Approximately $2 billion of employer-sponsored health care spending is wasted each year due to unnecessary or preventable costs across the continuum of care. This is approximately 20% of total health spending by employers each year, according to the American Health Policy Institute. 

Wasteful spending was a concern that one of our clients was facing when we met them. Their healthcare spending was increasing year over year in line with the healthcare industry trend, which is right now at +6% to +7% each year. Like most employers, a small group of people was driving a large percentage of their healthcare costs. And as, year over year, they were footing the gargantuan bill for their employees and their families, they were left with some very reasonable questions:

“Is the money we’re investing in our wellness program even making people healthier?”

“Is our diabetes-management program working?”

And, quite literally, the million dollar question…

“Where can we save on our healthcare costs?”

This employer partnered with us because of our team’s background in healthcare and wellness data science, as well as our team’s experience in advising large employers on their health spending strategy. We studied several years of their health and pharmacy data and we looked at this data by member status (employees, spouses, children) and by work location (corporate office, field offices, distribution center). We brought in absence data and we looked at the smoking status for each member. Here’s just a sampling of some of the highlights we found:

Diabetes is a major cost driver, but it could be costing less. Diabetes test strips, which were one of their top prescription drug cost-drivers, have costs that can vary by brand by up to 865%. The high cost variability of these test strips is not necessarily correlated to their quality. On one hand, an employer wants to make it as easy as possible for employees to access the diabetic supplies they need. However, without controls around this spending this could be a source of health spending leakage.

Members are not being driven to cost-effective medications. Pharmacy costs for diabetes medications were increasing year over year while medication adherence was decreasing. That right…the employer was paying more for less pills. What we found was that fewer people were taking their medications (adherence was decreasing). And of those who were taking their medications, they were being driven to the “preferred” brand of medication, but this brand was not the cheapest. This explains why they were paying more for less pills. This is also an indication that their medication formulary needs to be revised. 

An expensive method to quit smoking was not working. A costly and well-marketed medication to quit smoking was costing in excess of $63,000. When we examined adherence, very few of the people who took this medication completed treatment. This was most likely due to the medication’s unpleasant side effects. In fact, of the 58 people who started taking this medication, only 3 completed the recommended round of treatment. Clinical evidence indicates that 1 in 2 patients completing this therapy will quit smoking. This means that it cost this company $63,000 for 1 or 2 people to quit smoking. This expensive (and, in this case, ineffective) medication was on the plan’s preferred drug list. If the pharmacy plan had step therapy in place, people looking to quit smoking would be directed to use effective, yet less expensive medications before moving to more costly medications.

The Emergency Room is a cost-driver, while very few members use Urgent Care. Emergency Room visits were on average 4 times more costly than visits to Urgent Care. Not only were very few members ever using Urgent Care, there was a long list of Emergency Room “frequent flyers.” This informs the employer’s communication strategy on educating their members on the purpose of Urgent Care, as well as how to identify when a trip to the Emergency Room is necessary.

Employers typically have two goals when it comes to paying for employee healthcare: they want to support employees in improving their health, and they want to control costs. As a former veteran of the corporate wellness industry, I will be the first person to tell you that lots of companies will promise to make employees healthy and to save them money. Very few will actually deliver. This is because employers want a partner who will help them to control health costs, not just to deliver a program. 

Unfortunately, there’s no magic wand an employer can wave to suddenly reverse everyone’s chronic diseases. But there are many opportunities to ensure condition management programs have a positive return on investment. Furthermore, there are subtle clues hiding in their data that can show them areas where they are losing money where they shouldn’t. These are the many little holes where there’s healthcare spending leakage. It is our job is to find these holes for employers.

The good news for any employer looking to reduce wasteful health spending is that the insights we find are actionable. In this example, what we uncovered in this data is now being used by this employer to save money. Their Chief Human Resource Officer deserves enormous credit for not accepting the status quo with respect to their healthcare spending. He is among a growing number of HR professionals who understand that with the high cost of healthcare comes a responsibility to closely manage these costs. Their data drives a holistic strategy around health and wellbeing services that aligns with the strategy of the business. We are proud to partner with them to provide the actionable transparency they need to achieve their wellbeing goals.

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BetaXAnalytics is a healthcare data consulting firm that helps employers to cut their healthcare spending through proven strategies to contain costs. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

We’re living in funny times when there’s a public outcry for open accessibility to affordable healthcare, yet employers still cover over half of the non-elderly population in the U.S. So this leaves employers, very few of which have in-depth knowledge of how to keep people healthy, footing a large bill and assuming the health risk of their employees. In fact, 82% of employers with over 500 employees are considered “self-insured,” meaning that they pay dollar for dollar the claims of their employees, spouses and dependents. For most of these employers, healthcare is their second largest expense, second only to the cost of salaries. 

