Ep. 22 Navigating the World of High-Cost Healthcare: Effective Strategies and Insights

Navigating the World of High-Cost Healthcare: Effective Strategies and Insights

Dive into the world of high-cost claimants trends with Janet Young, M.D., Clinical Analytics Advisor at Springbuk and one of the authors of the 2024 Employee Health Trends report. The report sheds light on managing those hefty healthcare expenses. Janet describes the journey through the world of healthcare economics, beginning with a breakdown of high-cost claimants into distinct segments, then explaining how those groups differ in their influence on overall healthcare spending. The conversation then turns to the diverse health conditions within these categories, underlining the critical need to grasp these differences for crafting impactful management strategies. 

You'll hear about innovative approaches like encouraging regular cancer screenings and leveraging Centers of Excellence for top-notch care and advice, particularly vital in the priciest categories dominated by facility expenses.

What You Will Learn:
  • The segmentation of high-cost claimants in healthcare and their impact on total spending
  • The importance of understanding the variation in health conditions across different cost categories
  • Strategies for managing high-cost claims, including early cancer screenings and leveraging Centers of Excellence
Catch the full conversation.

Have feedback, questions, or suggestions for show ideas? Send them to us at podcast@springbuk.com.

Please rate and review us on your favorite podcast platform, and share it with your friends and colleagues. We appreciate you and thank you for listening!


Episode Transcript

[00:00:00] Jennifer: Welcome back to Healthcare on the Rocks: Employee Benefits with a Twist. I'm Jennifer Jones, Vice President of Strategic Partnerships and Population Health Practice leader at Springbuk. Some changes since our last episode, including a new voice that you'll hear in just a moment. But we're excited to be back and looking forward to bringing you a jam-packed season with incredible guests.

[00:00:22] David: And I'm David Pittman, that new voice Jen mentioned and the Senior Director of Marketing here at Springbuk. We recently released our fifth annual Employee Health Trends report. This year's version draws on analysis and findings from data of more than 5,600 employers on the Springbuk platform. Our talented team of clinicians, analysts, and population health experts uncovered three primary trends that we will be sharing with you in this episode and future episodes. The first trend we'll discuss is around high-cost claimants.

[00:00:57] Jennifer: Joining us to shed light on that topic is Dr. Janet Young Springbuk's Clinical Analytics Advisor. Janet has an MD degree from Yale University and has amassed more than 30 years of experience providing clinical expertise and oversight to the development of healthcare analytics, guiding clinical content development of new models, methods, and applications. Janet, welcome back, I guess I should say.

[00:01:22] Janet: Yeah, thanks Jen. I'm happy to be here today to talk about our analysis of high-cost claimants, which turned out to be very interesting.

[00:01:30] Jennifer: I will definitely think so. Yes, definitely. So Janet, to get us started, could you provide our listeners with a brief overview of why employers are increasingly focused on high-cost claimants and the factors contributing to the complexity of the issue?

[00:01:47] Janet: Sure. High-cost claimants remain of interest to employers for a few reasons. The first is their outsized contribution to total healthcare spend. Less than 2% of all members on a healthcare plan account for about half of spending. So there's potential for reducing future healthcare spend by strategizing to either reduce the number of high-cost claimants or reduce some of the spending by these claimants.

Another reason I think high-cost claimants are of interest relates to stop-loss insurance. With stop-loss insurance, employers may opt to pay to be reimbursed when an individual's total spend exceeds a predetermined value level. Because this insurance is more costly for lower-cost thresholds, employers are faced with decisions that require them to understand their potential risk at different thresholds so that they can make educated decisions on selecting the best threshold.

[00:03:01] David: You mentioned the use of thresholds like $50,000 or $100,000 to define high-cost claimants. Can you elaborate on why employers might use these thresholds and how they impact the identification of high-cost claimants?

[00:03:54] Janet: Sure, David. I think we often choose $50,000 or $100,000 because we like round numbers. Of course, over time, the number of people who meet either threshold goes up as costs increase. So, reexamining the threshold periodically makes sense, and there can be a big difference in how many members are identified as high-cost claimants and their characteristics depending on the threshold that's set.

In our book of business in 2022, about 1.8% of members met a threshold of $50,000. But far fewer, only about 0.7%, met the $100,000 threshold. It may make sense to set the threshold based on the percent of the population you wish to identify, or the percent of spend you want to address.

