The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.

2015 Was a Big Year for Bundled Payments. Here’s Why.

By Tom Halvorson/Tuesday, June 28, 2016

On November 16, 2015, CMS announced the Final Rule for the Comprehensive Care for Joint Replacement (CJR) model, instituting mandatory bundled payments for hip and knee total joint replacement episodes for hospitals in select geographies across the country. The bundles would cover all related services from inpatient admission to 90 days after discharge.

Unlike the earlier bundled payment initiatives, in which hospitals success was defined by their ability to reduce episode spending from historic levels, success under the CJR program is based on a health system’s ability to become and remain an efficient provider of joint replacement episodes in their region.

Case Study: Bundled Payments in Action

Although the new CJR payment model will continue for five performance periods, through December 31, 2020, it’s important for health systems to evaluate and monitor their CJR deployment as soon as possible. To position one regional health plan’s health system for success, Truven Health Analytics provided a high-level assessment, implementation services, and ongoing monitoring support. With the assessment, Truven Health:

●      Analyzed historical spending and utilization of post-acute service trends

●      Evaluated historical utilization of post-acute services against regional benchmarks using Truven Health MarketScan® data and the Medicare Standard Analytical File

●      Analyzed skilled nursing providers used by CJR patients

●      Performed a variation analysis of high-volume surgeons’ spend, utilization of post-acute services, and readmissions

●      Forecasted annual financial wins and losses

●      Projected performance using current internal data

As a result of the Truven Health review and modeling, the health system was able to develop and implement a standard care pathway to address variation in post-acute care, achieve consensus from the physician practice on the newly formed pathway, institute discharge planning protocols, and define a clear post-acute network. These efforts allowed the system to reduce single joint replacement costs by $400 and bilateral joint replacements by $3700.

How Ready Are you to Implement Bundled Payment Pricing?

For answers to your questions about bundled payments, or for help devising a bundling strategy, contact us at payersolutions@truvenhealth.com.

Tom Halvorson
Director, Analytic Consulting

*These results are a statistical narrative represented by a number of Truven Health client projects


Will Your Benefit Plan(s) Trigger ACA’s “Cadillac” Tax? Start Planning Today.

By Tom Halvorson/Thursday, June 11, 2015
A recent Wall Street Journal blog outlined the efforts some CFOs are taking to prepare for the ACA’s so-called “Cadillac Tax” provision.  But is it enough? A survey from Aon Hewitt found that a quarter of employers have not yet determined the impact of the “Cadillac” tax on their benefit plans, and more than one-third reported that their executive leadership and finance teams have limited or no knowledge of the implications of the tax for their organizations.

It’s critical to effective planning for budgeting, collective bargaining, and benefit strategy that employers understand which plans — current and future — are likely to incur the tax and when each plan’s costs may be likely to cross the excise thresholds. The earlier employers can quantify the impact of the tax, the sooner plans can be put into place to mitigate or defray the expense.

According to Truven Health Analytics latest research,* which analyzed recent MarketScan® claims data* for more than 13 million active employees, non-Medicare retirees, and their families in more than 2,500 self-funded plans to identify real-world healthcare spending trends, 15% of active employee plans are projected to incur the tax upon its activation in 2018, and by 2020, more than 19% of plans are expected to incur the tax. We estimate the tax would result in a cost increase of up to $480 per employee per year (PEPY) for plans expected to incur the tax.

Our study also found that early retiree plans are projected to exceed the statutory thresholds at a much higher rate than active employee plans. Eighty-one percent of early retiree plans for U.S. employers are likely to incur the “Cadillac” tax, and this rate is projected to increase to 84% by 2020. For the plans that we’ve projected will be impacted by the “Cadillac” tax, there will be an annual increase of $1,609 PEPY, or 6.8% of total costs.

We conducted similar research for industry groups such as health systems, universities, and public employers, and these analyses revealed that nearly 40% of active employee plans for health systems and more than 25% of active employee plans for universities in this study are projected to incur the “Cadillac” tax by 2020.

By implementing a combination of benefit design changes, premium contribution alterations, and health risk interventions, you can mitigate the impact of this new tax in 2018 and beyond. Early awareness is key. For more information on the effects of the Cadillac Tax, read our research brief. And contact us to learn how our modeling tools can help. 

Tom Halvorson
Director, Practice Leadership

*The study was executed using data from the Truven Health MarketScan® Commercial Claims and Encounters Research Databases, which consists of medical and drug data from employers and health plans. It contains data for more than 59.9 million individuals annually, encompassing employees, their spouses, and dependents who are covered by employer-sponsored private health insurance.

