending. And it was almost twice as accurate in assessing a person’s likelihood of being in the 5% high-cost group. (See graphic below.)

The difference lies in the HUI’s unique formulas. It gives full weight immediately to medical diagnoses rather than waiting for medical claims to materialize. Expenses for some diseases such as cancer accumulate over time and may show up months or years later. The HUI score also relies on a big-data reference database that includes much more than just healthcare claims, providing a more complete picture for the whole person.

The HUI score is as dynamic as a credit score. Just as people are able to repair their finances and improve their ability to borrow, new research is showing that patients who own their health by helping themselves through adopting healthier behaviors become better consumers of medical care and improve their HUI scores – and their health.

Predictive Power of Risk Index

 

*Based on an R2 statistical measure of significance used to assess predictive power measuring the relationship between risk score and total health benefit costs.
** Based on a pseudo R2 as measured from the logistic relationship between risk score and the likelihood of being high cost.
 
— By Robert L. Simison, HCMS Communications

On behalf of HCMS Data Analytics


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Health Insurance Exchanges Increase Risk of Workers’ Compensation Claims

Health Insurance Exchanges Increase Risk of Workers’ Compensation Claims


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Using private health insurance exchanges to hold down corporate health benefits spending results in higher use of workers’ compensation, researchers at HCMS Group found.

An analysis of private-employer data in the HCMS Research Reference Database showed that workers who selected health insurance plans with lower monthly premiums and higher deductibles filed more claims for workers’ compensation than the year before. Most of the people in the study opted for the less-expensive plans, designated bronze and silver under the Affordable Care Act.

Many American self-insured employers opted into private insurance exchanges in an effort to reduce their exposure to volatile and surging healthcare costs fueled by the healthcare law. Private exchanges are similar to the public exchanges established under the legislation. Notable employers using these exchanges to replace risk-bearing self-insurance plans include Sears Holdings, Darden Restaurants, Petco Animal Supplies, and IBM. These companies gave workers subsidies for buying health insurance from a menu of four or five plans, typically engaging a consulting firm to set up the exchange.

The HCMS findings show how medical-cost risk can migrate from one expense category to others, as documented years ago by HCMS. To prevent that from happening, employers need integrated health benefits data to carry out a comprehensive health benefits overhaul. This should take into account not only medical benefits but also incentives related to workers’ compensation and short-term disability. HCMS research shows that employers can lower total benefit costs by 10% to 15% by offering a single aligned-incentives health plan with a health account, incentives to use primary care and prevention services for complex medical situations, and a deductible design that favors value-based use of hospitals and specialists offering the best care at the lowest cost.Change in Lost Time for Bronze and Silver Plans

HCMS researchers compared expenses from the first five months of 2014 with those from the first five months of 2013. People with high-deductible health plans filed 8.1% more claims for workers’ compensation in the 2014 period than a year earlier. This suggests that people migrated to the workers’ compensation system in response to cost-sharing incentives. That happens mostly with musculoskeletal conditions (such as back injury or pain and carpal tunnel) where patients and providers have leeway to say whether it is work-related or not. If chalking a condition up to work avoids out-of-pocket expense to cover a deductible, then workers have an incentive to do so.

Bottom line for employers: The study shows that reducing the risk of healthcare costs is more complex than simply steering workers to medical insurance exchanges. These systems will push some of that risk back to employers in the form of increased use of workers’ compensation and lost time benefits. This should be a major factor for employers in deciding on healthcare exchanges.

— By Robert L. Simison, HCMS Communications
On behalf of HCMS Data Analytics


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In Search of the Best Hospitals


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Hospital Center of ExcellenceNew HCMS research provides an answer to one of the most vexing questions involving healthcare cost and quality: How do you evaluate provider performance?

Benefit providers and employers have increasingly embraced the idea of steering patients to “centers of excellence,” or providers that deliver the highest quality of care at the best prices.  However, providers often resist evaluation on cost and quality performance because the risk of their patients can’t be accurately measured and therefore the performance outcomes are flawed.

