Managing Risk with Summit ReView

Managing risks effectively is critical to the financial health of your company. It starts with accurate risk analysis and ends with cost-effective risk management strategies. This is a complex task, but it is now easier since we have introduced Summit ReView. Summit ReView is a package of consulting services designed to provide detailed analysis of risk exposure as well as recommendations to mitigate those risks. Some of the services included in Summit ReView include:

• Our proprietary InSight analysis, which helps you determine if you should purchase reinsurance coverage and, if so, the appropriate deductible levels and average daily maximum limitations given your claim history, contracted arrangements with network facilities and referral patterns. (See Insights into large claims.)
• A detailed evaluation of your medical management department’s structure, policies and procedures, with comparisons to nationally recognized benchmarks and recommendations for improving program efficiencies and effectiveness.
• Our reinsurance “Report Card,” an objective measure for comparing reinsurance options.
• A comparison of material contractual provisions contained in the excess loss agreements issued by current leaders in the health plan reinsurance marketplace.
• A high-level assessment of the financial competitiveness of your pharmacy benefits management program.
• An assessment of your directors and officers/errors and omissions policy.
• Referrals to consultants who can serve as interim executives and assist with strategic planning.
• An analysis of your investment and cash management strategies and recommendations for improvements.

These services may be “unbundled” and pricing depends on the options selected.

With our experienced, talented people who grew up with pricing, underwriting, and administering medical excess products and our “bird’s eye view” of the marketplace, we can offer you additional perspectives that often prove invaluable in helping you develop on-target risk management strategies.

Employer Stop Loss—can we really do that?

This article is part of a series of case studies—real stories of how managed care companies increased profits by using Summit Re’s resources to increase sales, decrease expenses, and manage claims. Offering your provider networks and care management programs to self-funded employers may be a key area of expansion and one that builds on your core competencies.

We have a long history of working with HMOs that contract with TPAs or establish their own ASO capabilities for the employer stop loss business. Our background in the managed care reinsurance market allows us to understand the challenges our clients face and present a wide array of solutions.

In fact, we are so committed to this effort, we explicitly mention providing employer stop loss products and services in our Founding Principles.

Range of services

In most instances, HMOs look to us for competitive stop loss quotes that reflect the savings associated with accessing their networks and care management programs. In some instances, however, HMOs have a properly licensed insurance company and are interested in becoming risk takers. They would like to offer employers a complete stop loss platform, including administration, provider networks, care management programs and stop loss coverage. Since most HMOs do not have the stop loss coverage expertise on staff, Summit is able to act as a managing underwriter—performing pricing, underwriting, policy issuance and claim functions.

Case study background

Company ABC is a very successful HMO operating in two locations. The company historically used a handful of stop loss carriers to offer specific and aggregate coverage to its self-funded groups. During one of our visits, we asked a simple question: “Why don’t you consider writing employer stop loss coverage through your insurance company, rather than somebody else’s?”

They called us back the next day and said, “Did you really mean it? Can we really do that?” We said yes, and the rest is history.

Taking control

This HMO moved the majority of its business from its previous carriers to the HMO’s insurance company. Company ABC staff members have the flexibility and control to meet marketplace conditions with respect to pricing and underwriting, including the setting of appropriate rates, lasers, and binding limits prior to the effective date of coverage. While Summit Re makes recommendations on pricing and underwriting guidelines, Company ABC ultimately decides what terms and conditions it chooses to offer employer groups, since the health plan’s insurance company affiliate is assuming the risk. Even though Summit Re does the actual underwriting, policy issuance and claims adjudication for this client, the client retains the authority to make all final decisions.

In addition to our day-to-day involvement with Company ABC, Summit Re lined up excess-of-loss protection for its employer stop loss portfolio after Company ABC absorbs a corridor of risk.

Results

The deal has worked out just as the HMO and its affiliates had envisioned: the marketplace reaction was favorable.

