Friday, March 25, 2011

“Does MedEncentive work?” Part 2: The Loomis Company’s analysis...

by Jeff Greene

As Yogi might say, "I love March Madness, especially at this time of the year."  What makes this March exceptional for my colleagues and me is not only the thrill of watching college basketball, but the joy of reporting remarkable results from years of effort – results that represent findings by now two independent experts seeking to answer the question, “Does MedEncentive work?”

In my March 3rd blog article, I wrote about studies being conducted by researchers at the University of Kansas School of Medicine.  These researchers have discovered that employers in Kansas and Oklahoma realized significant and sustained cost savings and reduced hospitalizations after implementing the MedEncentive Program.  Now, a second independent source is reporting essentially the same results for a third MedEncentive installation.

Gerry Blaum with The Loomis Company, a highly regarded health plan administrator lo-cated in Pennsylvania, reported that the Lourdes Health Network of Pasco, Washington recorded a significant decline in hospitalizations and total healthcare costs over a two year period after implementing MedEncentive in its employee health plan.

The graph above illustrates that this employer saw its healthcare expenditures decline over the last two years, realizing more than $1.6M in savings on 1,100 lives.  This represents a 14.4% savings against projected costs.

In terms of return on investment, Lourdes realized over $13 in savings for every dollar invested in the MedEncentive Program during this two year period.  This includes the financial rewards paid to participating doctors and patients.

To date, we have conducted a total of seven trials that have extended over several years.  All of them have contributed to answering the question, “Does MedEncentive work?”  Three of them have now been examined by independent experts.  Again, what Loomis found in the Lourdes data is very similar to what the researchers at the University of Kansas School of Medicine found in two other trial installations. 

An obvious question is, “How do you know that the savings being reported in these trials can be attributed to MedEncentive?”  Putting aside how and why MedEncentive works for the moment, there are several ways that this question is being answered.

First, the sheer number of MedEncentive trials that realized cost containment goes well beyond coincidence.  Then there’s the length of time that our program has been tested.  Few if any cost containment solutions have been examined as long as MedEncentive, and there are none that we know of that have produced sustained results as long as our program.

I could go into greater detail in answering this question, but it is much more convincing to have independent experts report their findings and conclusions.  To this end, we have the analysts at Loomis to thank for the findings presented in this article.

Let’s begin by using Loomis' findings to examine the correlation between total annual healthcare expenditures per person and the level of participation in the MedEncentive Program.  Logically, if the cost savings in these trials can be attributable to MedEncentive, then we would expect costs to go down as participation in our program goes up, over time.

The adjacent graph illustrates that this is exactly what was found in the Lourdes data.   As the combined level of doctor and patient participation in the MedEncentive Program goes up, the total annual health-care expenditures per person goes down.   

Now let’s examine the source of this savings.  Health economists recognize hospital admissions and hospital days as well known cost statistics.   Just like total annual expenditures, we would expect an inverse relationship between these hospitalization statistics and the combined level of doctor and patient participation in the MedEncentive Program, referred to as the “participation composite.”

The next two graphs illustrate that this is exactly what occurred in the Lourdes health plan.  It also implies that a primary way our program controls costs is by preventing hospitalizations.

The last correlation I want to share with you may get a bit technical.  None-theless, it is an important finding in establishing the fact that Lourdes’ cost savings can be attributed to the MedEncentive Program.  So bear with me for a moment.

A common practice in healthcare cost analysis is to segment total medical expenditures into high cost claims, known as catastrophic cases, and all other expenditures, known as non-catastrophic costs.  The reason catastrophic cases are segregated is that they are generally unpredictable from year to year.  In other words, in a given population of people, we cannot effectively predict when an accident or a cancer will occur from one year to the next.  So in order to gauge the underlying health and financial risk of a population, analysts will examine the non-catastrophic cost trend.  Though the dollar amount of a catastrophic case will vary among analysts, a typical figure is $50,000 per person per year.

Without going into a great deal of explanation as to why patient participation in MedEncentive and non-catastrophic costs correlate, just know that this is a phenomenon we have observed time and again in our other trial installations.  And sure enough, this is exactly what was observed in the Lourdes installation.

The following graph compares trends in patient participation in our program and Lourdes’ non-catastrophic costs.  As the graph indicates, when patient participation goes up, non-catastrophic costs go down, and vice versa.  It is curious how the slopes of these trend lines are almost inversely identical.

Certainly, we want patient participation to trend upward and remain as high as possible - at least above 55%.  MedEncentive has a host of tactics we employ to accomplish this objective such as adjusting the financial reward, increasing patient reminders, and enhancing the covered medical interventions.  It generally boils down to convincing the sponsoring organization to accept our recommendations.  I am pleased to report Lourdes is doing just that.

Obviously, these results speak for themselves in terms of answering the question, "Does MedEncentive work?"  In fact, Gerry Blaum has asked us to share his contact information if anyone is interested in learning more.

Gerald F. Blaum
Vice President
The Loomis Company
610-741-1133 Office Phone
610-741-4763 Cell Phone

I’m not sure what more I can say except that we challenge anyone to test MedEncentive according to design and disprove it works.  This has been a longstanding challenge.  In fact, we have collaborated for years with a host of others such as the University of Minnesota, University of Kansas, State of Oklahoma, and State of Indiana in an effort to secure funding from the federal government and private foundations to conduct control group studies.  Because we and our collaborators have failed to secure this type of funding, MedEncentive is offering to underwrite such a pilot, to include an independent, academic analysis of the results, in exchange for a portion of any savings.

In other words, we are willing to put our money where our mouth is.   In the spirit of March Madness, do we have any takers?

1 comment:

  1. A payback of 13x's is very impressive.

    In the past I took a very close look at MedEncentive and found the process to initially be counter-intuitive, but closer look leads an employer to conclude the process intellectually works beyond expectations and brings forth an incredible payback.

    Michael Samms
    Enable Quality Health, LLC
    Overland Park, Kansas