[00:04:52] Jennifer: So I think that's a good point, Janet, because to me, that was one of the interesting ways as we evaluated knowing healthcare costs have increased so significantly over the past handful of years. And when we looked at the data in the Trends report, it showed a significant change in the threshold for high-cost claimants from 2019 to 2022. So what trends have you identified in the percentage of members qualifying as high-cost claimants, and how does that impact overall plan paid figures?

[00:05:24] Janet: If we choose a threshold of $50,000 to define a high-cost claimant, we can see that the percent of members who qualify increases from a bit under 1.5% in 2019 to over 1.8% in 2022, and that translates into an increase in the percent of cost attributable to high-cost claimants from under 44% to about 46.5% in 2022.

We also divided high-cost claimants into a number of high-cost categories. The categories were $50K to $99K, $100K to $249K, $250K to $499K, and then $500,000 and over. And we found that the percentage of members within each category increased annually.

[00:06:21] Jennifer: And moving on to the conditions that are driving the high costs within each of those parameters. That I think was very insightful for our clients and anyone who was reading the EHT to be able to see that analysis. I think that was really unique and there are a lot of takeaways from that. So can you describe the shift in the prevalence of conditions at each of those cost thresholds? Really thinking about, how do those conditions, are they more associated with drug or surgical costs, and how that differs at the lower threshold and compared to the higher threshold.

[00:06:59] Janet: Yeah, I was really intrigued by our results here. When we divided members into these cost categories, we found that the lowest cost categories were driven mainly by members. With conditions that are treated with specialty drugs, conditions like psoriasis or rheumatoid arthritis but also conditions that are associated with expensive surgical procedures like degenerative arthritis of the knee or of the back.

But as we moved into the higher cost categories, we saw more and more top conditions that were forms of cancer. For example, seven of the top 10 conditions in the $500,000 and above category were cancer, and that's compared to only one of the 10 conditions in the $50K to $99K category.

[00:07:56] David: I remember last year's report, cancer was a major driver as well. So it's not decreasing unfortunately. But I always like to look at the demographics behind the numbers, and this year's report has some really interesting differences to explore, I think. Janet, why do you see increasing percentages of younger members in the higher cost categories, and how can employers use that information to tailor their programs?

[00:08:26] Janet: I think it was interesting to see how many young members were in the highest cost category, which is members exceeding $500,000 a year. Over 11% of these members are under the age of two. These members tend to be newborns with serious congenital anomalies and babies born prematurely. So certainly one thing to point out is how important good prenatal care is.

One of the biggest drivers of premature births is multiple births, meaning a pregnancy with two or more babies. So understanding risk for this in your population is also helpful. Some of the risk factors for multiple births include older age at conception, having had previous multiple births, and also use of reproductive technologies including medications that stimulate ovulation and in vitro fertilization.

If an employer is selecting a fertility benefit, they may want to understand how often elective single embryo transfer, which is intentional transfer of one embryo rather than multiple embryos is used because this can decrease the risk.

[00:09:53] Jennifer: I think the other common question employers try to understand around high-cost claimants or what they traditionally will try to solve is understanding how many of these individuals repeat as a high-cost claimant from year to year? What we saw was that a significant percentage of high-cost claimants at the higher thresholds were also high-cost claimants in the prior year. So Janet, can you delve into the implications of this trend and really how that can inform an employer strategy in managing overall healthcare costs?

[00:10:28] Janet: I thought what we found was a bit unexpected, at least it was for me. So when we looked at members who had spent between $50,000 and $100,000 in 2022. Only about a third had spend in the high-cost claimant range above $50,000 in the prior year. But as you just said, Jen, as we looked at members in our higher cost categories, so now we're talking about members who had spend of at least $100,000, we actually found that most of them did have spend exceeding $50,000 in the prior year.

And that the higher the threshold in the current year, the more likely they were to have been a high-cost claimant in the prior year. In fact, a lot of these members were actually in the same cost category in the prior year. So strategies that focus on targeting specific individuals who are most likely to be high cost in the next year probably can benefit from focusing on members in these higher cost categories.

Understanding the conditions of these members may help guide strategies to at least reduce their costs in the next year, and I think it can also help with financial planning. For example, a member who is still undergoing expensive cancer treatment at the end of this year, is probably likely to continue this treatment for a time in the next year and remain high.

[00:12:03] Jennifer: I am gonna circle us back to one of our other questions where you were describing the conditions that were driving within each of those thresholds. But we also talked about what are the cost contributions from a service classification? And I think that, again, was very enlightening for those that have read the report. How do the types of services that are driving the cost really evolve around different categories, and what can we learn from this to really help reduce costs too?