• Clients knew the HMO had been in the marketplace for over 25 years and its B+ rating was more than acceptable (Weiss).
• The HMO brought strong provider contracts and case management capabilities to the employer stop loss product.
• The plan had good relationships with brokers, agents and customers in the marketplace.
• It could now offer a fully branded product including its provider contracts and network management capabilities, its TPA services and its employer stop loss policy.

In the words of Company ABC, “Summit Re met all of my service requirements. Things are great from our perspective. We look forward to a long relationship with Summit Re on this product line.”

Although this client didn’t need it, Summit Re was available to provide sales and marketing training to HMOs who are new to this self-funded marketplace. Summit Re is also in a position to recommend consultants who assist HMOs in setting up their own administrative shops and in getting their stop loss policy forms and rates filed with departments of insurance.

This approach won’t fit everybody,but is it right for you?

Insights into large claims

This article is part of a series of case studies—real stories of how managed care companies increased profits by using Summit Re’s resources to increase sales, decrease expenses, and manage claims. An insight is the act or result of comprehending the inner nature of things or seeing intuitively (Webster’s dictionary). This is a good description of what takes place in a Summit Re InSight analysis.

We often have a better perspective for viewing this inner nature of a large claim, since we only deal with coverage for large claims. Your staff must spend a majority of their efforts in areas that involve smaller and much more frequent claim events. This case study is an example of how an InSight analysis conducted by Summit Re helped a plan gain a better view of the inner nature of its catastrophic claims.

Situation: An increase in large claims

ABC health plan, located in a large metropolitan area, focuses on Medicaid members, specifically AFDC/TANF eligible members. AFDC/TANF membership is primarily composed of mothers and their children, and the majority of the large claims for this population involve premature infants or other infants with significant problems at birth. For this reason, the large claims from these situations are primarily from inpatient hospital confinements at facilities equipped to treat infants who are severely premature or have other critical problems. ABC health plan was seeing an increase in large claims from this population.

Cause: Reimbursement structure

ABC health plan utilized strong DRG contracts for most facilities in its state. The exception to this was for facilities classified as children’s hospitals. These facilities were considered in a unique category by the state for its Medicaid reimbursement methodology, and the plan was simply following the state’s lead for reimbursement. These types of facilities were paid on a percentage of billed charges determined by the state.

The state’s intention was to recognize these facilities as unique, and the state therefore concluded that the DRG reimbursement was not appropriate given the level and type of services the children’s hospitals were providing. What that meant for ABC health plan was that its most severe and highest cost claims were often being reimbursed at a percentage of billed charges. In this instance, the plan had little ability to contractually modify this reimbursement, although that was certainly an option for the plan to explore.

The reinsurance implication

How did these circumstances translate to the health plan’s needs for catastrophic medical excess reinsurance coverage? The plan had been purchasing coverage with a relatively low average daily maximum limitation for inpatient hospital services because of a mistaken perception that the strong DRG reimbursements at many facilities and deep discounts at children’s facilities were protecting it from all risk except for the exceptionally long hospital stays. In reality, the facilities being reimbursed at a percentage of charges had been rapidly raising their rates and, despite the presence of deep discounts, the plan was experiencing average per-day charges on many large claims well in excess of its average daily maximum limitation for inpatient hospital services. This meant that the plan was absorbing a great deal of variability from large claims due to payments at very high costs per day.

Options

Now that the plan recognized the circumstances under which it was operating for many large claims, it could now consider the options for managing the risk. Re-contracting with children’s hospitals in its service area at more favorable terms would, of course, be a wonderful solution since it could be structured to significantly reduce the plan’s overall risk. In this instance, however, the plan was not in a position to implement such a provider contracting change. This course of action could certainly be considered in the future.

What could be restructured easily was the reinsurance coverage so that it would provide more coverage for high cost days. The best and most immediate solution for this plan was a higher average daily maximum limitation for inpatient hospital services, coupled with a slightly higher deductible. This allowed the plan to exchange reinsurance premium dollars for better reinsurance reimbursement for both long-stay and high cost-per-day hospital risk.