Beyond Claims & Assessments: Understanding Your Population Drives Results

By Tom Halvorson/Tuesday, May 19, 2015

Within healthcare analytics, we are constantly striving to drive action. We pore over data to make meaningful recommendations. Our business demands that we effect change in our health plans, our providers, and more often than not, our employees or members. Administrative claims can tell us a lot about an individual. A health risk assessment (HRA) can tell us even more.

But even with these rich data sources, we’re still missing the complete picture. What makes a person tick? What barriers prevent them from seeking preventive care?  Do they prefer to receive information via mail, the internet, or TV ads? What shops and restaurants do they frequent? 

Combining administrative claims with lifestyle segmentation and survey data can help bridge this gap and allow health care decision makers to make the kind of profound discoveries that lead to action. The right tool and analytic expertise are needed to merge these disparate data sets.  

Recently, a health plan client applied Market Expert® — a Truven Health tool that combines Nielsen PRIZM® lifestyle segmentation with our PULSE™ Healthcare Survey and the CDC Behavioral Risk Factor Surveillance System — to its existing members to understand what population segments were the most desirable from a business standpoint. The plan then used the tool to scan its service areas for more people in those segments. Beginning with a solid understanding of its ideal market demographics, this insurer was able to predict the healthcare needs of the unknown individuals and craft programs and perks to target and incent prospective members. The data provided clear insights into the most effective ways to communicate with this market. 

Another employer client wanted to increase HRA participation and act on the results. Using Market Expert, the organization started by parsing its population to understand what participation incentives would be the most appealing. Then it examined the most effective forms of communication for the population segments. This consumer-oriented strategy was successful, creating a substantial increase in HRA participation. The HRA led the employer to discover a previously unknown mental health issue in the population. This insight helped explain recent productivity declines, and the employer was able to design an effective intervention.  

Employers have also used data to increase their Flexible Savings Account (FSA) participation. In one case, the employer and its employees realized a decrease in payroll taxes when the organization effectively educated and encouraged members on the use and maintenance of the FSA. By segmenting their population into meaningful groups, the employer created four different targeted communication methods. Tools like Market Expert enabled this employer to marry demographic and lifestyle data to create target profiles for its employees and their families. Contact us to learn more.

Tom Halvorson
Director, Analytics & Consulting

Employer and Health Plan Costs Slow as Consumer Costs Spike

By Tom Halvorson/Monday, January 26, 2015

In a recent New York Times article, Health-Cost Slowdown Isn’t Just About the Economy, the economist author surmised that health care spending is independent of economic trends. This notion is in contrast to government analysts, who have theorized that the recent decrease in spending is caused by Americans skimping on healthcare during tough economic times. The author argues that history shows us that long-term usage trends are not directly correlated with economic health (or lack there-of), and that consumers will need to find ways to access services without greatly increasing their out-of-pocket costs.

Findings from the recent Truven Health AnalyticsTM U.S. Benchmarks and Trends reports for employers and health plans align with the author’s thoughts, suggesting that there are many other factors contributing to the low healthcare trends beyond a slowed economy. The healthcare landscape in the United States is experiencing shifting sands caused by the Affordable Care Act and an increased shift to consumerism through consumer-directed health plans, transparency, and reference-based pricing. While a dampened economy can certainly compound these issues, the gross domestic product is not the driving force behind decreased trend.

As I discussed in a previous blog, nearly one-fifth of all active employee benefit plans are expected to exceed the thresholds for the so-called “Cadillac” excise tax by 2020. Some industries are expected to have even more exposure on the current course; our analysts project that 25 percent of active public employer and 33 percent of active health system employer plans will incur the Cadillac tax in 2018. Employers, looking to mitigate this expense, will likely pass some of it on to employees. This may, in turn, exert some downward pressure on utilization as deductibles, copays, and coinsurance increase. Ultimately, our analysts found that consumer out-of-pocket costs are expected to rise 12 percent annually in the next two years. Though spending for both employers and health plans has recently risen, the increases were more modest -- 3.4 percent last year.

Finally, plan sponsors are looking to achieve savings by empowering consumers to make informed purchasing decisions. Information is more readily available today that at any point in the past, and there continue to be innovative solutions to serve up that information to individuals. Better informed and engaged consumers will shop for more cost-effective alternatives, thus shielding themselves from projected out-of-pocket increases. Payers can facilitate this empowerment by providing personalized enrollment and cost transparency tools to their employers and members. Tools like the Truven Health Treatment Cost Calculator will engage consumers in the decision making process and lead to lower overall unit pricing. 

Tom Halvorson
Director, Analytics & Consulting