HCMS Group’s individual health predictive risk metric provides an answer to that objection. The HCMS Human Capital Risk Index® (HUI, patent pending), can measure how well any medical provider–hospital, specialist, primary care provider–manages the cost and quality risk of patients. The HUI risk index is based on more than 300 personal characteristics including medical diagnoses, prescriptions, and health benefits use.

HCMS researchers evaluated a regional group of nine hospitals. The hospitals had average patient HUI scores several times higher than the overall average score of 1.0 for the general population (see table below). The average cost of a broad mix of hospitalizations ranged from $13,080 to $75,726 per person. The data was from the HCMS Research Reference Database, which includes almost 4 million people covered by more than 200 employers.

Researchers adjusted the cost totals to account for the different risk profile of each patient. The calculation produced a Value HUI (V|HUI) that links cost to the patients’ risk profiles. On this basis, the two top-rated hospitals had risk-adjusted costs of $4,410 and $4,791, putting them in the range of the most effective institutions that HCMS has studied. The lowest-ranked institution had a risk-adjusted cost of $12,116, almost three times as high as the No. 1 provider.

The V|HUI calculation provides an indirect measure of quality. Lower cost relative to individual patient situation suggests less bouncing from specialist to specialist and fewer unnecessary procedures and medications, all of which increase expenses and subject patients to more risk. There is no direct method of rating healthcare quality. The most-often used evidence-based medicine guidelines don’t measure the right things, are subject to small sample sizes, and don’t account for individual conditions.

HCMS researchers also compared the findings with the results of a self-reporting tool widely used for ranking hospitals. There was no correlation. The top hospital based on the self-reporting index ranked 6th in the V|HUI ratings. The two best institutions based on V|HUI scored in the middle and at the bottom of the self-evaluation scale.

HCMS Study of 9 Regional Hospitals

Centers of Excellence Hospital Comparison

Employers and benefit providers can provide economic incentives in the form of deductibles and cost-sharing to encourage patients to use top-rated hospitals and providers. Further research will refine the analysis to identify centers of excellence in specific procedures of the sort that business groups and insurance companies have singled out, such as hip and knee replacement; bariatric, spine, and transplant surgeries; and cancer treatment.

To learn more about how to evaluate centers of excellence in healthcare reform, listen to our webinar recording here.

 

— Robert L. Simison, HCMS Communications

On behalf of HCMS Data Analytics

 

 


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Healthcare Reform Webinar Series Video 5: Centers of Excellence and Finding the Best Care


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In the fifth webinar in our healthcare reform series, Dr. Hank Gardner, Dr. Tim Ryan, Rene Sims, MSN, RN, and Justin Schaneman, MS discussed centers of excellence and how clinical prevention plays a role. Watch the video recording to hear how centers of excellence are commonly evaluated and learn a new way of evaluation that measures how efficiently healthcare networks/providers manage patient risk.

For HD viewing, please click on the video and then click on “HD” in the bottom right of the pop-up window. The HD button will be blue when it is turned on.

Have any questions or comments? Leave a comment and we’ll be sure to get back to you.

To see the other videos in this series, please click here.


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Which Comes First — Better Health or Better Job Performance?


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Better Health or Better Job PerformanceThere’s a strong link between better health and better job performance, according to a study by HCMS Group.

People who rated in the top 20% on year-end performance reviews also had the lowest medical costs and the lowest health risk scores, HCMS researchers found. The analysis covered several thousand professional workers in the HCMS database over 12 months. The performance evaluation system classified the group in three performance bands—the lower 20%, middle 60%, and upper 20%.

There are two ways of looking at the findings. One is that high job performance correlates with a high sense of responsibility, so the better workers try harder to maintain good health. The other is that healthier people are simply better able to perform at a high level in the workplace, while for others illness may cause productivity to suffer.