Although these changes may seem obvious to the party reviewing large claims day in and day out, they were not at all intuitive to the plan’s management staff, who had been spending a majority of their time and effort managing the everyday activities and finances of a health plan. It is, in fact, the purpose of the InSight analysis to bring these circumstances to the forefront when they otherwise would remain hidden in the day-to-day activities of the plan.

“No Floors” Transplant Network

The most important consideration when choosing a transplant network should always be the quality of care delivered. A secondary but important consideration is the cost effectiveness of the network. Contracts for the U.R.N. Transplant Centers of Excellence network and Transplant Access Program (TAP) are structured in a variety of ways, allowing Summit Re customers referral options based on their desire for cost predictability. In order to assist in the contract selection process, U.R.N. has identified a subset of network contracts without floors and aggregated them into a “No Floors” network.

The U.R.N. "No Floors" network consists of programs with transplant contracts that eliminate the possibility of a transplant being paid at a percent of billed charges. This network consists of 51 centers and 237 transplant programs and increases the transparency of network providers without minimum payment provisions. This provides you with greater transplant cost predictability when using a “No Floors” network facility.

Information regarding the “No Floors” network, including a listing of the facilities, can be found on the U.R.N. website (www.urnweb.com) or you can contact Debbie Stubbs, RN, MS, CCM at 260-407-3979 or at dstubbs@summit-re.com.

Employer Stop Loss Expansion

Summit Re has expanded its self-funded marketing and underwriting staff and opened regional offices to provide even better service to you.

Meet Allen Engen

Allen Engen joined us as Regional Vice President in July 2006. Allen has more than 14 years of experience in employer stop loss and health care risk management, specifically in underwriting and sales. He brings a tremendous amount of energy to Summit Re and has hit the ground running. Allen’s clients appreciate his focus on meeting their needs and his ability to seek solutions that may fall “outside the box.” When not at work, he is very active in Boy Scouts and enjoys golfing and fishing.

New Regional Offices

As part of our commitment to you and to the self-funded market, we opened two regional marketing and underwriting offices. Chris Alexander, located in Charlotte, NC, runs the Eastern Employer Stop Loss Office and Allen Engen, located in Minneapolis, MN, heads up our Western Office.

Premium check-up

The last thing any of us wants to hear is, “We’re going to be audited!” We all face scrutiny in one fashion or another—whether it’s CPAs examining our financial statements, the NCQA reviewing the quality of care provided to covered members, or maybe even the IRS checking our tax returns. On a different scale, Summit Re began a review process in 2006 to test the premium paid on its reinsurance and stop loss contracts. Typically, our clients submit premiums on a monthly basis using remittance statements we provide at the start of the agreement year. You simply fill in the number of members at the beginning of the month, multiply that by the applicable premium rates, and send payment for the result. And when it’s received by our accounting department, we review the statement for accuracy—to verify that the correct rates were used and to determine if the census fluctuated significantly from prior month—before forwarding it to the reinsurer. The same process is followed for both HMO reinsurance and stop loss premium.

But up until now, we’ve not tested the underlying data, the membership numbers used to calculate premium. Our reinsurers, in audits of our own operations, thought that such reviews make good business practice, and we agreed. While we trust our clients to submit the appropriate premium agreed upon in the contract, it still makes sense to verify it once in a while.

Now, we won’t visit every client, nor will we come calling every year. Rather, we’ll select a few each year for review and travel to your offices to examine the source documentation. While it’s tempting to schedule clients located in the south for review during February (after all, we are in Indiana), we’ll likely perform the reviews in the summer after the busy winter and spring activity have subsided. And we’ll promise that we’ll be as efficient as possible. Generally, all we need is a couple of days to complete our work.

So, there’s no reason to panic if you get a call saying that we’d like to come and verify your premium numbers…you can save that for when the IRS letter arrives!

Five essentials for evaluating predictive models

Predictive modeling uses your vast store of information to forecast future needs for medical resources. By becoming a knowledgeable purchaser and user of predictive modeling services, you can enjoy a return on your investment in the areas of care management, underwriting and benefit design.

