Isolating The Risks Related to Catastrophic Health Care Claims
A primary factor that increases employer-sponsored health care costs year after year is the magnitude and frequency of the high-dollar, catastrophic claim. The rise of the catastrophic claimant (those incurring over $500,000 in medical and/or pharmacy claims in a plan year) over the past two years has been alarming.
According to a 2019 Aegis Risk Medical Stop-Loss Premium Survey, 64% of surveyed employers stated having a claimant of at least $500,000 in plan spend within the past two plan years, which is up 8% from the previous year. Additionally, 31% of respondent employers stated having a claim of $1 million dollars or more, with 6% of respondents having a claimant in excess of $2 million. Aggressive hospital billing tactics and the rise of specialty and orphan drug utilization were listed as factors in the survey. Moreover, in a 2019 Stop-Loss Research Report, merely ten conditions represented 51.2% of all claims that resulted in a stop-loss reimbursement, with only three conditions representing 31.3%.
Of the top high-cost conditions that result in stop-loss claims, many high-cost elements of cancer treatment, organ transplants, birth anomalies, medical/surgical complications, major orthopedic surgery and wellness-sensitive medical events can be tempered via various combinations of integrated primary care, care coordination and improved purchasing methodologies, such as the use of direct contracting, narrow networks and centers of excellence (COEs). However, some specific elements of these conditions remain independently expensive, such as the cost of medications or procedural processes required for treatment.
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Additionally, for other illnesses, such as end-stage renal disease, hemophilia, auto-immune and inflammation-related disorders, and growth hormone and genomic-focused conditions, the whole cost of treatment is independently expensive for the same reasons; the cost of medications and/or the procedural process of delivering medical services to the patient.
In most catastrophic claims, an overwhelming majority of the cost is clustered in a single, sentinel procedure. In a significant volume of catastrophic claims, the medication itself is the sentinel expense, often times representing 30 to 90% of the overall cost. As an example, a specific stop-loss claimant suffering from inflammatory bowel disease totaled over $215,000 in claims cost, with nearly $206,000 coming solely from the cost of Stelara, a multi-faceted specialty medication. In other scenarios, such as end-stage renal disease, a specific stop-loss claimant incurred over $577,000 in claims of which $543,000 originated solely from the weekly dialysis procedures.
Circumstances in which a sentinel procedure drives the majority of costs are viable opportunities to look at alternative purchasing models, otherwise known as carve-out programs. When the sentinel procedure is earmarked for carve-out, it is intended to be purchased outside of any network arrangement via an alternative medium at a cost significantly lower than any contracted network rate.
To learn how your organization may be able to benefit from carve-out programs, centers of excellence (COEs), accountable care organizations (ACOs) and more, click here.
For catastrophic claims in which pharmacy expense is not the sentinel driver of cost, the procedural process of delivering medical care is typically the sentinel cost driver. In those cases, ensuring patient adherence to the standard of care is paramount and should only be altered in a manner that improves convenience and access, as opposed to disruption that may reduce adherence to a care plan, such as limiting provider choice or creating financial burdens on the patient. In that regard, most alternative payment strategies do not alter the place of care but rather change the mechanics of how the cost of services is negotiated with tactics that incorporate using Medicare rules and reference-based pricing (RBP) as the antecedents for change. In other cases, the strategy is to intentionally change the place of care from a facility to in-home therapy, creating a better experience for the patient. This in-home transition, when appropriate, drastically lowers the cost and creates convenience for the patient while ensuring better adherence to care.