[00:12:35] Janet: We used our proprietary service classification method to look at differences in services that are provided depending on the high-cost claimant category. Not too surprisingly, the services that contribute the most to spend with in each of the high-cost categories is related to the conditions that drive that category.

So in our $50,000 to $99,000 category. We see that most cost is driven by Rx channel specialty drugs, which makes sense because we have many members with inflammatory conditions in there where specialty drugs are utilized. We also see a fairly high percentage of cost attributable to surgery in this category, which is likely related to knee replacements and spinal fusion used in treatment of degenerative joint disease.

But as we move into the higher cost categories, we see increasing contributions of medical, specialty drugs, and also facility costs. These are at least partially due to cancer treatment.

The facility costs may also be attributable to sick newborns requiring neonatal intensive care. Understanding this contribution of different types of services to the overall cost from high-cost claimants can help guide strategies. So for instance, if facility costs are high price, transparency tools may be helpful to determine where to steer members. If surgical costs are high, employers may want to look at options that may reduce the need for surgery.

[00:14:23] David: Okay, that's really helpful, Janet. So dig a little bit more into helping employers understand what they can do with this information. How can they use the information about conditions and demographics to develop effective strategies?

[00:14:40] Janet: In the end, employers really need to understand their own populations to develop their strategy. Knowing the demographics will help guide whether an employer might want to put more focus on strategies related to cost reduction for cancer compared to strategies related to premature newborns.

Knowing the prevalence of conditions will help guide the usefulness of partnering with specific clinical programs. For instance, if a population has a high prevalence of degenerative joint disease, it may make sense to partner with a clinical program that helps prevent surgery.

Jennifer: I think that's really important how you mention knowing your population and being able to find the right. Programs and tools to connect employers to those programs to be able to really address what some of those high-cost conditions can be. We announced in mid-January our new product called Springbuk Activate marketplace. Can you share how this new partner marketplace assists employers in identifying those potential partners and opportunities for savings to potentially manage these high-cost claimants?

Janet: Sure. So we just talked about employers first needing to understand their own population so that they have a better idea of the issues that are likely to result in high-cost claimants. We actually have a report in our report library that can help employers understand the conditions in their population that drive high-cost claimants within different cost categories.

So once they have an idea of the drivers, they can see what types of partners in the Springbuk marketplace may be useful in reducing their risk. There are partners who can help with many issues that drive high-cost claimants, including partners who can help with specialty drug costs, ones that can help with the need for orthopedic surgery, dialysis, and cancer treatment to name a few.

Jennifer: So lastly there, since you mentioned the cancer treatment, considering the insights that we uncovered on cancer treatments, and really prevention too, can employers strike the balance between promoting wellness, preventing high-stage cancers or end-stage cancers, and managing the costs associated with cancer care?

Janet: So we know that genetics, environmental factors, and lifestyle all play a role in the development of cancer. Employers can promote a healthy lifestyle through education, incentives and programs to help reduce cancer prevalence in the first place. Then being sure that members have recommended screening so that cancers are found early is also essential.

Employers can gain understanding of groups that aren't adhering to a number of screening guidelines. Through our gaps in care module, employers can also help educate members about screenings for which they're eligible and also some of the options for screening. For instance, I think a lot of people who are reluctant to undergo a colonoscopy might be willing to undergo less invasive tests that are available for colon cancer screening, but they need to know about these options. 

And then for those members who are diagnosed with cancer, it's important that they get the right treatment. The wrong treatment is wasteful, and it may lead to disease progression and more expensive treatments down the line.

There are many lab tests now that can help guide treatment, but they're often not used. So having a partner who can help guide members navigate care or perhaps working with a center of excellence or a partner that offers second opinions can be helpful.

Jennifer: Well, Janet, thank you so much for joining us today and once again sharing so many insights around high-cost claimants. And we know this is an increasingly important topic for employers, and really trying to understand solutions of planning for them, how to cost contain, and really thinking holistically about how high-cost claimants are impacting their population.

Janet: Thanks for having me join your podcast today.

David: We're always glad to have you on, Janet. We hope to have you back again soon. 

And that is it for this episode of Healthcare On the Rocks: Employee Benefits with a Twist. Remember to get your copy of the in-depth, 70-page Employee Health Trends Report or the high-level executive summary at springbuk.com/eht 24. You can find all of our previous episodes at springbuk.com/podcast or in your favorite podcast player. And, of course, remember to hit that subscribe button.

Jennifer: And while you're at it, we would really appreciate it if you would take a minute to leave us a five-star rating or review and leave a comment to let us know what other topics you would like us to cover. Thanks so much for joining us today.