For 3 consecutive years, beginning in 2003, a large self-insured health system’s employee health plan was experiencing 12-14% annual growth in health care expenses without any improvement in the quality of its outcomes. At the time, the average national annual increase in health care expenses was in the 8-9% range.
The employer was spending $15 million annually on health care for its employees and their dependents—the second largest business expense after payroll. The employer set a goal of less than a 7% annual increase in health care expenses with no decrease in quality of care outcomes.
The health system amended its employee health benefit plan to require employees and their dependents to select an employed primary care physician to coordinate each member’s care. The employer began a pilot program with their co-owned Preferred Provider Organization (PPO). The PPO Medical Director, David W. Bowers, MD, and his team initiated a basis Population Health Management program. The PPO coordinated basic lab screening tests and the Medical Director created a risk stratification of the employer’s members. Additionally, the employer’s Third Party Administrator (TPA) and a consulting actuarial firm supplied claims and actuarial data to the employer and the PPO’s Medical Director who then performed a clinical claims analysis. As a result, the PPO’s Case Managers were able to manage the highest dollar claimants and highest clinical screening risk members proactively. The health system’s primary care provider (PCP) practices were also participants in the program and received regular updates from the PPO’s RN Case Managers on their high risk and/or high cost members. As an early model of Team Based Care between entities, the PCP practices used this information to prioritize and coordinate care for their high risk/high cost members.
At the end of the first year of implementation of this new program, the employer’s annual health plan expenses showed a 0.0% year-over-year (Y-O-Y) growth. The phenomenal results continued over the following 4 years—annual Y-O-Y health care expenses rose from 2—6%. All years’ results were significantly better than the goal of less than 7% annual inflation.
During the 5-year period of the program (2006—2010), the health system employer saved $1.8 million in the first year of implementation and an additional $2.4 million in years 2 through 5. The results gained national attention as an innovative approach to Population Health Management through combined efforts of a self-insured employer and an owned provider-sponsored PPO.
As a result, the employer shared the savings with employees through pay raises and was able to hold health insurances premiums steady for 5 years.