Em El AR Passive Statistic or Call to Action?
For many, the medical loss ratio (MLR) is the ratio of the health plan’s incurred medical claims to the total premiums earned. However under the Affordable Care Act and for government health programs, the MLR is the ratio of medical claims plus quality improvement costs divided by earned premiums minus federal and state taxes and fees and payments in lieu of taxes.
This is not the time or place to get into a discussion about the rules for what is included in the calculation of the Medicare Advantage MLR, but rather focus on what are some of the drivers of the medical spend which makes up the greatest proportion of the MLR and what health plans should be focused on to control that medical spend without sacrificing the quality of services provided or the expected outcomes.
Most payers and provider sponsored health plans collect data based on provider submitted claims, and in most cases translate the data into an annual statistic referred to as the MLR. That is where the common ground begins to turn into quicksand. Why? Because not every health plan has either the capability or knows what to do next with the data that is being collected. Some plans will ask the questions related to what are the drivers behind the MLR, such as: what are the medical utilization outliers; are the providers coding inaccurately; are the referrals and referral patterns from PCP to Specialist or from Specialist to inpatient settings appropriate? What about the use of the ER, or the use of pharmaceuticals? Is the claims configuration process and adjudication process supportive of the provider contracts that have been negotiated? And so it goes.
The point is that even the more sophisticated Plans at times, are at a loss to identify all the drivers that impact the MLR, and therefore Plans are not able to address completely all the existing outliers that drive the MLR. Without that information, a Plan’s success in developing short, intermediate and long term strategies and initiatives focused on population management, medical management and financial planning is not fully realized.
A comprehensive understanding of the various elements that drive medical expenses and hence the MLR will enable Plans to develop forward looking assumptions regarding premiums for lines of business, projections on utilization of clinical services, and provider contracting budgets, just to name a few. Recognizing specific drivers of medical expense can assist health plans in transitioning from fee for service (FFS) driven contracted networks to “value based” networks as well as working proactively to lead a transformation of population management .
Such understanding can lead to health service initiatives around how to best impact provider practice patterns regarding member access, coordinated treatment planning, appropriate referral patterns and improved coordination of care via elimination of duplicative or unnecessary procedures.
Ultimately, the goal should be the development by the Plan of a medical expense management plan that is characterized by a forward looking and dynamic approach to proactive medical management and includes provider initiatives supported by performance based measures.
The bottom line is that for many of the health plans, the issue is not lack of data but how to ask the right questions of the data in order to create actionable efforts that lead to improved performance by the plan and provider and results in improved outcomes to the member.
And sometimes it takes an outside objective partner with a fresh approach to data analysis and understanding of industry best practice to interpret what the data implies. That is where we at the Gorman Health Group can help. Contact us today. You will be glad you did.
Resources
On September 26, Join John Gorman, GHG’s Founder and Executive Chairman together with colleague, John Nimsky, Senior Vice President of Healthcare Innovations, as they discuss the vehicles for achieving what could be characterized as a reengineering of the health care delivery process and its effectiveness. Register today >>
On Tuesday, August 19, GHG’s Senior Vice President, Bill MacBain and Senior Vice President of Healthcare Innovations, John Nimsky, explored the drivers and trends in cost and revenue which affect your MLR. Access the webinar recording by becoming a member of the Point >>
In addition to our continued work launching new entrants into the MA market, we are helping many experienced plans develop smart networks: accountable care, shadow capitation, and payment bundling within their current service areas and networks. Contact us today to learn how we can help you >>
Save the Date for the Gorman Health Group 2015 Forum. Join us April 7-9, 2015 at the Gaylord National Resort and Convention Center in National Harbor, MD. Learn more about the event >>