Case Study #3: Exclusive Provider Organization (EPO) Strategy

[PDF version of Exclusive Provider Organization (EPO) Strategy Case Study here.]

Client:
A 6,000-employee organization.

The Challenge:
The Client had been using an “open access” Preferred Provider Organization (PPO) program, but was not achieving the desired cost/savings relationship. The challenge was to prove to administration, through claims data and expertise, that an EPO strategy was the most effective cost containment solution. (The Client went to an EPO strategy in 2004 and then back to PPO in 2005, costing them $5 million more in net paid claims as compared to their 2004 benefit year with an EPO. We enhanced the Client’s savings by resuming an EPO strategy.)

Programs Utilized:
For this partially self-funded plan, we implemented a three-tiered program to ensure the most access to contracted providers while safeguarding costs for the health plan and its employees:

• EPO at the highest benefit level
• PPO at the second highest benefit level
• Out-of-Network providers at a lower benefit level

In our typical PPO contract arrangement, the overall blended claim cost savings may reach 50% (40% overall savings with competitors). In the EPO strategy, we can reach blended claim cost savings of approximately 65%.

Results:

• The employer was able to build a health fund surplus in excess of $7 million in the first 6 months of the EPO program in 2006. The Client’s fund surplus/reserve has now grown to over $8.5 million.
• For the plan year, dollars paid to hospitals decreased to 32% versus 44% for the previous year.
• The Client’s employees generated an estimated $72 million in gross medical claims (excluding pharmacy costs), but paid out only approximately $21 million in net claims due in part to the effective benefit plan designs and cost containment programs/services we provided.
• The Client pays $150 less per employee per month in comparison to a neighboring Client of similar demographic.
• Administrative fees for the program represented only 5% of the Client’s annual health fund expenses. For every dollar paid to administer the plan, the Client received a value of over $22.

Going Beyond…
In addition to the positive results listed above, we also:

• Efficiently administered the group’s stop-loss reinsurance program and recouped $1.4 million.
• Using a $30,000 benchmark, we identified 57 large cases totaling $4.4 million and utilized case management to optimize the plan performance.
• Introduced the “Benny Card” (debit MasterCard) to track utilization/spending and provide further value to Client’s members for flexible spending account (FSA).

Foresight Case Studies include Clients/results from various Access Plans USA, Inc. subsidiaries which utilize similar types of programs as Foresight TPA.

Foresight TPA
4929 W. Royal Lane
Irving, TX 75063

Phone: 1-800-854-2339