In today’s lagging economic environment most companies are
being forced to look for creative ways to reduce medical costs and
increase margins. Over the past 10 years PPOs and HMOs have successfully
ratcheted down provider fees and squeezed savings. Likewise, utilization
and case management companies have eliminated most, if not all,
unnecessary services, and have effectively directed patients to
less expensive and less invasive modes of care.
Luckily, there are still a few relatively new frontiers of cost-containment
that can generate significant savings for the employer or insurer
while also saving money for the patient. One of these in particular
focuses on the ability to generate savings on medical claims from
providers not participating with the PPO or HMO network(s) utilized
by the employer or insurer. These out-of-area /out-of-network (OON)
claims can be a significant source of cost for a plan, but alternatively
an opportunity for savings.
No matter how effective your analysis and selection of PPOs or
HMOs for your covered employees or insureds there will be out-of-area/
out-of-network (OON) claims. Even the best network configuration
can leave 10-30% of claims OON. The result is that significant dollars
are left undiscounted on medical claims that must be paid at retail,
or the Usual and Customary Rate (UCR) is applied resulting in the
patient being responsible for the balance.
- EXAMPLE: A 5,000 employee company with 80% of their claims being
from in-network providers can experience over $6,000,000 in OON
claims per year
- EXAMPLE: A 100,000 member HMO with 95% of their claims being
from in-network providers can experience over $15,000,000 in OON
claims per year
These are significant dollars that can dramatically impact the
bottom line of any organization.
However, there is good news! There are companies that can
assist you in reducing your costs associated with claims that are
OON.
- For example, a patient incurs a $30,000 claim that is from an
out-of-network provider and the cost-containment vendor is able
to obtain a 20% discount, (or gross savings of $6,000). Now, instead
of paying an OON benefit of 70% on $30,000 the employer is responsible
for 70% of the $24,000. This can also have a significant impact
on stop-loss premiums by reducing your medical loss ratio. NOTE:
There are even some reinsurers / stop-loss carriers that will
provide more aggressive premiums when using such companies to
discount OON claims.
Additionally, for employees participating in a PPO they will see
reductions in their costs, even though the claim is paid at the
OON benefit level.
- What to do:
- First, check with your Third Party Administrator
(TPA), insurer or HMO to see if they offer OON claim repricing
solutions. If so, find out what percentage of your OON claims
are being discounted and at what average savings.
- Second, if they are not offering this service or
the savings are not satisfactory, there are companies that
specialize in gaining discounts on OON claims. Savings
on $6,000,000 in OON billed charges can be as high as $500,000
to $1,000,000!
- What to look for:
- Companies with several avenues for gaining discounts including
wrap PPO networks, supplemental PPOs, negotiations and bill
audit/recovery.
- Do they offer access to multiple supplemental PPOs for repricing
- If one PPO is good isn’t 5 or 10 even better?
- Do they rank their networks in each state by historical
savings? Are you getting the greatest savings possible,
or using the network with the best fee to the vendor?
- Do they handle all service issues related to the discounted
claim, including provider inquiries - or are you put in
the middle between the provider, the PPO and your employee
or insured?
- Does the vendor have direct contracts with all the networks
they are accessing, or are they using discounts for the PPOs
through another source? No "silent or blind"
PPOs!
- Confirm the vendor’s contract with the PPOs allow for
supplemental discounts - No "silent or blind"
discounts that lead to lost savings and employee dissatisfaction.
- Can they provide a detailed analysis of projected savings
based on historical results - or do they "guestimate"
your savings?
- Look at the percentage of OON claims they are able to discount
AS WELL AS average discount per claim - High savings but
a low success rate will not generate the savings available
in the market.
- Where are they successful - If they are great in the
northeast but all your employees are in the midwest - is the
company your best solution?
- Check for thresholds on negotiations - many companies
only negotiate on bills over a certain amount (e.g. over $1,000
for physicians or $5,000 for hospital) - you may be losing
savings opportunities!
- Do they have HIPAA-compliant electronic solutions or real-time
Internet access?
- Can they deliver average savings per discounted claim of 20% or
higher?
- Is their average success for discounting claims 50% or higher?
- Do they price on percentage of savings basis (no savings, no cost)?
- Do they have a disaster recovery plan including third party hosting?
One of the best mechanisms to determine if the vendor can truly
provide value and increased savings is through a detailed savings
analysis. This allows the vendor to take actual claims from your
organization and run an analysis against historical data to determine
the estimated savings through their services. This is an "apples
to apples" comparison that will tell you immediately if there
are additional savings opportunities.
In the final analysis, there are no magical solutions for managing
healthcare costs. However, we do know that through a wide range
of services, including a focus on out-of-area/out-of-network claims,
companies can yield significant savings and increase margins.
Coalition America, Inc. is a leading out-of-network claim discounting
and primary network management company. For more information on
Coalition America, please visit www.coalitionamerica.com
or contact Libby Roper, Director of Marketing and Public Relations
at 404/459.7201, ext. 5265 or libbyroper@coalitionamerica.com.
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