CFOs Now Have Three Core Ways to Bend the Healthcare Cost Curve

By Scott Doolittle
Chief Financial Officer
Quantum Health

Self-insured employers will continue looking for ways to trim expenses and boost financial performance in 2024 to address high interest rates, growing medical costs related to chronic illness and cancer, and the need to consolidate digital health point solutions to drive engagement and utilization. And while reducing workforce may be a key tactic many organizations will follow, CFOs might overlook one area within the financial choices available in reducing spend: healthcare benefits claims costs.

For decades now, healthcare benefits costs have been increasing and continue to represent companies’ second largest expense compared with other operating costs. A Mercer study of CFOs reported that 68% cited healthcare as a significant or very significant cost concern compared with other operating expenses. Yet, as financial leaders, we must shake up the status quo in our health benefits programs by inserting ourselves into the details of our healthcare plans and partnering closely with our CHRO and HR teams to evolve our healthcare benefits programs.

To manage and realize claims savings from a company’s health benefits plan, one must first understand what’s driving increases. Research shows that employers will pay 8.5% more in healthcare costs in 2024, driven by:

• Price increases from providers,
• High-cost claims for those with catastrophic or chronic conditions, and
• Increased use of specialty pharmacy or costly medications.

Healthcare navigation is a solution that many companies are integrating into their benefits programs. Independent healthcare navigation has been shown to produce significant, sustainable savings for a company year after year, by proactively guiding employees to the most clinically appropriate and cost-effective individualized care within their existing benefits platform.

While few healthcare navigation companies offer the transparency of a full book of business cost analysis, employers should look for results that will demonstrate the actual cost savings to their organization. One cost-savings impact analysis revealed that navigation can deliver significant cost-savings by using predictive analytics and integrated care coordination to engage employees early in their healthcare journey. As a result, in this study, the growth rate of employers’ claims costs remained below projected levels. In the first year, employers saw a growth rate of 5.9% below projection, on average, and averaging 2.2% below projection in the following years.

Data from another study examined the source of savings among several healthcare utilization areas where employers exert cost-control impact. This study showed that by engaging with either the member, their providers, or both on 85% of all claims costs, employer medical claims costs trended below an average industry medical trend of 4.8% within all claimant percentiles. Specifically, claims cost in the top 25% of claimants (representing 87% of client’s total claims) grew at 3.2% annually, well below industry trend. Among the top 1% of claimants (33% of total claims), costs grew at an even slower rate, 2.8%.

Savings were achieved by guiding cost-effective decisions like:

1. Increasing the use of primary care and reducing emergency services. The use of primary care visits increased by 2% cumulatively, while specialist visits declined by the same amount, and shifted the proportion of immediate, unscheduled care by 2.4% (annually) toward urgent care and telemedicine; more expensive ER visits declined as a result.
2. Encouraging the use of cost-effective surgical sites. Employers saw an increased use of cost-effective outpatient, ambulatory surgical centers and office surgical settings, while inpatient surgeries declined nearly 21% cumulatively. Employers saw declining medical and surgical inpatient admissions per 1,000 members (down 4.8% annually), inpatient days per 1,000 members (down 4.3% annually) and 30-day readmissions (down 1.9% annually).
3. Encouraging cost-effective, clinically appropriate care for chronic conditions and specialty drug treatments. This analysis revealed decreases in inpatient medical and surgical admissions for five of six chronic diseases and conditions studied. Specialty drug treatments — costly for those with chronic conditions — increased to in-home and office settings by 8.5% annually, while treatments in more costly outpatient hospital settings declined by 6.9%.

As you and your C Suite look for ways to reduce spend and create sustainable savings this year, focus on driving more cost efficiency in your employee healthcare benefits. Work with your HR leaders to evaluate the success of your current benefits programs and consider adding healthcare navigation integrated with care coordination to drive significant financial savings – beyond reducing network access and cutting back on available offerings. Then, choose a healthcare navigation partner that can show you their full book of business results and who will answer the tough questions about the sustainability of their results.

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Scott Doolittle is the chief financial officer of Quantum Health, an independent healthcare navigation and care coordination company that provides comprehensive, consumer-focused services to assist individuals in using their benefits and managing their healthcare needs across a spectrum of medical conditions and health statuses.