CBIZ : 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.

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. Additionally, for other illnesses, such as end-stage renal disease, hemophilia, autoimmune 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 is high.

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 (in the form of ulcerative colitis) totaled over $215,000 in claims cost, with nearly $206,000 coming solely from the cost of Stelara, a multi-faceted specialty medication that can be used in the treatment of moderate to severe cases of ulcerative colitis, Crohn's disease, psoriatic arthritis and psoriasis. In other scenarios, such as end-stage renal disease (otherwise known as chronic kidney disease or chronic renal failure), a specific stop-loss claimant incurred over $577,000 in claims of which $543,000 originated solely from weekly dialysis procedures.

Interested in strategies that large employers like yours can implement to help combat rising health care costs? Check out our 2020 State of Health Care Guide.

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.

For high-dollar specialty medications, a very narrow set of qualifying disease states represents the majority of not only those drug costs but also drug costs specific to catastrophic claims. 45% of specialty drug costs originate from cancer and biologic drugs for autoimmune disorders (BDAIDs) alone.

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 thesentinel driver of cost, the procedural process of delivering medical care istypically the sentinel cost driver. In those cases, ensuring patient adherenceto the standard of care is paramount and should only be altered in a mannerthat improves convenience and access, as opposed to disruption that may reduceadherence to a care plan, such as limiting provider choice or creatingfinancial burdens on the patient. In that regard, most alternative paymentstrategies do not alter the place of care but rather change the mechanics of howthe cost of services is negotiated. Such negotiations may include tactics thatincorporate utilization of Medicare rules and reference-based pricing (RBP) asthe antecedents for change. In other cases, the strategy is to intentionallychange the place of care from a facility to in-home therapy, creating a betterexperience for the patient. This in-home transition, when appropriate,drastically lowers the cost and creates convenience for the patient, whileensuring better adherence to care.