Key Factors for RFP

There's been an explosion of predictive modeling services, each with different methodologies and technology designs. Ineffective predictive modeling— through either poor models or data—wastes your valuable resources and may have a negative impact on your members. However, by understanding how to assess the offerings and apply the technology once you have purchased it, predictive modeling can realize the promise of using information to significantly improve value in health care. The following factors can be used in a Request for Proposal (RFP) to help you select a vendor:

Accuracy

Always ask for the model's R-squared measurement, the commonly accepted measurement of a predictive modeling solution's accuracy. Reliable vendors will know their R-squared measurement.

Vendors should be able to demonstrate both the sensitivity and specificity of their solutions, especially for case management programs. High sensitivity indicates positive predictive value: an ability to identify most of the people who would benefit from a care management intervention. Specificity or negative predictive value is the ability to limit the number of false positives or people who would not benefit from a care management program. Sensitivity and specificity are important so you can assign resources where they're needed most.

Transparency

Transparency means the ability to differentiate among the data points. For care management programs, transparency means clinicians can look underneath the risk scores to the level of individual claims so they can devise appropriate interventions. A risk score is not particularly helpful for care management nurses; they need a way to understand what's driving the risk. To this end, member profiles should include a listing of all episodes of care and the key services involved in their treatment.

To evaluate transparency in your RFP, ask whether the model is a rules-based or neural net solution. In general, you should look for rules-based models, because they match data patterns to clear clinical rules that identify such things as the disease, type of episode, co-morbid conditions, and drug treatments. In a good rules-based model, you can easily identify these risk markers.

In contrast, neural net or so-called black box algorithms are not clinically based and are technically complicated, so you have to possess real data mining expertise to understand how a specific risk score has been compiled. This robs clinicians of many of the advantages that predictive modeling should deliver for care management. Black box algorithms also make it difficult for you to check the validity of the model.

Interoperability

Your RFP should ask whether the vendor supports your relevant database technologies, so they can load the data quickly and reliably into their model's data mart. You should also ask if supporting databases will be exported to your care management, underwriting, and actuarial applications.

Another key question is how the model defines and groups care— by procedure, diagnosis, or episodes of care. Using fully fleshed-out episodes of care results in better predictions since the groups are clinically homogeneous. This approach takes into account all of an individual's underlying clinical factors, not simply a diagnosis or severity indicator.

Supports operational needs

The solution selected must adapt to your operational issues and must generate predictions as often as your business needs dictate. Also, the data used in the solution must be fresh, reliable, and accessible. In particular, it should be refreshed at least monthly to be available for client renewals.

Finally, the solution must be flexible enough to use the data that is available, e.g., medical only, pharmacy only, medical and pharmacy combined. It should also be able to incorporate emerging data sources, such as lab results.

Industry credibility

One of the most obvious markers of industry credibility is market penetration. The RFP should probe whether others use the solution and if they will speak to its value.

Because predictive modeling is changing and improving at a rapid rate, credibility is not just rooted in the solution itself, but in the ongoing support the vendor offers. Upgrades and support require a team that fully understands not just the technology, but also how health care works. The RFP should check whether the support offered includes an integrated team that brings together IT, clinical, actuarial, and underwriting experts.

The information in this article is subject to change without notice. This article contains proprietary information, which is protected by U.S. and international copyright. All rights are reserved. No part of this article may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying and recording, without the express written permission of Ingenix, Inc. Copyright 2006 Ingenix, Inc.

Disclosure and insurability

Disclosure is the process of revealing information. To bind reinsurance coverage, you must reveal claimant data that may not have been available at the time of underwriting. This disclosure is important for identifying chronic situations that represent known risks and is necessary because of the inherent delay between underwriting the risks and binding the coverage. Disclosure is intended to be a quick review of the latest claim activity at the time that a binder for coverage is signed.

Why is disclosure important?

When preparing a quote, the reinsurer performs a careful analysis of claim costs and trends, including an analysis of the current year's activity. A critical assumption is the degree to which this data can be considered complete. Disclosure helps the reinsurer solidify the accuracy of this assumption.