So this leaves any smart employer with a very reasonable expectation—they want to keep their employees healthy. After all, they’re footing the bill for healthcare, so they have a vested interest in the health of their employees and their families.  But how do you keep people healthy? Do you go home with them to make sure they don’t devour a package of oreos at night? Or call them to remind people to take their blood pressure medication? Or wake them up early to make sure they hit the gym before work?

Of course these interventions sound crazy. People’s health habits are a product of personal choices that are decades in the making…and changing these habits is a tall task. So employers are left to manage all sorts of 3rd parties to handle just this—to administer health services, to provide resources for health coaching, to inspire employees to be physically active, and to provide behavioral health and addiction services. But the basic problem remains…employers are paying for these services, so how can they know they are getting what they pay for? This is one of the reasons why health analytics is so important.

Here are the top reasons why employers need to use health analytics:

1.      To understand employee health needs. Most employers, in addition to offering health insurance to employees, offer services to address employee health needs. The goal of offering health services is to improve employee health and to lower health costs over time. These services could be health coaching, health seminars, fitness challenges and weight loss programs. And with the average employer spending $693 per employee on wellness incentives, they want to make sure they understand which services are needed most by their employees. This helps them to spend wisely. This moves them from the spaghetti method of health and wellness spending—throwing everything to the wall to see what “sticks,”—to a data-driven health and wellness strategy that can be justified and measured for their senior management. 

2.      To give high-risk employees the health resources they need. What if you were able to know someone was going to have a heart attack before it happened? The amount of data available today can be used for a very good purpose—to help to match people with proactive care before they end up in a hospital. Let’s say you use an outside service to provide health condition management for your members. The only way condition management can be valuable is if it is reaching the right employees. Leveraging health analytics of your members can ensure that the right members are receiving proactive condition management outreach at the right time—before they end up in the hospital.

3.      To find wasteful spending. Most employers today are under increased internal scrutiny to ensure that they are doing their due diligence in managing their vendors, and the total health and wellness cost for employers is significant. Annual premiums for employer-sponsored family health coverage is $18,142, according to a 2016 employer survey from Kaiser Family Foundation. One very common source of “waste” is the misuse of the emergency room (ER). Understanding the magnitude of emergency room misuse and patterns in the reasons for costly ER visits helps to inform how to best communicate existing benefits to employees, communicate alternatives to the emergency room as well as to evaluate changes to ER co-pays to encourage employees to seek alternative forms of urgent care when it makes sense.

4.      To manage prescription costs. A 2016 study by Castlight Health found that 1 out of every 3 opioid prescriptions covered by employers is abused, and that painkiller abusers cost employers nearly twice as much ($19,450) in medical expenses on average annually as non-abusers. Rising opioid usage and skyrocketing specialty medication costs are at the top of mind for employers, but most employers get very little transparency into this information. Examining prescription drug data helps employers to better understand medication usage, adherence and addiction among their members. This provides valuable information that is crucial to help them to save money in the future, make needed changes to their pharmacy plans and to provide appropriate behavioral health and addiction resources to members.

5.      To manage health service vendors. It is becoming more common for wellness service contracts to include performance guarantees, meaning your company could be getting money back, sometimes up to 30% in returned fees, if employee health is not improving as promised. If your company has performance guarantees in your vendor contracts, you’ll want the ability to have your own source of truth on whether those guarantees are being met. Have you ever had a question that was met with 3 different answers from 3 different vendors? This is comparable to doing your taxes – you may take your tax documents to 3 different accountants and come up with 3 different numbers on your return. Every vendor is looking at data through a different lens, and some lenses are more accurate than others. It’s ironic that employers foot the bill for employee health, yet they rarely have the ability to have their own data arsenal to inform their decisions and audit vendors. Analytics helps employers to become more savvy “consumers” of health services. 

Bottom line – when you are spending a lot of money on something, you deserve to know if that money is being well-spent and you deserve to know how you might be able to save money in the future. This is the value to employers of making data-driven decisions on their healthcare spending. And if you have the opportunity to receive this data from an impartial 3rd party whose contract is not “on the line” based on the data they provide (i.e. not the health plan, not the wellness service provider), an employer is in a prime position to best manage these services.

About BetaXAnalytics:

BetaXAnalytics uses “data for good” to improve the cost and quality of health care for employers. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, saving health dollars and better targeting health interventions to keep employees well.

Follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.