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11 Cards in this Set

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WHY IS GOOD FORECASTING / TREND ANALYSIS IMPORTANT?
(May also be tested as “Why Is It Important to Identify the Market Force of Trend?”)
 identify patterns
 ratesetting
 stabilize financial results
 set capitation rates
 improved reserving
 to measure impact of provider reimb changes
 to measure impact of MC interventions
 better UM
 preemptive planning
 failure to identify trends leads to:
 lapses
 antiselection
 uncompetitiveness
Net vs. Allowable PMPM Claim Cost
Pallow – Pcopay = Pnet.
Allowable vs. Eligible Reimbursement Cost
Allowable vs. Eligible Reimbursement Cost
Why Net PMPM Costs Can’t Be Used for Trend Projection
 Net claim cost trend is susceptible to deductible/copay leveraging.
 trend in Net PMPM cost > trend in Allowable PMPM cost.

 Net trend is also affected by yearly changes in ded/copays
TYPES OF TRENDS AND THEIR
Total Claim Cost Trend (or just Total Trend)
 The trend in Pallow from one year to the next.

Provider Reimbursement Trend
 Increase in reimb that a provider receives for doing the same service.
 = Increase in Callow from one year to the next.

Residual Trend
 the part of Total Trend that is not due to increased provider reimbursements.

Components of Residual Trend
 increase/decrease in utilization habits per member (largest factor)
 random fluctuation / catastrophic claims
 intensity mix changes
 Technology changes
 enrollment demographics changes
 legislative changes (“government initiatives”)
 MCO’s product mix (benefit changes)
 Code Creep
 Cost shifting

Copay changes are not part of the residual trend.
When to Use Eligible Instead of Allowable Charges for Trend Analysis
 If historical experience included a one-time change in discount, then use Eligible instead of Allowable charges for trend analysis.
COMPUTING PHARMACY COST TREND
Computing Pnet 1992 for Pharmacy benefits is a little tricky, because there are two cost factors. (See Exhibit A.4)

 Cost per prescription is equal to the Ingredient Cost plus the Dispensing Fee.
Cprescription allow = Cingredient allow + Cdispensing allow.

 The Ingredient Cost is subject to a negotiated discount.
Cingredient eligible * (1 – discount) = Cingredient allow.

 U represents number of prescriptions per 1000 members per year.

 Pallow must be computed as Pingredient allow + Pdispensing allow, where each of those is determined by the usual methods. (That is, run the above procedure twice.)
TREND ANALYSIS
Questions to Ask About the Computed Trends and Costs:
 reasons for copay changes?
 will copay change again?
 why did provider contract change?
 will it change again?
 “fee negation”?
 causes of the residual trend?
 mostly utilization trend (list other components too)
 MCO’s UM activities
 prior year’s errors in prediction
 leveraging
 How does the MCO’s experience compare with outside indices?
 Medical CPI (consumer price index)
 unemployment rates
 Number of providers in the work force
 For pharmacy costs and trends:
 anticipated changes in the dispensing fee
 anticipated formulary changes?
 changes to the drug UM system?
BASE TREND vs. DETAILED TREND ANALYSIS
Base Trend Analysis
 global in nature.
Purpose is to:
 Streamline data gathering
 Produce reports useful to many areas of the MCO
 Produce updated trend reports every quarter.
Components of the Base Trend Analysis
 Historical Claims Experience analysis
 claims by major service category
 claims by product line
 U, C, P
 output is Total Trend

 Provider Contract Changes analysis
 Establish a standard data gathering method
 group similar contracts together
 analyze contract changes
 analyze effect of risk-sharing
 output is Provider Reimb Trend

 Large Claim Analysis
 identify the “catastrophic” part of the residual trend

 Demographic Characteristics
Detailed Trend Analysis
 break up every step of the Base Trend Analysis into details.
 Detailed numbers must sum back to base analysis numbers

Components of the Detailed Trend Analysis
 Allocated Commercial Experience detail
Split up the claim costs and trends by:
 individual products vs. small group products vs. large group products
 HMO products vs. POS products

 POS product detail
 in-network claims vs. out-of-network claims

 Hospital Inpatient detail
 Analyze each type of care separately:
 intensive care, mental health, surgical, radiology, obstetrics, etc.

 Separate U into its components:
 A = number of Admissions
 L = average Length of Stay

 Hospital Outpatient Detail

 Physician Detail
 split up by specialty
 split by procedure code (type of service)

 Pharmacy detail
 Generic drug costs
 Formulary brand drug costs
 non-Formulary brand drug costs

Done.