The disclosure also identifies claimants that may be categorized as chronic and, therefore, highly predictable in both the usage and the cost of services. Depending upon the level of predictable costs, certain members may become uninsurable.

Further, the reinsurer may be able to immediately employ a managed care program to assist in the management of these new claims. This, of course, would potentially benefit both you and the reinsurer.

An accurate disclosure is important to you to protect against possible denial of a claim. The disclosure statement is part of the signed binder. Therefore, without full disclosure, the reinsurer has the right to exclude serious losses that were known by the plan, but not disclosed. This may be rare, but the reinsurer does this to protect against the situation where a party knowingly withholds serious losses.

What to disclose?

The disclosure statement (sample below) identifies the claimants that need to be disclosed: any member that is expected to have covered losses that will exceed 50% of the selected specific retention. Limiting this list to those representing a potential serious loss will expedite the process; however, you need to be careful to list all members that are known to you.

No matter how long or short your list, it is critical to provide the following data for each claimant:

• Diagnosis or diagnoses—allows the reinsurer to identify chronic or ongoing care which is highly predictable in nature.
• Prognosis—helps identify a near term resolution versus an ongoing situation and helps identify future costs. An estimate of future costs should accompany a prognosis.
• Charges/claim amount—identifies the magnitude of the claim.
• Current status and future treatments—supports the information provided in the prognosis.

When these items are provided in a concise but thorough manner for each disclosed claimant, the process can usually be completed very quickly with little, if any, additional discussions of clinical details.

What are the possible outcomes?

Most likely the disclosure will reveal a normal level of catastrophic claim activity of an acute nature, which allows the reinsurer to confirm the terms as originally priced.

Another scenario is that a chronic claim is identified to have a high probability of continuing into the coverage period in question, and a separate deductible may be assigned to that claim if it is likely to exceed the retention. This has now become a known claim to both you and the reinsurer and, therefore, uninsurable. A basic premise of insurance is that known events with predictable costs are not insurable.

A third scenario is that the disclosed claim information is dramatically different from the claim information presented during the quotation process, and the reinsurer is forced either to materially modify its quoted rates or terms or to completely withdraw their quotation. This rarely occurs.

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Disclosure Statement by Reinsured

(Used by Summit Re and ERC/Swiss Re)

You agree that any serious losses known by you as of the date you sign this Offer will be excluded from coverage unless previously disclosed to and accepted by ERC. Please enclose with this Offer any serious claim information that has come to your attention so that we may re-evaluate our underwriting. A "serious claim" is defined as any loss known by you for which:

1. Charges incurred have exceeded 50% of the Specific Retention selected; or
2. Charges are expected to exceed the Specific Retention selected due to the nature of the illness or injury; or
3. Any Member remains hospitalized or disabled and is expected to exceed 50% of the Specific Retention.

Information submitted for each serious claim should include the diagnosis or diagnoses, prognosis, charges/claim amount, current status, and future treatments.

Case studies from The Assist Group

The Assist Group specializes in solutions for catastrophic claims management and high-risk premature infants. Current products include CareAssist, a unique, physician-driven neonatal care management program, and ClinAssist, a powerful forensic audit and claims resolution service. The Assist Group has a proven track record for delivering financial value to clients. For more information about these products and services, please visit the company's website, www.assistgroup.com, or contact Debbie Stubbs, RN, MS, CCM at Summit Re, 260-407-3979.

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CareAssist Success Story: 32 % Reduction in Length of Stay and $163,693 Savings

This twin boy was born at 25 weeks, weighing one pound, eight ounces. His mother used multiple illicit drugs throughout her pregnancy and on the day of delivery. He was on mechanical ventilation and in critical condition when referred to CareAssist on day of life (DOL) 17. This infant was not expected to survive due to his prenatal history, the circumstances of his birth, and extreme prematurity. The CareAssist neonatologist recommended an ethics committee consultation to discuss quality of life issues when it became evident on DOL 30 that he would survive. By then, this infant had the severest form of intraventricular hemorrhage, along with hydrocephaly and porencephaly. He also had severe chronic lung disease (CLD) and remained on mechanical ventilation well past his first month of life. His long-term prognosis was poor.

