SN 202-00 Projecting Pricing Trends for MCO's
Terms
undefined, object
copy deck
-
WHY IS GOOD FORECASTING / TREND ANALYSIS IMPORTANT?
(May also be tested as “Why Is It Important to Identify the Market Force of Trend?â€) -
ï‚Ÿ identify patterns
ï‚Ÿ ratesetting
ï‚Ÿ stabilize financial results
ï‚Ÿ set capitation rates
ï‚Ÿ improved reserving
ï‚Ÿ to measure impact of provider reimb changes
ï‚Ÿ to measure impact of MC interventions
 better UM
ï‚Ÿ preemptive planning
ï‚Ÿ failure to identify trends leads to:
 lapses
 antiselection
 uncompetitiveness - Net vs. Allowable PMPM Claim Cost
- Pallow – Pcopay = Pnet.
- Allowable vs. Eligible Reimbursement Cost
- Allowable vs. Eligible Reimbursement Cost
- Why Net PMPM Costs Can’t Be Used for Trend Projection
-
ï‚Ÿ Net claim cost trend is susceptible to deductible/copay leveraging.
 trend in Net PMPM cost > trend in Allowable PMPM cost.
ï‚Ÿ Net trend is also affected by yearly changes in ded/copays - TYPES OF TRENDS AND THEIR
-
Total Claim Cost Trend (or just Total Trend)
ï‚Ÿ The trend in Pallow from one year to the next.
Provider Reimbursement Trend
ï‚Ÿ Increase in reimb that a provider receives for doing the same service.
ï‚Ÿ = Increase in Callow from one year to the next.
Residual Trend
ï‚Ÿ the part of Total Trend that is not due to increased provider reimbursements.
Components of Residual Trend
ï‚Ÿ increase/decrease in utilization habits per member (largest factor)
ï‚Ÿ random fluctuation / catastrophic claims
ï‚Ÿ intensity mix changes
ï‚Ÿ Technology changes
ï‚Ÿ enrollment demographics changes
ï‚Ÿ legislative changes (“government initiativesâ€)
 MCO’s product mix (benefit changes)
ï‚Ÿ Code Creep
ï‚Ÿ Cost shifting
Copay changes are not part of the residual trend. - When to Use Eligible Instead of Allowable Charges for Trend Analysis
- ï‚Ÿ If historical experience included a one-time change in discount, then use Eligible instead of Allowable charges for trend analysis.
- COMPUTING PHARMACY COST TREND
-
Computing Pnet 1992 for Pharmacy benefits is a little tricky, because there are two cost factors. (See Exhibit A.4)
ï‚Ÿ Cost per prescription is equal to the Ingredient Cost plus the Dispensing Fee.
Cprescription allow = Cingredient allow + Cdispensing allow.
ï‚Ÿ The Ingredient Cost is subject to a negotiated discount.
Cingredient eligible * (1 – discount) = Cingredient allow.
ï‚Ÿ U represents number of prescriptions per 1000 members per year.
ï‚Ÿ Pallow must be computed as Pingredient allow + Pdispensing allow, where each of those is determined by the usual methods. (That is, run the above procedure twice.) -
TREND ANALYSIS
Questions to Ask About the Computed Trends and Costs: -
ï‚Ÿ reasons for copay changes?
 will copay change again?
ï‚Ÿ why did provider contract change?
 will it change again?
 “fee negation�
ï‚Ÿ causes of the residual trend?
 mostly utilization trend (list other components too)
 MCO’s UM activities
 prior year’s errors in prediction
ï‚Ÿ leveraging
 How does the MCO’s experience compare with outside indices?
 Medical CPI (consumer price index)
 unemployment rates
 Number of providers in the work force
ï‚Ÿ For pharmacy costs and trends:
 anticipated changes in the dispensing fee
 anticipated formulary changes?
 changes to the drug UM system? -
BASE TREND vs. DETAILED TREND ANALYSIS
Base Trend Analysis
ï‚Ÿ global in nature.
Purpose is to: -
ï‚Ÿ Streamline data gathering
ï‚Ÿ Produce reports useful to many areas of the MCO
ï‚Ÿ Produce updated trend reports every quarter. - Components of the Base Trend Analysis
-
ï‚Ÿ Historical Claims Experience analysis
 claims by major service category
 claims by product line
 U, C, P
 output is Total Trend
ï‚Ÿ Provider Contract Changes analysis
 Establish a standard data gathering method
 group similar contracts together
 analyze contract changes
 analyze effect of risk-sharing
 output is Provider Reimb Trend
ï‚Ÿ Large Claim Analysis
 identify the “catastrophic†part of the residual trend
ï‚Ÿ Demographic Characteristics - Detailed Trend Analysis
-
ï‚Ÿ break up every step of the Base Trend Analysis into details.
ï‚Ÿ Detailed numbers must sum back to base analysis numbers
Components of the Detailed Trend Analysis
ï‚Ÿ Allocated Commercial Experience detail
Split up the claim costs and trends by:
 individual products vs. small group products vs. large group products
 HMO products vs. POS products
ï‚Ÿ POS product detail
 in-network claims vs. out-of-network claims
ï‚Ÿ Hospital Inpatient detail
 Analyze each type of care separately:
 intensive care, mental health, surgical, radiology, obstetrics, etc.
 Separate U into its components:
 A = number of Admissions
 L = average Length of Stay
ï‚Ÿ Hospital Outpatient Detail
ï‚Ÿ Physician Detail
 split up by specialty
 split by procedure code (type of service)
ï‚Ÿ Pharmacy detail
 Generic drug costs
 Formulary brand drug costs
 non-Formulary brand drug costs
Done.