There’s been relatively little research on the connection between work performance and health. One study by Brigham Young University’s department of health science found that employee engagement, health behavior, and physical health were significantly associated with job performance and absenteeism. The research was based on 20,000 employees of three U.S. companies who completed surveys between 2008 and 2010.

For each of the three performance groups in the HCMS study, researchers calculated the average annual medical costs and the average risk score, using the Human Capital Risk Index® (HUI, patent pending). The HUI score takes into account about 300 variables for each individual, including medical diagnoses, health plan costs, compensation policies, and use of disability and workers’ compensation benefits. The average risk is 1.0.

Risk Score Health Plan Cost by Performance Group

Medical costs for the entire group averaged $5,455 for the year. Those in the top-performing 20% had average health expenses of $4,100, more than a third lower than the middle group’s $5,600. People in the lowest performance band had healthcare costs 41% higher than those in the middle band.

Similarly, the HUI risk scores average 1.0 for the top-performing group, or 17% lower than for those in the middle group. The lower-rated band had average risk scores 17% higher than those in the middle. The research also found that those in the middle and lower performance groups were two to three times as likely to have a disability claim. Workers’ compensation filings were twice as high for the bottom group as for the upper two categories.

 

— Robert L. Simison, HCMS Communications

On behalf of HCMS Data Analytics

 


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Can a Backache Be Contagious?


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Contagious BackacheIf you have a backache, a knee sprain, or some other injury to the body’s structure of bones, joints, and muscles, the risk that someone else in your family has such an injury rises by more than a third.

That’s what researchers at HCMS Group LLC discovered in analyzing healthcare data on more than 3.7 million people whose medical benefits were provided by more than 200 employers. They found that when a covered employee has medical costs for treating a musculoskeletal condition, there’s a 27% likelihood that a dependent will, too. That compares with a 20% risk for dependents when the employed family member doesn’t have such an injury.

Among dependents, the risk is higher for adults than for children, but the findings are consistent across all groups. (See figure 1 below.)

Likelihood of Dependent Musculoskeletal Cost

For more than a century, economists and psychologists have observed a contagion effect in social networks and workplaces. One 1996 study found that health symptoms often spread through groups of workers without any physical cause. In 2000, researchers, led by Dr. Hank Gardner,  the CEO and principal owner of HCMS Group, analyzed data on claims for workers’ compensation and family leave. They found evidence that workers learning from each other about the benefits fueled a contagion effect in filing of claims.

With respect to musculoskeletal conditions, multiple cases within a family can have significant cost ramifications. Average annual expenses for treatment of these conditions range from $500 to $55,087, according to HCMS Group research. The low end of the scale is for the healthiest 50% of the population. At the high end are those in the 5% of the population who account for 50% of healthcare costs. People in this group have an average of 10 other conditions, with several medications and specialists involved in their treatment. (See previous blog post. For information on HCMS Group’s 5|50 Solution™ designed to address this problem, click here.)

 

— Robert L. Simison, HCMS Group Communications

On behalf of HCMS Group Data Analytics

 

This is the final installment in the series on musculoskeletal discoveries. Please visit the links below to read the other posts in this series:

1. Musculoskeletal: Top Contributor to Total Claim Costs

2. Musculoskeletal Costs Nearly Twice that of Condition-Specific Costs

3. The $55, 087 Backache

 


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Healthcare Reform Webinar Series Video 4: The Importance of Primary Care


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The fourth video in our healthcare reform webinar series focuses on the importance of primary care. Watch this live webinar recording of Dr. Hank Gardner, Dr. Nim Patel, Shawn Petrini, MSN, RN, and Justin Schaneman, MS as they discuss a market solution for healthcare reform, primary care and clinical prevention analyses, key issues with primary care usage, and clinical prevention’s synergy with primary care.

For HD viewing, please click on the video and then click on “HD” in the bottom right of the pop-up window. The HD button will be blue when it is turned on.

Have any questions or comments? Leave a comment and we’ll be sure to get back to you.

To see the other videos in this series, please click here.


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