His final discharge disposition further complicated his clinical status as his mother continued to struggle with polydrug abuse and was considered unsuitable to care for him after discharge. CareAssist consistently recommended early discharge planning to allow a foster family to be trained to care for this infant upon discharge. This timely intervention allowed this baby boy to be discharged appropriately and safely.

Multiple oxygen weaning recommendations were made by the CareAssist neonatologist. This infant was eventually weaned to nasal cannula oxygen on DOL 59 and was discharged on low flow nasal cannula oxygen. This infant’s nutritional status was complicated by his CLD and tendency to tire during feedings secondary to his compromised pulmonary status. The steroids used to help wean him from supplemental oxygen also compromised his ability to gain weight. The CareAssist neonatologist emphasized to the treating team the importance of using high calorie formula and advised early developmental interventions through the use of non-nutritive sucking and OT/PT involvement in nipple training. As a result of these interventions, the infant was nippling all of his feedings at a corrected age of just 35 weeks.

The weekly care oversight by CareAssist for nearly three months ensured consistency in the implementation of this infant’s treatment plan. Due to CareAssist’s oversight, this infant was discharged safely to foster care 39 days earlier than originally anticipated. This resulted in a 32% savings of $163,693.

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ClinAssist Success Story: $321,757 Savings

A 110-day confinement at a children’s hospital resulted in total billed charges of $1,287,027. ClinAssist reviewed approximately 10,600 line items of detailed charges. Utilizing the clinical expertise of ClinAssist’s neonatologists and nurses, ClinAssist performed a forensic review of the charges and identified the following exceptions:

• Room and board charges billed at incorrect levels of acuity
• Experimental pharmaceutical therapies
• Supplies and services incorrectly unbundled from the room and board charges

ClinAssist successfully achieved a $321,757 reduction in billed charges after the audit exceptions were presented to the facility. The account balance was adjusted to reflect the facility’s written agreement that the exceptions identified by ClinAssist were not payable charges.

Cost containment and more

Summit Re recently entered into an agreement with National Care Network (NCN) for its medical cost containment services. NCN’s core solutions for out-of-network claims include Fee Negotiations, Supplemental Network Repricing, and Hospital Detail Analysis, a Medicare-based pricing methodology.

Unmet Needs

While NCN had been extremely successful in saving its clients millions of dollars with these products, it realized that neither NCN nor other cost containment companies were doing enough to reduce overall healthcare charges. A new product was needed, a product which would:

• Allow fair reimbursement based on the facility’s costs to provide care
• Benchmark similar facilities reflecting the variances within facility costs
• Use flexible pricing methods to meet clients’ needs
• Recommend pricing that is transparent to the payer, provider and member

Data iSight

After a year and a half in development with Data Advantage, a company NCN acquired in 2005, NCN recently introduced Data iSight to meet all of those needs. Data iSight will generate fair reimbursement recommendations that generate legitimate savings. To do this, Data iSight leverages nationally recognized data sets to enhance provider understanding and acceptance; reviews both the financial and clinical components of a claim; incorporates cost-based awareness; and provides a transparency component for providers, payers and members.

About NCN

NCN, a privately held organization based in Irving, Texas, provides its services to large insurance carriers, self-funded organizations, third party administrators, HMOs, employer groups and reinsurance carriers across the country. NCN has achieved many milestones in its fourteen years of operation, including being the first in its industry to receive the URAC Core Accreditation, establishing HIPAA compliant EDI transactions, developing on-line tools for client access of claim tracking and reporting, and reviewing billions of dollars in medical charges.

NCN provides you with a dedicated team to ensure success in helping you meet your savings objectives. Visit NCN at its website, www.nationalcarenetwork.com, or contact Debbie Stubbs, RN, MS, CCM at Summit Re, 260-407-3979.